What are emission offsets?

In Alberta, the TIER imposes an emissions benchmark on facilities that emit 100,000 tones or more of GHG emissions (and smaller emitters that voluntarily opt-in). Facilities subject to TIER must meet their emissions benchmark by reducing their year-over-year operating efficiencies or, to the extent they cannot meet the benchmark, they must either:

• contribute money to the TIER Fund to obtain a “fund credit” for each tone of excess emissions the facility produces;

• submit emission performance credits generated by a TIER-regulated facility that reduced their emissions to below their benchmark in the current or previous compliance year; or

• submit emission offsets generated under an approved emission offset protocol. Facilities subject to Alberta’s TIER regime are exempt from carbon pricing under the federal GGPPA

How are emission offsets generated?

Emission offsets are generated by facilities that undertake a project or activity in Alberta that results in the reduction or sequestration of GHG emissions. The facility must also meet the standards set out for the quantification of offsets in an approved quantification protocol, verify its offsets through a qualified third party, and submit project information required by Alberta’s Standard for Greenhouse Gas Emission Offset Project Developers for its offsets to be registered in the Alberta Emissions Offset Registry. Each properly registered offset represents one tone of CO2e that a TIER-regulated facility can purchase and use to effectively offset the number of excess tones of CO2e it produces in a given year, relative to the applicable benchmark.

What activities can be used to generate offsets in Alberta?

Quantification protocol

Only activities covered by an approved quantification protocol can qualify to generate emission offsets. Alberta currently has 19 approved protocols, of which the following are most directly applicable to agriculture:

Quantification Protocol for Agricultural Nitrous Oxide Emission Reductions (e.g., on-farm practices to reduce emissions from nitrogen sources and reducing fuel use associated with the management of synthetic fertilizer, manure fertilizer and crop residues)
Quantification Protocol for Reducing Greenhouse Gas Emissions from dairy (e.g., manure handling and sequestration practices and new technologies in the finishing stages of injection of manure)
Quantification Protocol for Solar Protocol (e.g., the use of a genetic merit trait procedure in renewable power )
Quantification Protocol for Cogen waste heat capture Production from Combustion
Quantification Protocol for Energy Generation from the Combustion.

Agriculture operations may also be able to generate emission offsets pursuant to quantification protocols approved for solar and wind-powered electricity generation, distributed renewable energy, and energy efficiency projects (e.g., emission reductions through facility improvements).

What is an emission offset worth?

The price of an emission offset in Alberta is driven by supply and demand. However, the price of a TIER fund credit – currently $40 per ton – effectively acts as a price ceiling. Using 2019 as an example, data shows that the price paid for emission offsets in the province varied month-to-month between the TIER fund credit price and $10 below the fund credit price (see the 2019 data [PDF]). Because the federal OBPS also provides facilities subject to the regime with the option to pay an excess emissions charge to comply with emission targets, the federal regime has the same effective price ceiling for offsets that will be generated in accordance with protocols under the proposed Greenhouse Gas Offset Credit System Regulations. As noted above, the federal carbon pricing threshold is expected to increase annually by $15 per ton, from $40 per ton CO2e in 2021 to $170 per ton in 2030. This in turn will increase the ceiling on the value of emission offsets, and drastically increase the potential benefits of generating and selling emission offsets in Alberta.

Offset Project Description

Projects that are implemented according to this protocol can generate carbon offsets by committing and switching to an integrated set of Beneficial Nitrogen Management Practices (BMPs) for annual cropping systems. These BMPs manage applied nitrogen (N) sources in a more comprehensive and sophisticated way to reduce overall nitrous oxide (N2O) emissions associated with nitrogen fertilizer application.

This quantification protocol is written for professionals with experience and expertise in agronomy, which may include farmers, project developers and/or aggregator representatives. Agricultural professionals will be assisting farmers in designing and implementing the 4R Plan. These professionals must be trained and accredited to apply this protocol. More detail on this accreditation program is given in the next few sections. The project developer/aggregator will work with the farmer and agricultural professional to complete the project(s) in accordance with this protocol and the criteria of the Alberta Offset System.

Protocol Scope

The scope of this protocol is limited to on-farm reductions of emissions from nitrogen sources and fuel use associated with the management of synthetic fertilizer, manure fertilizers and crop residues. Greenhouse gas (GHG) reductions associated with carbon sequestration in the soil and off-site emission reductions affected by the manufacture and distribution of nitrogen fertilizers are excluded from the protocol.1 The exclusion of off-site reductions of fertilizer manufacturing increases conservativeness in emission reduction calculations and limits the scope of quantification to those sources, sinks and/or reservoirs for which data are readily available.

Other emission reduction activities, where quantification protocols exist, may be used in conjunction with this protocol upon director approval. Project aggregators will be required to present Offset Project Plans covering included farms for an entire crediting period (i.e., carbon offset project plans span the entire eight-year crediting period and any crediting period extension). Aggregated project planning sheets (APPS) may only contain each farm that has committed to implementing the protocol activity for the entire crediting period.

Emission Reduction Activity

Application of nitrogen from synthetic fertilizer, biological fixation, manure fertilizer and crop residues are an important component of agricultural production. Fertilizer-derived nitrogen, like any form of soil mineral nitrogen2 (or free or soluble nitrogen), is subject to emission as N2O either from nitrification/denitrification pathways in the soil, losses through leaching of nitrate, and/or volatilization and redeposition of ammonia gas. BMPs, which synchronize the availability of nitrogen with the requirements of the crop, minimize the emissions of N2O per unit of crop mass. 3 This protocol minimizes these N2O emission pathways by managing on-farm applied nitrogen sources through the implementation of the BMPs in the 4R Plan, resulting in:

• Optimization of the crop response per unit of added nitrogen; and,

• Minimization of the risk for nitrate-N to accumulate or persist in the soil where it is

potentially denitrified and/or emitted directly or indirectly as N2O or lost to the system through leaching and runoff. This 4R Plan is a risk-based approach, informed by over 40 years of peer-reviewed research on the effect specific management practices have on the biological processes that lead to nitrogen losses in North American cropping systems.