Aggregators Act as Carbon Offset Middlemen

Carbon offset aggregation involves converting land-based practices into tonnes of CO₂ equivalents, allowing participation in a market where producers can add value to their operations by offering offsets to large final emitters.

"The principle is to have producers understand how they qualify and how they generate offset tonnes," says Bill Dorgan of Agri-Trend Aggregation Inc. So far, it's been a steep learning curve, say those involved in the industry.

"Some of the work in the past shows that individuals on their own, with only a small number of offsets really start facing some steep challenges with respect to marketing costs, contractual costs and trying to develop projects," says Keith Anderson of Carbon Reduction Offset Projects Ltd. and acting chairman of the Carbon Offset Suppliers Association of Alberta (COSAA).

Whether an aggregated project or a regular, one-off project, the process is set out in provincial legislation that took effect last July. It begins with an aggregator preparing an offset project plan, which details the monitoring system for the collection of data. There must also be plans for quality control, quality assurance, quantification and verification.  The whole process must then be verified by an independent third party, who checks the results with the actual guidance documents to ensure the tonnes are real, quantifiable, measurable and valid for sale.

"Everyone involved in the entire process wants to ensure we have a valid currency in these offset tonnes. The independence of the verification process is not only mandatory, but we welcome it," says Dorgan.

Once the offset tonnes are confirmed and verified, an offset assertion report is provided to the buyer, who applies it to their compliance requirements, with the cash delivered back to the producer.

Typically, those providing offsets are farmers or agricultural producers, while buyers are large industrial emitters.  For example, a farmer can generate reductions of greenhouse gas (GHG) emissions by implementing no-till and reduced-till systems on agricultural lands.  A producer's crop also removes CO₂ from the atmosphere during the photosynthesis process, acting as a carbon "sink".

Aggregators act as the middle man, assisting both sides with the transaction. Often they need to accumulate multiple sellers for each buyer as a typical agricultural project may not create enough carbon credits for a single large emitter.  There are a range of aggregation services, with some offering everything from project development to reconciliation and others only generating tonnes for sale but not marketing them.

"The basic role of an aggregator is to add value to a transaction between a buyer and a seller.  You need to have fair and transparent contracting," says Anderson, adding aggregators help manage the business risks involved in the offset business.

There are currently nine members of the fledgling industry association, which aims to ensure the emerging carbon offset market set is credible, transparent and fair. Although transaction rules of transaction are set by government, COSAA members will be required to operate under a code of conduct. The association will also help assist and educate producers and other stakeholders.