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Nevin Rosaasen, APG Policy & Program Specialist POLICY UPDATE A CRASH COURSE IN CARBON PRICING, MARKETS AND OFFSETS Government policies have the poten al to greatly impact the compe veness of certain sectors. The problem with regula ng oceans and the atmosphere at the interna onal level is that there is a fine balance between doing nothing, the status quo, and doing something due to societal pressures, norms or stated societal desired outcomes. Natural resource economics refer to regula ng oceans and atmosphere, the tragedy of the commons. Unless everybody stops dumping garbage into the commons, the ac ons of few have li le to no impact. In the case of carbon dioxide and the atmosphere, there exists a concept of race to the bo om. The jurisdic on where environmental regula ons are the most lax is o en the centres of dir est industry, where the cost of produc on is lowest. Think of China. Not only has it become the factory of the expor ng world, it has also become the smoke stack. Here in Canada, we have a fragmented patchwork of carbon pricing, whether through carbon taxes, cap and trade, measure and trade, or cap and tax programs. The complexity of understanding the shared jurisdic on between the feds and the provinces has resulted in some provinces aligning with California and the Western Climate Ini a ve, where some provinces that have closer es to the eastern US seaboard and energy markets to contend with have regional similari es. Some provinces have rebuked federal efforts to price carbon altogether and will be forced to take ac on and announce new policies in the coming months. What does this mean for agriculture and farmer par cipa on in the de-carbonizing of the Canadian economy? First off, the ac ons that producers have taken, in absence of regula ons to reduce their emissions has not been recognized. Long ago, farmers moved away from summer fallow and towards con nuous cropping removing by far the largest CO 2 emi ng prac ce. "It is time government and society pay farmers for the emissions they sequestered or avoided emitting altogether." Farmers have been adop ng new technologies including GPS, autosteer, sec onal control, conserva on llage, 4R nutrient stewardship, and precision agriculture and other prac ces that either mi gate CO 2 emissions at the stack, or sequestering carbon in soils. Policy makers, technocrats and natural resource economists determine the three pillars of establishing quality carbon offsets: Addi onality, Permanence and Baseline. Addi onality relates to beyond business as usual, meaning the prac ce of changing to generate an offset must have been ini ated due to the offset itself, rather than business as usual. Farmers reduce costs in order to remain compe ve and remain financially viable. They o en adopt cost reducing prac ces to ensure they remain profitable. Permanence relates to whether or not emission reduc ons can be re-emi ed over me. The conserva on offset protocol for example - should a producer revert to llage, the carbon sequestered is at risk of being re-emi ed. Baseline is the most important factor – determining what date the emissions are measured from and includes within it, the ques on of emission boundaries – where technocrats will set the boundaries of where they start measuring emissions, in the life cycle so to speak, as well as where the emissions end. 8

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