Offsets Offer New Opportunity for Alberta Farmers

With 9 of the 16 Alberta government-approved quantification protocols related to the agricultural sector, farmers have a significant opportunity to generate emission offsets, which can be used as a compliance option for large emitters in Alberta under the provincial Specified Gas Emitters Regulation.

"I think emission offsets will lead to a new opportunity for farming communities and become a part of their income stream over time," says John Kolk, a partner in Kolk Farms Ltd.  Kolk has farmed for nearly 20 years near Picture Butte, devoting his time to projects that promote economic, social and ecological viability in rural Alberta.

But Kolk warns this opportunity also comes with risks.  He recommends interested participants thoroughly read and understand all the approved protocols before entering this fledgling market and investing in new practices or equipment for their farms.  For example, if farmers overlook a rule within a protocol, their work will not qualify for credits.

"Farmers should aim at meeting the entire protocol rather than a part," explains Kolk.  "Missing any element of the protocol will mean missing out on the opportunity."

Detailed record keeping is also important, because farmers must be able to prove their accomplishments.

"All farmers - even if they're just thinking about it - should start identifying their cultural and cropping practices anyway," says Kolk, noting record keeping is a helpful management tool for all producers, even if they don't sell offsets.

Farmers should also explore the economics of emission offsets in relation to their overall operations.  "It's not a lucrative enough business unless it's an add-on to a best-management practice," says Kolk.  "If farmers would like to go no-till because of their desire to save water and reduced fertilizer usage, then the offsets may be the determining factor in planning to take that leap - a direct seeding operational change is in the six digits."

Because individual farm-based protocols will typically generate small volumes of credits, farmers will likely sell them through aggregators or brokers.  Before signing on the dotted line, Kolk recommends farmers "pay close attention to claims made by brokers in the contract."

Farmers can also compensate for low volumes by combining several protocols into a larger package.  Feedlots are perfect examples of such practices.   

"Feedlot operators should look at no-till practices, certain manure management protocols and feeding protocols.  They may as well do all three and tie a package together that will allow them to sell 10,000 tonnes rather than 2,500 tonnes," Kolk explains.

The greatest risk to farmers is posed by unpredictable events, like droughts or weed infestations, which may impact the "production" of offsets and force them to abandon protocols altogether.  In this case, they would have to find a way to make up for the buyers' loss.  According to Kolk, the only way farmers can mitigate this risk is to be sure they can deliver on their promises.  This confidence should also determine the term limits of contracts.

Since the risk of unforeseen problems compounds over time, Kolk advises farmers to only sign long-term contracts if they're positive they can deliver credits in tough times.  "If some event is going to turn you from a sink to a source, you'd better go short term.  If you think you can manage your system in such a way that you can internally guarantee those credits, then you want to go with something that's higher up the risk scale because you're going to get paid better for it," he advises.