What Are Carbon Credits Worth?


Like many Prairie farmers, Bob Burns of Oxbow, Sask. has not yet sold any of the carbon credits he has earned by direct seeding. Bill Kemp of Craig, Sask. also direct seeds and contracted his credits to an aggregator two years ago. He has yet to receive a payment. Both growers are wondering how much money they may receive from the sale of their carbon credits.


The option to pay the $15-per-tonne fee has put a $15 per tonne ceiling on value of carbon credits in Alberta. That is not to say growers will automatically be paid $15 for carbon credits. The actual price they get is determined by supply and demand of carbon credits as well as the quality of the credits the farmer is selling. (Not all credits are perceived to have the same value. The better the science behind the determination of the credit, the more value it is likely to have. As well, the risk of reversal of the credits impacts the carbon credit value. For example: Working land that has been zero tilled will release carbon, which has been be sequestered in the soil. That means credits created under the tillage protocol may not be as valuable as credits that are created from wind or solar powered generation of electricity for which reversals are not possible.)

In Alberta, values for carbon credits created under the tillage protocol have ranged from under $4 per tonne to over $12 per tonne.


The second market opportunity open to all Canadian growers is to offer credits for sale through a climate exchange. Chicago Climate Exchange (CCX) is the primary trading floor for carbon

credits in North America and works similarly to a stock market exchange. Sellers offer carbon credits for sale and those seeking offset credits place bids for the credits they need.

The Montreal Climate Exchange opened in 2008 and will be the Canadian trading floor if and when a federally regulated Canadian carbon market is instituted. Until that time, the MCX is only offering carbon futures trading.

Most carbon credit sales made by Canadian growers (with the exception of Alberta growers participating in the regulated Alberta system in the last three years) were made under contracts through the Chicago Climate Exchange. Carbon prices rose from $1 per tonne when the CCX opened in December of 2003 to a high of $7.40 per tonne in April of 2008. However that price has had a meltdown to about 15 cents. Causes include the worldwide recession, a supply of credits that now exceeds demand, questions about the quality of carbon credits being offered on the exchange, as well as countries reneging on their commitments to reducing emissions.

What’s more, CCX is no longer accepting offers of carbon emissions credits created in Canada. Brookly McLaughlin, spokesperson for the CCX, explained the plans for a regulated carbon market in Canada has prompted the CCX to stop trading Canadian carbon credits due to the risk of double counting credits.

The only option open to Saskatchewan and Manitoba growers at this time is selling through the over-the-counter market. Basically, this is direct sales by aggregators or, in some cases, producers of carbon credits themselves to companies seeking to voluntarily reduce their carbon footprint. Since this market is voluntary and unregulated, there is a wide range of prices for carbon credits.

Source: www.grainews.ca

Category: Credit

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