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Obstacles to Canada's Carbon Credit Trading

12 February 2009
Alberta Agriculture, Food and Rural Development

ALBERTA, CANADA - Producers looking to sell under Alberta’s carbon offset system have to meet a series of requirements in order to participate.

“Alberta’s carbon offset system is one of the mitigation tools the Government of Alberta has come up with to combat rising greenhouse gas emissions,” says Kerrianne Koehler-Munro, climate change program planner with Alberta Agriculture and Rural Development, Edmonton. “In order to negotiate a sale of an offset, a producer must evaluate their options, prepare to receive an offer, negotiate the terms of the offer, negotiate the contract, and then follow through with the delivery.”

According to Alberta's Agriculture and Rural Development, issue of Agri-News, Despite the potential gains that can come from participating in the carbon market, system designers caution producers from entering into the market blindly. “Before rushing into the market, all buyers and sellers should look at all the options,” says Koehler-Munro. “Both parties involved in a sale must evaluate their appetite for risk, the opportunities available and the costs associated with taking action.”

Although the task of selling carbon credits may seem complicated, there are private services available that can make the job easier. These can include help for producers with data collection and reports, finding buyers and increasing thAe attractiveness of the sale.

Various details about the carbon credit need to be established before an offer or bid can be made. The seller must set a base price, and specify the type of project, the number of potential offset credits available, and any specific terms that are required.

The search for the second half of the equation, a party to buy the carbon credits, can be a potential obstacle for the seller. However, the search is not necessarily a difficult process. “Finding a purchasing party can be as simple as posting the verified tonnes with the required documentation on the Alberta Emission Offset Registry or hiring a broker to pitch on the seller’s behalf,” Koehler-Munro says.

Once a potential buyer has been found, negotiations of both the terms of the offer and the business terms of the transaction are discussed. The final steps are contract negotiation and delivery, which are the formalities that should follow the negotiation of the terms of the offer or bid.

The speed and time of the transaction for offset credits is unique to each individual agreement and situation. Transactions can occur at any point in the process, and the transaction speed will depend on the sophistication of the parties, the nature of the transaction and the risk sharing profile.

“With the right people helping and a clear understanding of the system, the trading process can be relatively straight forward if the required steps are followed,” adds Koehler-Munro.

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