Aggregator Perspectiveon Carbon Credits

Presented byAgraGate Climate Credits Corp

David Miller, Chief Science OfficerJuly 18, 2007

Items to be Covered

• Current opportunities in US carbon credit markets

• Carbon market expectations

• Dealing with uncertainty in agricultural carbon credits

• Characteristics of cost-effective aggregation programs

Carbon Credit Program

Greenhouse GasEmission Reductions

Carbon Credit Program

• Eligibility Assessment • Protocol Development• Monitoring• Reporting• Verification• Registration

Carbon Credits(certified, tradable, $$)

Chicago ClimateExchange protocols

Achieved viaqualifying GHGemission reduction projects

Sell on CCX through an aggregator

CCX Reduction Timetable

• 2003-2006: Reduce emissions to 1%, 2%, 3%, 4% below 1998-

2001 baseline

• 2006 – 2010: Reduce emissions to 6% below 98-01 baseline

CCX Emission Reduction Schedule

92%93%94%95%96%97%98%99%

100%

1998-2001

2003 2004 2005 2006 2007 2008 2009 2010

Meeting CCX Reductions

• Allowances (x% less than baseline)

• Own reductions • Industry credits

from excess reductions

• Offsets (no more than 50% of reduction requirement)

• Soil Offsets• No-till• New Grass• Rangeland

• Forestry• New Plantings• Enhanced Working Forest

• Ag Methane• Industrial Fuel

Switching• Biofuels• Landfill Methane

Carbon Offset Prices2004 - 2006

2006 Vintage Carbon Offset Prices

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

$ P

er

Metr

ic T

on

Price forecasts for US carbon credits

Figure 1. Projected price curves for US carbon credits ($US per metric ton).

$0

$5

$10

$15

$20

$25

$30

$35

2004 2006 2008 2010 2012 2014 2016

hi

low

med

$0

$5

$10

$15

$20

$25

$30

$35

2004 2006 2008 2010 2012 2014 2016

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low

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Sources: Carbon Finance, August 2004; EIA/DOE 2004. Analysis of S. 1844, the Clear Skies Act of 2003; S. 843, the Clean Air Planning Act of 2003; and S. 366, the Clean Power Act of 2003. Energy Information Administration, USDOE, SR/OIAF/2004-05, May 2004; EIA/DOE 2005. Impacts of Modeled Recommendations of the National Commission on Energy Policy. Energy Information Administration, USDOE, SR/OIAF/2005-02, April 2005; AEP 2004. An assessment of AEP’s actions to mitigate the economic impacts of emissions policies. American Electric Power, August 31 2004

How Our Land is Used

Carbon Sequestration• Carbon sequestration can be defined as

the capture and secure storage of carbon that would otherwise be emitted to or remain in the atmosphere.

• What are Carbon Credits?– Carbon credits encompass two ideas:

(1) Prevention/reduction of carbon emissions produced by human activities from reaching the atmosphere by capturing and diverting them to secure storage.(2) Removal of carbon from the atmosphere by various means and securely storing it.

SOIL CARBON DYNAMICS SOIL CARBON DYNAMICS IN RESPONSE TO TILLAGEIN RESPONSE TO TILLAGE

SOIL CARBON (% OF ORIGINIAL) IN RESPONSE TO CULTIVATION

1 50

SO

IL

CA

RB

ON

0

100

PLOWING

PERENNIAL VEGETATION

years

CONSERVATION TILLAGE

50

Soil Offset Credit Zones

No-till Credit Rates (Metric Tons CO2/Acre/Year)

CCX Zone

Dryland

Other

A 0.60

B, E, G &

LRR(K)

0.40

LRR-G & HIrrigated

0.60

C 0.32

MLRA 52, 53A, 54

Chem Fallow

0.32/0.00

D & F 0.20

LRR-G & HIrrigated

0.60

New Grass Plantings

Southwestern US: 0.4 ton; Rest of US: 1.0 ton

Western Canada: 1.0 ton

Tillage Equipment

• Full width inversion– Moldboard plow– Chisel plow– Field cultivator– Tandem disk– Offset disk– Row crop cultivator

• Okay to use– No-till/strip-till planter– No-till drill– Rolling harrow– Tools with wide knives

• Subsoiler/ripper • Anhydrous applicator• Manure knife applicator

• General Guideline: After the implement has been through the field, there must still be a substantial amount of surface residue present and the soil disturbance must not be full width. If use of the implement would require that a leveling or smoothing activity follow, it would probably result in too much soil disturbance.

• No credits earned during year if residue is removed or burned

Dealing with Uncertainty

• What is the goal?– Assurance of a minimum amount?– Minimization of variation around the mean?

• Two approaches– Pooling with discount– Specific plot measurement

Pooling with Discount

• Define eligible practices

• Set rates for geographic areas– Peer-reviewed literature– Long-term studies (Reference sites)

• Apply discounts from the mean rate– Cumulative probability distribution function

• Law of large numbers

Specific Site Measurement

• Illusion of accuracy– Sampling error– Sampling bias

• If aggregated, pool average will match true mean

• Does not change carbon being sequestered

Cost-effective Aggregation

• Standardized contracts

• Easy to understand forms & reports

• Common, established practices in similar geographic areas

• Reference sites with long-term data sets

• Self certification with random spot checks

• Penalties for dishonesty or fraud

• Low transaction and verification costs

Mechanics of Trading• CCX Registry

• CCX Trading Floor

Contact Information

David MillerChief Science Officer

AgraGate Climate Credits Corp.5400 University Ave

West Des Moines, IA 50266

www.AgraGate.comPh: 515-225-5431

E-mail: damiller@AgraGate.com