|
What are carbon credits?
Carbon Credits
– Carbon Credits are credits for the carbon that has been sequestered as
a result of the efforts of Project Owners to minimize the release of
Greenhouse Gas emissions into the atmosphere. The credits are issued by
the Chicago Climate Exchange (CCX). The CCX sets the standards for
these credits and issues them to project owners on an annual basis once
all of the program requirements have been confirmed.
Carbon Credits (also referred to as Offsets) are classified by the type
of sequestration that occurs. The CCX authorizes a total of nine Carbon
Credit Project Types. The CCX website lists and explains each of these
projects. Through the KyCGA/KySGGA Carbon Trading Program, farmers and
landowners can enroll Soil Projects.
- Soil Projects are separated into 2 subprojects
- Continuous Conservation Tillage
- New Grass Cover Plantings
Soil Projects
– Soil Projects earn Offsets (XSO’s) for carbon stocks that are built in
the soil through the photosynthetic process. For instance, for every
year that a farmer uses conservation tillage practices, he is preventing
the release of that carbon into the atmosphere. Through a Carbon Credit
Program, the farmer is issued a XSO for the carbon that he sequesters in
the soil by the no-till practice. These credits are issued on a per
acre basis and have financial value. The credits are traded as a
commodity on an exchange that is modeled after the Chicago Board of
Trade. In a similar fashion, XSO’s can be earned by farmers who
establish acres into permanent grass cover.
Trading Credits
– Once credits have been issued, they can be traded. The CCX
administers the platform that these credits are traded on. For
efficiency purposes, individual Project Owners are typically required to
access the CCX Trading Platform through an Aggregator (similar to a
stock broker). KyCGA/KySGGA became an Aggregator in 2006. A complete
list of Aggregators can be viewed on the CCX’s website. Just as a stock
broker would, Aggregators typically charge a service fee for
representing Project Owners. The most common rate charged by
Aggregators is 10 percent. However, the KyCGA/KySGGA Carbon Trading
Program does not charge a service fee to Soil Project Owners in
Kentucky. The rate charged to Soil Project Owners in other states and
to Forestry Project Owners will be 5 percent.
Additional Resources:
|
