Credit Stacking

In October 2015, EPRI announced PDF (31 KB) $2 million in private and public funding that will expand the scope of the Project. Of this, the U.S. Department of Agriculture (USDA) awarded a $300,000 Conservation Innovation Grant to develop "credit stacking" of nutrient and greenhouse gas emission reductions. EPRI is additionally contributing $200,000.

The Conservation Innovation Grant will be used to vet opportunities for creating greenhouse gas and nutrient credits using the same agricultural practice while considering concerns about double counting. For example, it may be possible to account for nitrous oxide (N2O) and nitrogen reductions from reduced fertilizer use and qualify them as greenhouse gas and nutrient reduction credits.

Background on Credit Stacking

Many conservation practices provide multiple benefits to the environment. Credit stacking is defined as establishing more than one credit on spatially overlapping areas (see figure below). Credit types include carbon, endangered species, water quality, and wetlands. EPRI initiated its credit stacking research project in 2009, with funding through the Ohio River Basin Water Quality and Greenhouse Gas Trading Project. The motivation for this research is to vet opportunities for multiple credit types in the Ohio River Basin, initially focusing on water quality and carbon with possible expansion to other ecosystem markets. To inform the Ohio River Basin effort, EPRI is conducting broader research into credit stacking activities and approaches across the United States.

Credit Stacking
Fox, J. et al. Stacking Opportunities and Risks in Environmental Credit Markets. Environmental Law Reporter. Feb 2011

Credit Stacking Research and Publications

The growing markets in carbon sequestration, water quality trading, and wetland and species banking have brought attention to the need for understanding protocols, case studies, and opinions for how credits can be stacked among these different markets. In 2009 EPRI formed a collaborative team to develop a National Credit Stacking Survey. Working with the World Resources Institute and Stetson University College of Law, EPRI launched an electronic survey in 2010 that was distributed to 1,500 key contacts in the mitigation credit field throughout the United States.

The resulting survey garnered a total of 309 responses covering agencies, bankers, researchers and private companies. The survey uncovered the current involvement in credit stacking by credit sellers and purchasers, exchanges and brokers, researchers and academic institutions, and regulatory agencies.

In February 2011, results of the survey were published in the Environmental Law Reporter. The article summarizes the current state and viable opportunities for credit stacking in the United States. Additionally, it offers a consensus definition for credit stacking (“Establishing more than one credit type on spatially overlapped areas, i.e., in the same acre”) and suggests there is need for improved clarity in the rules on transactions involving stacked credits.

In November 2012 EPRI hosted an offset credit stacking workshop. new window The workshop was thirteenth in a series of workshops sponsored by EPRI since 2007 related to greenhouse gas (GHG) emissions offsets. As part of the workshop, EPRI developed a white paper that summarizes information contained in reports and peer-reviewed journal articles on offset credit stacking. The paper also summarizes key developments related to credit stacking, including the Climate Action Reserve’s development of a Nitrogen Management Project Protocol. The paper covers the following topics: an introduction to credit stacking; case studies; recent developments; benefits and barriers; and next steps.

In January 2014, EPRI researcher Jessica Fox and co-author Royal C. Gardner published “The Legal Status of Environmental Credit Stacking” in Ecology Law Quarterly. The article provides background on environmental markets, credit stacking, and considerations for a credit stacking protocol. The authors offer six considerations to strike a balance between the public interest in environmental mitigation and the credit producers’ personal interest in financial return.

Credit Stacking in Pilot Trades

The Ohio River Basin Water Quality Trading Project plans to calculate greenhouse gas emissions reductions (credits) associated with reduced fertilizer application related to the pilot trades. To do this, EPRI intends to use the U.S. Cropland Greenhouse Gas Calculator developed by EPRI and Michigan State University (MSU-EPRI Methodology), along with other methods described in the versions of the MSU-EPRI N2O Offsets Protocol that have been approved to create GHG emissions offsets by the American Carbon Registry (ACR), the Climate Action Reserve (CAR), and the Verified Carbon Standard (VCS).

American Carbon Registry, “Methodology for Quantifying Nitrous Oxide (N2O) Emissions Reductions through Reduced Use of Nitrogen Fertilizer on Agricultural Crops” new window

Climate Action Reserve, “Nitrogen Management Protocol”  new window

Verified Carbon Standard, VM0022 – “Quantifying N2O Emissions Reductions in Agricultural Crops through Nitrogen Fertilizer Rate Reduction, v1.1” new window

Michigan State University, US Cropland Greenhouse Gas Calculator new window

Background Information on the MSU-EPRI Methodology for Quantifying Nitrous Oxide Emissions Reductions from Reduced Use of Nitrogen Fertilizer on Agricultural Crops new window (1055834)

Developing Greenhouse Gas Emissions Offsets by Reducing Nitrous Oxide (N2O) Emissions in Agricultural Crop Production new window (1020546)

Developing Greenhouse Gas Emissions Offsets by Reducing Nitrous Oxide (N2O) Emissions in Agricultural Crop Production: Experience Validating a New GHG Offset Protocol new window (1023669)

EPRI continues to explore the potential to stack water quality credits and greenhouse gas emissions offsets as part of our ongoing research.