Guide Carbon credit

7/30/2019 Guide Carbon credit

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In association with the Commonwealth Project

Community-University Partnership Supported By:

A Landowners Guide toCarbon Sequestration Credits


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INTRODUCTION

CONTACT INFORMATION:

CLIMATE CHANGE

CARBON SEQUESTRATION

WHAT CARBON CREDITS ARE

HOW CARBON CREDITS ARE EARNED

HOW PAYMENTS FOR CREDITS WORK

CARBON CREDIT PRICES

OTHER NOTES

THE CHICAGO CLIMATE EXCHANGE (CCX)FUTURE OF THE EXCHANGE

SEQUESTRATION METHODS CURRENTLY ACCEPTED BY THE CCX:

CONSERVATION FARMING

GRASS PLANTINGS

ANAEROBIC METHANE DIGESTERS

TREE PLANTINGS

LONG TERM COMMITMENT

VERIFICATION AND AGGREGATION

VERIFICATION

AGGREGATION

POTENTIAL AGGREGATORS FOR MINNESOTA LANDOWNERS

The Delta Institute (DI)

Aggregate Credit Corporation (AGC)

The National Farmers Union (NFU)

Forecon EcoMarket Solutions. (Forecon)

LANDOWNER OBLIGATIONS

STACKABLE INCENTIVES

EXAMPLE STEPS TO ENROLLMENT

POTENTIAL INCOME CALCULATIONS OVER THE LIFE OF THE CONTRACTEXAMPLE CONTRACT:

CCX CARBON ACCUMULATION TABLES

SOIL OFFSET MAPS

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Table o Contents

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Introduction

This guide oers a path or local landowners to earn additional income while helping diminish adverse

eects o global climate change through implementation o carbon sequestration and other stackable

incentives. This document is a tool to help landowners make the decision whether or not to enroll

their land in carbon sequestration. It discusses background inormation on carbon sequestration and

global climate change; current methods o sequestration, including orestry, conservation planting,

methane capture and others; and steps a land owner must take, including contracts, verication, and

implementation, once they have made the decision to enroll their lands in a sequestration project.

Contact Inormation:

Dean Current, Research Associate

Center or Integrated Natural Resources and Agricultural ManagementUMN Dept o Forest Resources

115 Green Hall, 1530 N. ClevelandSt. Paul, MN 55108(612) [email protected]

Kent Scheer, Project Coordinator

The Commonwealth ProjectWadena, MN(218) [email protected]

John Harting, Undergraduate Research Assistant

University o Minnesota, College o Food, Agriculture and Natural Resources Science

1716 Rollins Ave SEMinneapolis, MN 55414(608) [email protected]

Diomy Zamora, Assistant Extension Proessor

University o Minnesota Extension Service708 Maple St. Brainerd, MN 56401(218)[email protected]

Linda Ulland, Executive Director

Central Region Sustainable Development Partnership1830 Airport RoadStaples, MN [email protected]


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Climate Change

Background Inormation

In every corner of the globe on land and in water, in melting ice and disappearing snow, during heatwaves and droughts, in the eyes of hurricanes and in the tears of refugees the world is witnessing

mounting and undeniable evidence that natures cycles are profoundly changing.

-- Al Gore, An Inconvenient Truth

Scientists around the world began raising the idea o global climate change more than 40 years ago,

when man-made changes to the atmosphere rst began to be recognized.

There are multiple actors causing climate change, many o which are human-induced, including

deorestation, urbanization, emissions rom burning ossil uels, and industrial agriculture. Changes

in climate have seen exponential growth as both natural and man-made actors build upon one

another. As emissions in the atmosphere restrict more o the suns solar rays rom refecting o theearth and back into space, the temperature rises and the ice and snow on the poles begin to melt.

Historically this ice and snow have refected light o the earth, but as it melts and the underlying

ground is exposed, higher levels o solar rays are absorbed, urther increasing temperatures and

continuing to accelerate the speed at which climate change occurs.

This discussion ocuses on global climate change, not global warming. Global warming implies

the earth temperatures will increase, that the entire earth with heat up. Global climate change, the

subject o this discussion, results in severe changes in temperature, precipitation, and the number

o severe storms. These changes in weather patterns may result in changes in vegetation, wildlie

habitat and habitat ranges and even economic opportunities. In Minnesota and the northern United

States, or example, these changes may maniest themselves through the encroachment o savannahlandscapes, the loss o deciduous orests, and less overall accumulation o precipitation along with

higher degrees o intensity when precipitation does occur. This could change winter based recreation

by reducing opportunities or snowmobiling or skiing. Less precipitation can aect armers and the

type, quality and quantity o crops produced.

In early 2007, the Intergovernmental Panel on Climate Change, a scientic eort spearheaded by the

United Nations (UN) and supported by scientists rom countries around the world, ound there is a 90

percent probability that human actions are contributing to global climate change, statistically a very

high probability. Additionally, the lead scientist or and the president o the American Association or

the Advancement o Science, John Holdren, noted that evidence o climate change and its eects are

absolutely stunning.


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Carbon SequestrationCarbon sequestration is the capture and secure storage o carbon dioxide that would otherwise be

emitted to or remain in the atmosphere. Terrestrial carbon sequestration is carbon stored in the

biomass created by perennial vegetations such as root systems and tree trunks.

Transormation o ree foating atmospheric carbon to a xed-state carbon in can be achieved through

the ollowing methods:

Tree plantings (primary ocus o this document)Soil Organic Matter (decayed plant remains which hold carbon within)Perennial grass plantingUnderground traps, including large bodies o water

What Carbon Credits are

Credits that you as a rural landowner can receive in exchange or implementing perennial

vegetations on your land which result in high levels o carbon sequestration. These credits arethen sold on the CCX or cash payments.

How Carbon Credits are Earned

Carbon credits encompass two ideas:

The prevention and or reduction o carbon emissions produced by human related activities1. rom

reaching the atmosphere by capturing and diverting them to secure storage. Methane digesters or

conservation arming, which are discussed on ollowing pages, are examples o this and work to

reduce to amount o carbon released into the atmosphere in the rst place.

The removal o carbon rom the atmosphere by various means such as agroorestry or2. perennialgrasses and securely storing it in orms such as biomass or soil organic matter.

Thereore, as a landowner, you will earn carbon credits or implementing CCX approved sequestration

methods (see ollowing page or list o approved methods).

How Payments or Credits Work

The Chicago Climate Exchange (CCX) is the trading platorm or carbon credits, trading them in large

bundles. In order to sell credits on the CCX, landowners need to work through an aggregator. An

aggregator combines credits with several landowners to create a bundle o credits large enough to

trade on the exchange. When a landowner enters into a contract with an aggregator, the landownerhas given the aggregator the rights to the carbon sequestrated in exchange or payment. The

aggregator chooses when to sell the credits to the market established by the CCX, and within 24

hours o the sale will receive payment rom the CCX into the aggregators account. Then, at varying

times throughout the year, depending on the aggregator, sales are totaled and payments are made

to program enrollees (landowners). The payment allocation and disbursement system varies rom

aggregator to aggregator.


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Carbon Credit Prices

Prices or credits on the CCX have varied greatly over time, yet have shown a general upward trend.

When the exchange originally opened in December 2003 credits were selling or $0.98, and they

have been as high as $4.40 in November 2006. Recently, credits closed the month o December

2006 at $4.10/credit, January 2007 at $3.30/credit, and February 2007 at $4.05/credit. One creditis earned or each metric ton (mT) o carbon sequestered. (See page 14 or an example situation that

examines potential earnings rom carbon credits.)

Other Notes

The CCX takes 20 percent o a landowners initial credits and places them into a reserve pool. Thispool is an insurance measure against a stochastic event (a random event, resulting in large scaleenvironmental degradation such as a orest re or blow down). I at the end o a landownerscontract there has not been a stochastic event, the landowner is eligible to receive these creditsback in ull. These credits are at that time eligible or sale.

Each year there are varying but specied open enrollment times or carbon credits, usually ending

by the beginning o summer. However, it is expected that in the uture additional enrollment timeswill be oered in the all.

The Chicago Climate Exchange (CCX)

The development o the CCX began in the years 2000 and 2001 as the demand or tradable market

credits or pollution based emissions began to grow. The primary research behind the exchange was

conducted by Northwestern University, and ater a trading platorm was designed, the CCX launched in

2003. The purpose o the CCX is to purchase carbon sequestration credits rom landowners who haveimplemented carbon sequestering practices on their lands, and in turn sell those credits to carbon

emitting companies and industries, thereby reducing their net carbon emissions.The Chicago Climate

Exchange is the only active market currently operating within the United States. Markets have been

proposed in Caliornia and the New England area, but nothing else is yet active.

Currently the CCX is 100 percent voluntary, meaning no industries, public or private, are requiredto purchase credits.

Enrollment in the exchange by both landowners and industry members is voluntary. However,once contracts are entered into and nalized within the exchange, all contracts become legallybinding agreements.

The Chicago Climate Exchange began operations in 2003, recently completing Phase 1 in 2006.The exchange has now entered Phase 2, which runs until 2010. According to the CCX, it isunclear what will happen ater December 31, 2010, although the same problem was presentedduring Phase 1, and the exchange was just renewed through Phase 2. Thereore, contracts areonly legally binding through 2010. I the exchange continues, landowners will have the optiono renewing their contract or exiting rom the exchange.


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Additionally, i a landowner can demonstrate that a project has been sequestering carbon atveriable rates in years beore entering into a contract, oset credit payments can be earned thatdate back to 2003, the year the exchange began. This is, however, a very rigorous processand annual records must include inormation such as spacing, width measurements, ages, etcbeore eligibility is determined. To date, no landowners have received payments or plantingsundertaken prior to enrollment in a trading contract.

The CCX requires each landowner to set aside 20 percent o each years oset credits as insuranceagainst a rapid release o carbon rom stochastic events, such as orest res or wind storms. Thelandowner still owns the reserve pool credits, but cannot sell them until 2010. I a landownerdoes not have enough reserve pool credits to cover losses, they must buy oset credits rom themarket to make up the dierence.

Future o the ExchangeAs previously mentioned, the uture o the exchange beyond 2010 is unclear. One associate rom

the Delta Institute (see pg. 10) believes that the CCX will wait to see what the Federal government

does beore deciding to extend the program. It is likely that the CCX will continue in some orm

beyond 2010. The most plausible scenario is or the CCX to continue as the trading platorm, while

relinquishing rulemaking and regulatory control to the U.S. Environmental Protection Agency.

Sequestration Methods Currently

Accepted by the CCX:

Conservation Farming

Eligible projects implement no-till or strip-till (low till) practices on agricultural lands that did not

previously employ these methods. The CCX credits the carbon benet at 0.4 or 0.6 metric tons o

carbon dioxide (CO2) per acre per year.1 In addition to carbon sequestration, this practice involves

cultivating crops to reduce soil erosion by leaving crop residue on the soil surace rather than plowing

or disking it into the soil. According to Sustainable Conservation2, conservation arming can save a

armer an estimated $40-$70/acre/yr through savings in uel, labor, material inputs and maintenance

costs. Weeds are controlled through the use o cover crops or herbicides rather than through cultivation.

Water is also used more eciently as the water-holding capacity o the soil increases and water losses

rom runo and evaporation are reduced. For crops grown in drought-prone soils, this more ecient

water use can translate into higher yields.

1 Recent review o past research indicates that, although limited tillage systems have many positive impacts, they may notactually sequester more carbon that conventional tillage systems. (Lennon, Megan J. and Nater, Edward A. 2006. BiophysicalAspects o Terrestrial Carbon Sequestration in Minnesota. http://wrc.umn.edu/outreach/carbon.)

2 http://www.suscon.org/dairies/conservationtillage.asp


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Grass Plantings

The CCX credits grass plantings implemented ater January 1, 1999 at 1.0 metric tons o CO2 per

acre per year. Perennial grass plantings turn green aster, stay green longer, and produce more

biomass. This equates to more protein and higher value orage or both wildlie and livestock along

with sequestering carbon through the buildup o biomass. I possible, a mix o native species ograsses has been shown to have the most ecient accumulation o biomasses. Up to one cutting per

year is allowed through CCX approved contracts.

Anaerobic Methane Digesters

Eligible projects are those that were in operation any time ater 1999 and have installed biogas fow

monitoring and/or electrical metering equipment. The CCX credits methane digesters at 18.25 metric

tons o CO2 per ton o methane per year. Anaerobic methane digesters work by placing arm waste

such as manure into an air tight chamber which then harnesses emitted gasses and converts them to

energy that can be used to power nearby appliances, electronics, and even homes. The remains can

also be used as excellent sources o ertilizer.

Tree Plantings

For orestry projects, the CCX uses the level o carbon in the atmosphere on January 1, 1990 as its

baseline to measure against current levels. Thereore, orestry projects can be enrolled i the plantings

were initiated on or ater January 1, 1990 on land that was not orested, or on orested land that had been

degraded (a decrease in the quality condition o the orest) or deorested (harvested) as o December

31, 1989. Projects include aorestation, reorestation via plantings, orest enrichment (increasing the

planting density), and passive reorestation. Tree plantings in the upper mid-west average 3 to 4 metric

tons o CO2 per acre per year with some as high as 7 metric tons per acre per year.

Carbon sequestration rates are highest or orestry methods such as plantings or reorestation. (See rate

table on page 18). Sequestration rates or tree plantings will initially increase, yet will eventually decrease

over time as they are directly correlated with tree growth rates. During the early stages o plantation

establishment, trees experience the highest levels o growth, actually growing at exponential levels to

begin with. As such, they require and absorb higher levels o carbon dioxide rom the atmosphere

through the process o photosynthesis. Some o the carbon then becomes xed as it is used to maintain

the vigor o the tree through respiration. Once trees mature, and their growth rates decrease, they

sequester less carbon. However this does not begin to happen until ater 20-25 years and oten longer,

depending on the species.


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Long Term CommitmentThe backbone o carbon sequestration projects is long-term sustainability. This means that projects

enrolled into the CCX must be designed with long term commitment in mind. There are multiple ways

o demonstrating this commitment, with a ew o them highlighted below:

Establishing a conservation easement, or a term o no less than eighty years, providing that theproject land is to be maintained as orest or the duration o the easementTranser o ownership o land parcels to a land trust, qualiying non-governmental organizationor governmental body, which establishes legal protection that the project land is to be maintainedas orest or no less than eighty yearsEnrollment into CRP contract o no less than 15 yearsSigning a letter o intent stating that you as the rightul landowner will continue to manage yourlands in accordance with the CCX and aggregator contractsEvidence o membership in American Tree Farm System or other sustainable management system

Verifcation and Aggregation

Verifcation

Third party verication o sequestration levels is required or projects that sequester more than 2,000

metric tons (mT) o carbon per year. The landowner hires a CCX-approved verier to perorm the work.

For enrolled land sequestering less than 2,000 mT o carbon per year, the CCX will perorm a paper

verication, by reviewing carbon calculations and documentation submitted by the landowner.

Aggregation

Because exchange members incur transaction costs when buying and selling oset-credits, they

preer to buy credits in large amounts. As a result, the CCX requires landowners to work through an

aggregator i the project sequesters less than 12,500 mT per year. The aggregator pools credits rom

multiple landowners into a marketable package and trades the credits on behal o the landowner,

allowing exchange members to purchase large quantities o credits with low transaction costs. When

the landowner enrolls, they are making a contractual commitment with the aggregator, not the Chicago

Climate Exchange. All aggregators remove a small ee rom gross carbon credits payments in order

to sustain their business. The Chicago Climate Exchange also takes an enrollment and trading ee o

$0.20 per ton. All aggregators can enroll credits rom conservation tillage, grass and tree plantings,

and methane digesters.


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Potential Aggregators or Minnesota Landowners

The Delta Institute (DI)The Delta Institute is an Associate Member and Registered Aggregator o the Chicago ClimateExchange. The Delta Institute manages two carbon sequestration programs the Illinois Conservation& Climate Initiative and the Michigan Conservation and Climate Initiative. Although the Delta Institute

has specic programs in two states, they can aggregate credits rom any state. The Delta Institute isalso developing a CCX-approved pilot program that measures the carbon sequestration potential omature, managed orestlands. This program is expected to be available in early 2008.

Contact Information:Bill Schleizer, Associate Todd Parker, Associate53 W. Jackson Blvd. Ste 230 600 W. St. Joseph St. Ste 10Chicago, IL 60604 Lansing, MI 48933312-554-0900 x 24 517-482-8810

www.deltacarbon.org

Aggregate Credit Corporation (AGC)

The AGC, ormerly part o the Iowa Farm Bureau, is working to aggregate carbon credits rom Iowa and surroundingstates landowners or sale on the Chicago Climate Exchange. Credits can be earned through soil conserving

arming methods, tree plantings and methane capture.

Contact Informationhttp://www.iowaarmbureau.com/special/carbon/deault.aspx

(515) 225-54315400 University Ave

West Des Moines, IA 50266

The National Farmers Union (NFU)The NFUs Carbon Credit Program has earned approval rom the CCX to aggregate carbon credits. FarmersUnion will enroll producer acreages o carbon into blocks o credits that will be traded on the Exchange.

Contact Informationhttp://www.nu.org/issues/environment/carbon-credits/Dale Enerson 800-366-8331 ext.116

Forecon EcoMarket Solutions. (Forecon)Forecon is a multi-disciplinary orestry and natural resources consulting company. EcoMarketSolutions, a wholly owned subsidiary o Forecon, is an approved CCX aggregator that ocuses on

orest oset project development. They assist clients in capturing nancial returns o their orests bydeveloping, evaluating, registering, reporting, and trading orestry oset carbon credits.

Contact Informationwww.oreconecomarketsolutionsllc.comJohn Giord 716-664-5602 x-301or [email protected] East Main StreetFalconer, NY 14733

Aggregation Fee: 8 %

Payment periods:

Semi-Annually

AggregationFee:10%

PaymentPeriod:Within

30 days o the sale o

credits.

Aggregation Fee: 10%

Payment periods:

Semi-Annually

Aggregation Fee: 10%

PaymentPeriod:Payments

occur within days o the

sale o your credits


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Landowner ObligationsComplete an application orm and contract and submit the documents directly to the aggregator.1.

Required Documents (Delta Institute)

Signed Contract

Enrollment Worksheet

Farm Service Agency (FSA) Maps

FSA Crop Certication Summary (FSA-578)

Conservation Practices Documentation(CCC-509 or AD-1026)

CRP/CREP Contracts, i applicable

Tree Planting Documentation(Mgmt Plan or Planting Invoice)

Conservation Easement or Letter o Intent

Grass

XSO*

XSO

Tillage

XSO

XSO

Forest

XFO**

XFO

* XSO: Exchange Soils Osets Program ** XFO: Exchange Forestry Osets Program

Note: other documentation, such as CRP enrollment orms, may be required.

For small projects, simple landowner calculation o sequestration levels based upon provided criteria2.and variables (usually ound within a contract) is required. The status o the lands and practicesyou enroll into the exchange are subject to external review at any time.Manage lands according to the contractual agreement between landowner, the aggregator and the3.Chicago Climate ExchangeSubmit yearly project report (one-page orm) to aggregator demonstrating conormance with the4.contract requirements, veriying the number o acres enrolled in the program, the project type, and

project locations (not required by all aggregators)

A representative rom the selected aggregator will help interested landowners work through the

enrollment and verication processes.

Stackable IncentivesStackable incentives oer opportunities to reduce start up costs o entering into a carbon sequestration

project and to increase the economic viability o carbon sequestration or small landowners by

stacking other credit and cost-share programs.

The ollowing section is divided between cost-share programs that help landowners overcome the

initial cost o converting their lands to carbon sequestering methods and programs that provide

cash payments in addition to the carbon credits or lands in carbon sequestering states. Local

organizations that administer these programs will need to be contacted to ensure qualication. For

urther inormation on any o the EQIP cost reducing opportunities please see the Conservation Practice

Payment Document at www.eotswcd.org. EQIP programs are only eligible during the nal year o a

CRP contract or i no CRP contract has existed.


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Cost ReducingOpportunities

EnvironmentalQuality IncentivesProgram(EQIP) Critical

Area Planting

EQIP - ResidueManagement

EQIP Forest Site

Preparation

EQIP Tree/ShrubEstablishment

EQIP Restoration andManagement oDeclining Habitats

ContinuousCRP Cost-Share

Assistance

Erosion, SedimentControl & WaterQuality Cost ShareProgram

www.maswcd.org

Percent oCosts Covered

50% o up to:Earthwork:$1000/acreFertilizer: $35/acre

Veg Cover: $260/acreWeed Control:$10/acre

100% o up to$30/acre

50% o costs up to

$130/acre

50% o up to:Tree Planting, Coniers:$270/acreHardwoods:$310/acreVeg Cover: $350/acre

Site Prep: $110/acre

50% o up to:Tree Planting,Coniers: $270/acreHardwoods:$310/acreVeg Cover: $350/acreSite Prep: $110/acre

Up to 50%

Up to 75% or highpriority practices

Up to 50% orsecondary

LandownerInvolvement

Installment oPracticesPerorm uplandtreatment actions,

and adequatelyaddress potentialadverse impactsto conservation

Installment oPracticesPerorm uplandtreatment actions,and adequatelyaddress potentialadverse impactsto conservation

Installment o

PracticesPerorm uplandtreatment actions,and adequatelyaddress potentialadverse impactsto conservationpractices

Installment oPracticesPerorm uplandtreatment actions,and adequatelyaddress potential

adverse impactsto conservation

Installment oPracticesPerorm uplandtreatment actions,and adequatelyaddress potentialadverse impactsto conservation

Establishmento approvedcover on eligiblecropland

Installment opermanent,non-productionpractices designedto protect andimprove soil andwater quality

PracticesCovered

Permanent Vegetative

Cover - Mixed Native

Grasses

Low till armingNo till farming

Clearing of previous

vegetations to allowfor the installation of

new forests

Tree Plantings:

Conifers and

Hardwoods

Site Preparation,

seed, stock, planting

and necessary

tending

Tree Plantings:

Conifers and

Hardwoods

Permanent vegetative

cover, native

ecosystem mix

Establishing

perennial vegetations

on previously

cropped land

Critical area

stabilization

Field Windbreaks

Strip Cropping

Terraces

Other

One time payment o $40/acreUp to 10 acres may be enrolledMust be on lands that would have beenplanted as row crops

Annual payment o $30/acre/yr or up tothree yearsUp to 250 acres can be enrolled

Regeneration will be accomplished according

to a detailed orest management plan.Regeneration practices shall be done inaccordance with procedures and guidelinescontained in Forest Site PreparationForest Site Preparation should be usedin conjunction with Tree and ShrubEstablishment or seedlings and planting.

Covers between 400-800 trees per/acreWeed Control where required will beaccomplished within 24 months romplanting.At this time, the only authorized repellants areDeer Away Big Game Repellent Powder and

Plantskydd Deer Repellent.

A detailed plan is required, in accordancewith the specications outlined in the NRCSpractice standard.

Land must have been cropped our out o theprevious six years

Contact your local Soil and WaterConservation District or urther inormation


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Government

Payments

Sustainable Forest

Initiative Act

(SFIA)

http://cc.cans.

umn.edu/nryb/nrr/

SFIA_NRR.pd

Conservation

Reserve Program

(CRP)

Forest Legacy

Program (FLP)

Permanent

Conservation

Easement

www.dnr.state.

mn.us/orestry/

index.html

Payment Forms

Annual paymentbased onMarket vs.

Current UseValuesMinimumpayments o$1.50/acre,oten around$5.00/acre

Payments arebased uponthe productivityo the landin traditionalarmingmethods

One timepayment equalto the dierence

in market valueo propertybeore andater easementrestrictions are

set in place.

Landowner

Involvement

Must havea orestmanagement

plan by anapproved planwriter andrecord a 8year covenantrestricting the

woodlandrom beingdeveloped.

Installment opracticesMust providecontracts whenapplying orCarbon Credits

Prepare amultipleresource

managementplan as part othe conservationeasementacquisition.

Practices

Covered

Dedicationo land tosustainable

orestmanagement

Conversiono specied,usually highlyerodible,land intoconservationpractices suchas perennialgrasses or trees

Dedication tosustainableorest

management

Other

Annual incentivepayments aretreated as taxable

income to theproperty owner, nota rebate on propertytaxes.

As part o hisethanol push,President Bushhas proposed thatno new GeneralCRP contractsbe awardedduring 2007 &2008. However,Continuous CRPand CREP are stillbeing acceptedand the practicesallowed dovetail

well with carbonsequestrationprograms

Landownerssurrenderdevelopment rights

to the property inexchange or a onetime paymentThe ederalgovernment mayund up to 75% oproject costs, with atleast 25% comingrom private, State orlocal sources.Land must belocated within oneo seven legacyareas.


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Example Steps to EnrollmentI am a Landowner who would like to put 100 acres into mixed hardwood tree plantings for carbon

sequestration, what do I need to do?

Steps to be taken as a landowner:

You must be able to demonstrate that your land is or was degraded beore the restoration/1.

sequestration project began. For example, i you are replanting a previously harvested stand, then

you have a reorestation project. I you are replanting abandoned agricultural land, then the CCX

considers your project to be aorestation.

You must demonstrate a long-term commitment to maintain the land in trees, through either a2.

conservation easement, letter o intent, or CRP contract. Note there are no dates associated with the

letter o intent. It is an honor letter o intent. Aggregators may require additional documentation,

such as a orest stewardship plan, to demonstrate your commitment to maintain the lands in

trees.Contact an aggregator who will combine your credits with those o others until the total reaches a3.

suitable level or sale on an exchange.

In order or the aggregator to work or you, you must complete a contract with them. For small4.

projects ( < 2,000 mtCO2/yr, generally 400-500 acres) this contract includes:

Forest Oset Enrollment WorksheetCarbon Calculation Worksheet, where you calculate the amount o carbon your land willsequester based on species, age and density o planting.Veriying that you do intend to enter the land into the carbon sequestration program and thatyou will continue to manage the land in a conservation based manner or many years tocome. Your chosen aggregator will provide urther details.

Convert the land into mixed hardwood orest cover. Included in this step is the land preparation, the5.purchase o the seeds or saplings, tillage and plowing, ertilizing and planting o the trees.

Submit necessary documentation to aggregator and/or CCX.6.

Receive payments based on the sale o your credits according to sequestration accumulations.7.


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Potential Income Calculations Over

the Lie o the Contract

From the example project, based on CCX rate table through 2010, the end of the guaranteed

contract:

1. First calculate how many metric tons o carbon will be sequestered each year:

100 acres x 3.5 mT/acre = 350 mT

2. Then calculate how much o that will go directly into the reserve pool:

350 mT 20% (reserve pool tonnage) = 280 mT/yr

3. Multiply this number by the going rate or carbon credits:

280 mT/yr x $4.00/mT (based on avg. CCX rate) = $1,120/yr

4. This is your gross annual income, beore CCX and aggregator charges are applied. Proceed to

subtract these charges:

$1,120 8% aggregator fee = $1,030.40/yr

$1,030.40 (280 mT x $0.20/mT CCX trading fee) = $974.40/yr

5. This is your net annual income. Multiply this number times three (or 2007, 2008 and 2009)

to calculate your income over the rst three years:

$974.40/yr x 3 years = $2,923.20 through 2009.

Then in 2010 you get to add in your reserve pool credits. So, in 2010, the total amount o

credits or sale are 560 (350 annual tonnage plus 210 reserve pool tonnage).

560 mT = $1948.80 after fee removal

6. Total Income or the lie o the contract: $4,872.00


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Notes:

In the above example there were no stochastic events. I a stochastic event does occur on anyCCX land, credits will be taken out o the reserve pool equally rom all landowners and willthereore reduce your total income as these are no longer available or sale.

Since current contracts only run through 2010, plantings undertaken in 2007 will only beguaranteed payments through 2010, although it is likely that the program will continue beyond2010. I this is in act the case, payments have the potential to be higher in the years ollowingas the sequestration rate increases, assuming the market rate or credits remains the same (seerate table or urther details).

This hypothetical income calculation in no way refects costs that a landowner may ace whenbeginning a sequestration project, nor does it include additional, stackable payments such asCRP that a landowner may receive. Although, as previously mentioned, landowners can recoupa large proportion o the costs through government programs.

For urther inormation on the current market rate or carbon credits please visit the ChicagoClimate Exchanges website at www.chicagoclimatex.com

Example Contract:

Note: Only the irst page is provided, to view contracts o other aggregators, please visittheir websites

View the contract on the ollowing page.


17/19Page 17

APPLICATION FOR PARTICIPATION IN FORESTRY OFFSET POOLAnd

SALES CONTRACT for EXCHANGE FORESTRY OFFSETS (XFOs)

Mail Contract to:

Carbon Credit ProgramFarm Bureau Management Corp

5400 University AveWest Des Moines, IA 50266

I you have questions, Please call:515-225-5431 Contract NumberXFO-______________________

Contract Size Classifcation: Please check the appropriate size classifcation

Small________ Medium__________ Large___________

Annual CO2: less than 2,000 MT 2,001 MT 12,500 MT More than 12,500 MT

I, ___________________________, hereby apply or participation in a orestry carbon pool managed by the Farm Bureau ManagementCorporation to register Exchange Forestry Osets (XFOs) with the Chicago Climate Exchange (CCX) or the years 2003-2010 on _________acres o property that I own or control. I hereby attest that I hold ull legal title to the Greenhouse Gas mitigation rights registeredas CCX Osets that are associated with the acilities and sites included in the registered project. I hereby agree that the orest projecthas as a primary purpose the long-term storage o atmospheric carbon in accordance with the CCX terms o participation and thatit is the intentions o the owners o the enrolled orested lands to maintain such lands in compliance with the principles and practiceso sustainable orestry production systems. I hereby attest that the project is in the U.S. and* involves orestation (which includesaorestation or reorestation) and orest enrichment, via plantings and/or natural regeneration initiated on or ater January 1, 1990, onland not orested, or on orest land that had been degraded or unorested on December 31, 1989 The quantity o XFOs to be issued toa CCX-registered orestry project shall be based on the annual increase in stored carbon (expressed in metric tons o carbon dioxideequivalence) on eligible sites included in the project during years the 2003 through 2010. I urther agree that I will abide by the rules othe CCX as they pertain to XFOs and to the conditions or Pool participation as set orth in this Agreement.

Statement o Intent to Maintain Forest Cover and Manage Forestry Oset Land in a Sustainable Forestry System: I hereby attest thatit is the intent o the owners o the property enrolled in the Chicago Climate Exchange Forestry Oset program through this Iowa FarmBureau Management Corporation contract to maintain the enrolled land in orest cover and to manage such lands in compliance withthe principles and practices o sustainable orestry systems.Purchaser agrees to buy and seller agrees to sell and deliver to purchaser ree rom liens and encumbrances at 5400 University Ave,West Des Moines, Iowa, the rights to the Exchange Forestry Osets (XFOs) created during the years 2003 through 2010 on land locatedat: (See Forestry Enrollment Worksheet)Seller warrants that the XFOs covered by this contract comply with all rules o the Chicago Climate Exchange and the rules orparticipation in the orestry carbon pool. In the event that the project ails to meet these requirements, all XFOs rom such land shall benull and void and any payments or XFOs delivered prior to January 1, 2011 shall be repaid subject to interest and penalties as providedin this agreement.*The transer price o the XFOs covered by this contract shall be the sales price as determined by sale through the Chicago ClimateExchange less a 10% service ee retained by Iowa Farm Bureau. Contracts acilitated by an Associate Aggregator will be subject toan additional 10% service ee which will be paid to the Associate Aggregator. Exchange oset registration ees and oset verifcationcosts are the responsibility o the oset project owner. Oset registration ees will be deducted rom pool proceeds prior to paymentcalculations.Sale o XFOs covered by this contract shall be at the sole discretion o the Purchaser, however all XFOs shall be pr iced no later thanJune 30, 2011. Payment or XFOs covered by this contract shall be made on a semi-annual basis ater pricing o the XFOs through the

Chicago Climate Exchange. The parties to this contract hereby agree that the title to the XFOs shall be automatically delivered to thePurchaser on the frst day o January ollowing the year in which sequestration occurs. Seller urther warrants compliance with the termsand conditions contained in the Agreement or the period rom January 1, 2003 through January 1, 2011.

_________________________________Date____________

Sellers Signature Purchasers Signature

_________________________________Date_____________

Farm Bureau Management Corp

Seller

Address

Farm Name

Date

Phone

E-mail

Associate Aggregator

Firm Name

Address

Aggregator Number

Phone

E-mail

City, State, Zip City, State, Zip


18/19Page 18

CCX Carbon Accumulation Tables

Table 1-1: CCX Reorestation Carbon Accumulation Tables

Dense Planting (>250 stems per acre)

Metric tons CO2 per acre per year

6-10

1.86

1.75

1.51

2.80

2.68

2.45

1.63

1.981.75

1.28

3.38

4.78

2.45

4.54

5.13

2.80

2.45

1.40

1.40

0.70

US Region and Species*

SE Loblolly

SE Slash

SE longlea pine

Delta loblolly

Delta slash pine

Southern plains loblolly

South Central Bottomland hardwoods

Appalachian loblollyAppalachian shortlea pine

Northeast white/Norway spruce

Northeast red pine

Lake States, white spruce

Lake States, red pine

Corn Belt mixed hardwoods

Corn Belt mixed sotwoods

Central States Bottomland Hardwoods

Northern Plains, mixed hardwoods

Rocky Mountains, ponderosa pines

Pacic Coast Douglas r

Pacic Coast ponderosa pine

0-5

1.51

1.51

1.40

2.21

2.10

2.10

0.23

1.631.51

1.28

2.68

3.61

2.10

3.50

3.96

1.16

1.98

1.40

1.05

1.63

11-15

6.99

6.52

5.24

7.81

7.69

6.87

2.56

7.116.52

1.40

3.50

4.66

2.56

4.66

5.36

3.03

2.45

1.51

1.28

0.82

16-20

6.17

5.83

4.78

7.92

7.69

6.87

3.49

6.415.71

2.56

3.50

5.01

4.31

4.78

3.50

1.63

2.45

2.33

3.26

0.93

* I the species and region combinations do not match your project, apply the carbon accumulation values or

the species you have that are applicable to a climatically similar climate.

Region Defnitions:

SE (Southeast): AL, FL, GA, SC

Delta: AR, LA, MS

Southern Plains: OK, TX

Appalachian: KY, NC, VA, TN, WV

NE (Northeast): CT, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VT

Lake States: MI, MN, WI

Corn Belt: IA, IL, IN, MO, OH

Northern Plains: KS, ND, NE, SD

Rocky Mountains: AZ, CO, ID, MT, NM, NV, UT, WYPacic Coast: CA, OR, WA

Special Addition:

For Arkansas Oak (hardwoods), CCX has established the ollowing carbon sequestration rates:

Years Since Planting

6-10

2.48Oak (Hardwood)0-5

1.63

11-15

2.07

16-20

2.07


19/19

Gulf of Mexico

Atlantic

Ocean

Pacific

OceanMexico

-120-130

-110

-110

-100

-100 -90

-90

-80

-80

-70

30

30

40

40

Zone A: 0.6

LRR G/H: 0.6, if irrigatedZones D/F: 0.2

Zone C: 0.32Zones B/E/G: 0.4

Carbon Sequestration Rate (metric tons/acre/year)Conservation TillageSoil Offset Map

Carbon Sequestration Rate (metric tons/acre/year)Permanent GrasslandSoil Offset Map

Gulf of Mexico

Atlantic

Ocean

Pacific

OceanMexico

-120-130

-110

-110

-100

-100 -90

-90

-80

-80

-70

30

30

40

40

1.0 0.4