Carbon credits meeting

Gainesville, Fla. — Nearly 1,800 farm operators will soon receive checks for the sale of carbon credits.

AgraGate, a subsidiary of Iowa Farm Bureau, collects credits from individual farmers and ranchers and combines the credits into sizable pools. AgraGate has paid out more than $4.2 million to customers across the country who have already enrolled their no-till, strip-tilled or grass-planted agricultural land in the voluntary carbon credit market. The checks average $2,375 and cover the first half of 2008.

Dave Krog, CEO of AgraGate, said, “Our 2008 mid-year payments more than tripled from last year, when we wrote checks totaling just under $1.2 million to 1,141 participants, an average of $1,050 an operation.” He attributes the rise to an increased number of customers and credits enrolled in the CCX (Chicago Climate Exchange) by companies such as Florida Farm Bureau Federation.

Florida Farm Bureau Federation is providing Florida landowners the opportunity to participate in this program. Seminars have been held all across the state and more are upcoming in Washington and Columbia counties. The sessions are aimed at educating landowners about the benefits and risks of the new program.

Landowners with no-till, strip-till, or grass planted land, managed or new timber, and those with a methane digester are eligible for participation in the program. Payment is based on the amount of carbon being sequestered (stored) through agricultural practices and forest management.

“We’re pleased that the Florida Farm Bureau Federation has agreed to work with us as we aggregate carbon credits from farmers and ranchers in the state,” said Krog. “The market for carbon credits offers farmers, ranchers and private forest owners a brand new revenue opportunity. It’s important to partner with people who have significant experience in the state so they can help explain both the opportunities and the risks involved in the program.”

Upcoming meeting locations, dates and times include:
• Washington County Ag Center, East Wing- July 22 at 6 p.m.

For more information on the educational seminars please call Florida Farm Bureau at (352) 384-2661.

The Florida Farm Bureau Federation is the state's largest general agricultural association with approximately 135,000 member-families statewide. Headquartered in Gainesville, the Federation is an independent, non-profit agricultural organization and is not associated with any arm of the government. For more information, visit http://www.floridafarmbureau.org/carbontrading.

Frequently Asked Questions
Exchange Forestry Offsets (XFO)

Who is running the carbon credit pilot program?
    The carbon credit pilot program is being offered and managed by the Chicago Climate Exchange (CCX), a commodity exchange for greenhouse gases.  The CCX is the world’s first and North America’s only voluntary, legally binding rules-based greenhouse gas emission reduction and trading system.  The aggregator or organization that serves as the middleman between the CCX and participating landowners, is AgraGate Climate Credits Corp, a wholly-owned subsidiary of the Iowa Farm Bureau. 

What is a "carbon credit”?
    A "carbon credit," or Exchange Forestry Offset (XFO), is a market term.  Registered companies with the CCX exchange agree to voluntarily reduce CO2 emissions by 4 percent by 2006 and by 6 percent or more by 2010. Some examples include Dupont, Dow, and Ford Motor Company. Some reductions come from company change and other reductions can be from buying a carbon credit from a land owner who is managing his/her forest in a way that increases carbon sequestration on a long-term basis. A carbon credit is normally quantified in terms of "carbon dioxide equivalent (CO2e)."  One carbon credit is equal to one metric ton of CO2e.  A company cannot achieve more than 50 percent of their reductions from purchased offsets.  
                                   
How can land owners with forest land participate in the carbon credit market?
    Land owners can participate under an Afforestation program and/or under a Sustainably Managed Forest program.  Land owners are eligible for the Afforestation program if they planted trees after January 1, 1990 on land that did not previously have trees.  Under Afforestation, the land owner can not thin or harvest trees on enrolled land.  Land owners are eligible for the Sustainably Managed Forest program if they follow a certified forest management program.  Approved certification systems include Forest Stewardship Council (FSC), American Tree Farm Systems (ATFS), the Sustainable Forest Initiative (SFI), and any other CCX-approved certification system.

How do I start the process of enrollment?
    Land owners wanting to enroll in the CCX XFO market will need to work with an aggregator that is a member of the CCX.  AgraGate Climate Credits Corporation is an aggregator member of CCX.  The land owner and AgraGate will enter into an XFO contract that specifies all eligibility requirements and terms and conditions for participation.

    Contact AgraGate or one of our associate aggregators to start the enrollment process.

What is the length of time of the XFO contract?
    The XFO contract with AgraGate has a term length of 15 years.  

How many credits can I earn under the Afforestation program?
    The number of carbon credits earned under an Afforestation contract will depend on the quantification method used.  Carbon credits can be quantified by either using the CCX Carbon Accumulation tables or by using a direct measure approach with a growth and yield model.  In the CCX carbon accumulation tables, carbon credit rates are a function of geographic region of the U.S., species category, and age of trees.  With the direct measurement approach, carbon accumulation is projected over time using a CCX-approved growth and yield model. 

How many credits can I earn under the Sustainably Managed Forest program?
    Under the Sustainably Managed Forest program, carbon credit accumulation can only be estimated using the direct measurement approach and a growth and yield model.  The aim is to estimate net carbon accumulation over time and account for carbon accumulation as well as carbon loss due to harvest, fire, insects, disease, and other carbon losses. 

Can I get credits for long-lived wood products?
    Yes, land owners can receive carbon credits for long-lived wood products if there is sufficient and verifiable documentation on harvested timber going into long-lived wood products.

What happens if I have signed an Afforestation contract, and I need to thin my stand?
    If you have entered into an Afforestation contract and then come to a point in time that you need/want to thin your enrolled stand of trees, you will be allowed to transition out of the  Afforestation provisions of the contract and into the Sustainably Managed Forest provision of the contract.  It is very important that the land owner transition to a Sustainably Managed Forest contract prior to thinning an Afforestation stand of trees.  If the land owner does not transition to a Sustainably Managed Forest contract, then they will be out of compliance if they thin their Afforestation stand of trees. 

Are any credits I earn held in reserve?
    Yes, the CCX requires that upon registration, 20 percent of your earned credits by held in reserve.  Credits remain in reserve for five years after which they are released into the sellable pool of credits.

What happens if I am go out of compliance with my XFO contract?
    If you go out of compliance with your XFO contract, a credit recovery process is required.  That is, you will be required to replace all credits earned to-date under the contract.  You can replace or recover credits using reserve credits and purchased credits.

What happens if some or all of my enrolled trees are destroyed by fire, insects, or some other natural disaster out of my control?
    In the case of a natural disaster (i.e., fire, wind, insect damage, disease) that destroys all or part of your enrolled trees, your risk is limited to credits that you have held in reserve.  Your reserve credits will be used to replace lost credits due to natural disaster but if you do not have enough credits in reserve then reserve credits from your pool are used to replace your lost credits.  The XFO pool that you are in uses the pools reserve credits to “self insure” against natural disaster losses in the pool.

    In any event, the credit recovery for losses due to events beyond the control of the land owner is limited to forfeiture of credits held in the reserve account.
How much will I get paid?
      AgraGate will sell the aggregated carbon credits on the CCX board at the time of its choosing. The exact amount depends on market conditions at the time of the sale. In December of 2007, prices traded under $2.00/credit.  Recently, in April of 2008, prices are trading over $6.00/credit.  Prices go up or down on a daily basis. When AgraGate makes net proceeds distributions to land owners, fees are deducted.  AgraGate Climate Credits Corporation retains 10 percent of the gross revenue and an additional 10 percent of net revenue is deducted if an Associate Aggregator is involved in the project.  In addition, CCX fees are subtracted (currently $0.20 per credit) and verification fees are also subtracted.  Verification fees will vary but will likely range from $0.20 to $0.25 per credit.  

When will I get paid?
     Currently, payments are made twice per year – in July and December. 

What if some other exchange comes along in the next five years that will pay me more? 
    For the period covered by this contract, the credits will be registered and traded through the CCX.  New members are joining the CCX on a regular basis and it is hoped that new buyers will participate in the CCX market.  You will not be allowed to register the same credits on more than one exchange.

Why sign now?  I’ll wait for more money from someone else.
    There may never be a “someone” else. It is highly unlikely that future programs will recognize credits for activities in previous years that have not been registered or verified.

What are the upfront costs to the land owner?
    AgraGate does not require payment of any "up front" costs for participants in our XFO program.  Associate aggregators and/or forest service providers working with AgraGate may charge a fee for forest cruise or other services.
Can I sell land that I have enrolled in the XFO program?
    Under CCX rules, if XFO-enrolled land is sold to another party, the XFO contract can be transferred to the new land owner.  If the new land owner refuses to enter into an XFO contract, the contract will be considered out of compliance. 
Will my enrolled land be subject to an audit?
   Once per year, 10 percent of all XFO contracts will be selected for an on-site verification audit.  If you are selected, you will be contacted and informed about when the on-site verification visit will take place.
How does the annual certification work?
    Each year, participant land owners will be sent certification forms to be completed and returned to AgraGate.  Participants will certify that their enrolled land is still in compliance.  If acreage adjustments are needed, those adjustments will be indicated on the certification forms.  Also, the participant will report any harvest activity on the certification forms.