8. Canadian Cattle Producers as Carbon Sellers

If Cattle producers decide to create and sell ERCs there are a number of considerations to be aware of. These include:

• Type and time frame of sale. The buyer could offer to buy today’s ERCs or buy an option on future ERCs the seller will produce or some combination of the two.
    

• Source of ERCs. The buyer may only be interested in ERCs from certain sources and not others (for example a buyer may be interested in ERCs from improved manure management and not from soil carbon sinks).
   

• Certification of ERC validity. The seller will most likely require that the ERCs be independently verified to ensure they are real emission reductions. This may include a clear definition of the change in operation that has resulted in the emission reduction. The producer or auditor will need to clearly indicate the original method or practice used, when it was used, emissions arising from it and the improved method or practice, when it was adopted, emissions arising from the improvement, and the difference in emissions between the two.
    

• Permanence of credits. There is concern that carbon sink credits may not be permanent and that a seller may be liable if he or she sells sink related credits without a time limit. The liability would arise if carbon was removed from the soil at a later date if the producer were to revert to significant cultivation, break grasslands to grow annual crops or remove shelterbelts or other permanent vegetation. Ways to deal with this risk are to “lease” the credits to a purchasing company or to sell for a clearly defined period of time after which the purchaser is liable for replacing the credits from other sources or by renewing the contract with the producer. In this way the risk is not transferred from the buyer to the seller.
     

• Credits net of whole farm or from individual changes in management. It is not clear at this time whether ERCs will be determined from emission reductions arising from individual methods used on the farm or net emission reductions arising from all activities on the farm. For national greenhouse gas inventory purposes all major activities will need to be accounted for but ERCs for trading purposes could be based on changes in individual activities.
     

• Future domestic and international GHG policy changes. One concern for both ERC buyers and sellers is the threat of changes to regulations in the future. At the moment it appears that agriculture will not have regulations requiring the industry to reduce emissions. Will regulation occur in the future? Will producers be required to reduce emissions? Will producers need their own ERCs to comply with future regulations? If a producer enters into a contract to sell ERCs the level of these risks should be identified and shared between buyer and seller.

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