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Carbon Credit Market In Doubt

With almost no fanfare, Saskatchewan has passed a new greenhouse gas bill that should theoretically provide a mechanism for farmers to be paid for carbon credits.

However, the devil will be in the details and the regulations for the bill have yet to be established. Observers worry that when the dust clears, farmers will not be playing a significant role in meeting the provincial commitments for reducing greenhouse gas emissions.

For the last 10 or 15 years, there have been discussions and proposals about farmers being paid for carbon credits, specifically for minimum tillage and direct seeding. There is no doubt that the now dominant seeding methods which generate minimal soil disturbance also sequester carbon in the soil.

Over the years, groups such as the Saskatchewan Soil Conservation Association have believed this could and should be a significant source of new revenue for producers.

There has been some trading of voluntary carbon credits from Saskatchewan farms through the Chicago Climate Exchange, but for the most part farmers have seen limited benefit from their carbon storage.

A few years ago, Alberta initiated a program whereby that province’s large emitters can purchase carbon credits as part of their reduction in emissions. A number of companies are acting as aggregators, gathering up the carbon credits from producers and then selling them to the large emitters, all within Alberta.

For an Alberta farmer practising direct seeding, the payments per acre have not been large, but with the retroactivity of the program, larger-acreage producers have received some significant cheques.

It isn’t clear whether Saskatchewan producers will benefit to the same extent from the new bill passed here.

The way the system has been structured, there may be more incentive for large Saskatchewan emitters to pay money into a Tech Fund and then remove the money for approved carbon reduction projects rather than buying carbon credits. There has been little indication that big players like SaskPower and Mosaic will be interested in buying credits from farmers.

As well, the issue of retroactivity hasn’t been resolved. How far back will producers be able to go to accumulate marketable carbon credits?

There’s also the overriding reality of supply and demand. Saskatchewan doesn’t have nearly as many large carbon emitters as Alberta, but we have a lot more farmland and a greater adoption of direct-seeding practices. Our supply of carbon credits is large while demand is small on a comparative basis.

A number of provincial farm organizations are suggesting the system would be well served by having Saskatchewan Crop Insurance become a registry of the carbon credits accumulated by each individual producer. That seems to make a great deal of sense since crop insurance already has a lot of the information required for the job.

Saskatchewan has an opportunity to learn from Alberta’s experience and having Saskatchewan Crop Insurance as a carbon credit registry would be an easily implemented improvement. However, it remains to be seen whether a carbon credit market is actually going to be fostered in this province.

Saskatchewan is a world leader in direct seeding and visionaries here have long promoted the possible benefits to producers and society from a properly structured carbon credit trading system.

The provincial government doesn’t seem to have been paying much attention. Carbon sequestration isn’t a priority for the Environment Ministry. As well, Environment doesn’t seem to communicate well with the Agriculture Ministry.

There’s still an opportunity to get it right with the proper regulations to accompany the new greenhouse gas bill, but that doesn’t appear promising at the moment.

Farmers and their lobby organizations are spending their time pressing governments for help to deal with the washout of the 2010 growing season. The carbon credit opportunity has been all but forgotten.

Kevin Hursh is a consulting agrologist and farmer based in Saskatoon. He can be reached at [email protected]

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