Carbon offsets: Landowners’ wave of the future?

By Holly Michels, of The Montana Standard - 12/09/2007

Sue Peterson and her husband Randy raise cattle from their ranch near Drummond, and are branching out to a non-traditional commodity.

With the help of the National Carbon Offset Coalition, based in Butte, the Petersons will sell carbon offsets. Though you can’t see or touch offsets — and many people are unsure of exactly what they are — national corporations like Ford Motor Co. and DuPont are gobbling them up.

The coalition, 305 W. Mercury St., is one of the early players in carbon trading, a new market Executive Director Ted Dodge predicts will become mainstream. His company is starting an outreach program to make southwest Montana landowners aware of the benefits of carbon offsets.

“At this point carbon markets themselves are emerging,” Dodge said. “There’s an increasing interest and it’s beginning to appeal in terms of value to a farmer or rancher.” So what exactly are carbon offsets?

“It’s a way to reduce carbon dioxide emissions modeled after the stock market,” Dodge said. “We trade carbon just like other stocks on a stock market.” Sound confusing? Dodge doesn’t think so.

How it works It works like this: A landowner in Montana reduces the amount of carbon dioxide put off from working his or her land. For farmers, that could mean implementing a no-till operation, since digging up the soil releases excess carbon.

The amount of carbon that landowner saves is measured by the coalition, and then sold in a type of stock market. For the coalition, it’s the Chicago Climate Exchange, North America’s only place to trade the gas.

Who would want to buy carbon?

Most customers are corporate manufactures that want to reduce their emissions, but can’t at their own factories because it’s too expensive or not feasible.

“Let’s say Ford (Motor Co.) promises to reduce their carbon emissions by 6 percent,” Dodge said. “Now they can’t capture all emissions they produce and it might be cheaper for them to buy an offset from a rancher in Montana to meet their goal.” The Petersons just signed a contract with the coalition to offset carbon using rotation grazing.

“We have 12 pastures, and the cattle are rotated through them so they don’t hit certain areas very hard,” Sue said. She and Randy bought the ranch in 2003 and started fencing off separate pastures to move their cattle before hearing about coalition.

“It’s something we would do anyway,” she said. “We didn’t have to change our management style to apply. We’re very conservation-minded. That’s one reason we divided our place into all these pastures, so we could grow more grass.” Cattle will spend two months in each pasture, allowing the vegetation to re-grow between grazing.

“It really helps because the cows are always on fresh grass. They do better, there’s more grass for the wildlife, it’s healthier for everyone,” Peterson said.

The Petersons aren’t sure how much they’ll receive for the offsets they sell. It’s not a lucrative trade, she said, but it helps.

Future profits John Talbott, deputy director and project manager of the Big Sky Carbon Sequestration Partnership, said carbon trading won’t bring in buckets of money for landowners now, but that might change in the future.

He said it’s almost impossible to estimate how much the average rancher could profit from trading, but some estimates put it at about $300 for every 100 acres.

“It varies so much by management practice. Crop lands sequester more carbon than rangelands,” he said. He estimates the average crop land can sequester about a half-ton of carbon per acre. Dodge said carbon sells for anywhere between $1.80 to $4.10 a ton.

“All the carbon markets are voluntary right now,” he said. “But that might change.” To those who are skeptical that reducing carbon in southwestern Montana’s air will have little effect on cities like Detroit, Dodge understands. But he thinks some progress is better than none.

“So what’s the other alternative?” he asks. “A ton of CO2 taken out of the air is a ton of CO2 taken out of the air.” He and his wife, Emily Tafoya, started the coalition in 2001 when “we realized carbon credit trading was going to be real at some point,” Dodge said.

After several grants, he made his first trade on the Chicago Climate exchange between The Confederated Salish and Kootenai Tribes and a London company.

Now he’s partially funded by the U.S. Department of Energy and works closely with the Big Sky partnership at MSU. The coalition is run by a board made up of the leaders of seven local nonprofit groups, and 1 percent of every sale it makes is funneled back to the board to invest locally.

Getting started To start carbon trading, landowners like the Petersons fill out an application to see if their project meets coalition requirements. Projects can range from no-till farming operations to sustainable stocking rates.

“If they’re no-tilling, we’ll take it. If they’re having an appropriate number of cattle on their land, we’ll take it.” Projects can only be submitted for work the landowner is already doing or plans to do. That, Tafoya said, helps keep coalition out of the business of controlling what private parties do on their land.

“They come to us with their submissions,” she said. “They set it out. It’s not like we’re in the business of land management.” After a stringent technical review, approved projects are sent to the Chicago Exchange in cycles. Then they are put up for trade.

A third-party review system makes sure the projects are being carried out as specified and are offsetting the claimed amount of carbon.

Dodge stressed it’s a “first-run strategy.” “There’s no silver bullets, just a lot of silver BB’s. But it’s something we can do now. Some folks see it as a license to pollute, but until someone comes up with something better this is the best tool we have in the tool box.” Reporter Holly Michels may be reached via e-mail at holly.michels@lee.net.