[Terrapreta] Charcoal, Carbon Credits, and Net Present Value of TP Benefits

[Kevin Chisholm]

Dear Peter

Thanks very much.

Peter Read wrote:
> The prices quoted are usually per tonne of CO2, currently about $5 in 
> Chicago and 20 Euros in Brussels. Multiply by 44/12 for the price /t C.

This works out roughly at $US 5 and $US30, for CO2, (USA) and $18 and 
$110 for pure C. (Brussels)

Approximately what percentage mark-up would the Carbon Credit Broker 
charge? Would the above prices be the price that the Producer gets for 
his Carbon Credits, OR would they be the price that the Customer pays 
the Broker for the Carbon Credits?

There is no way that a Charcoal Producer could produce Charcoal for sale 
at $18 per tonne. However, there may be special circumstances where he 
would be able to produce it for sale at $110 per tonne.

Fundamentally, the use of Charcoal in TP must be justified on the basis 
of the its incremental agricultural benefit. If we assume that Charcoal 
in TP gives a return with aNet Present Value  equivalent to $50 per 
tonne of Charcoal applied, then if he can get Charcoal for $50/tonne, he 
could break even. Since Charcoal will probably cost about $100 to $200 
per tonne, there is no way Charcoal could be used in TP in the US; if he 
could get Charcoal for $100 per tonne, and get the benefit of a $18 
Carbon Credit, his Revenue per Tonne of Charcoal applied would be about 
$50+$18-$100 = -$32 per tonne Charcoal. He would need to get a NPV 
benefit of $82 per tonne of charcoal plus the $18 Carbon Credit in order 
to break even by applying $100 Charcoal. With the same NPV benefit and 
the same Charcoal Cost, the arithmetic for Brussels would be 
$50+$110-$100 = $60 per tonne C applied

In simplistic terms, in the US, the Carbon Credit must be about 2 times 
as much as  the present Carbon Credit for the Farmer to justify Charcoal 
application, assuming a charcoal cost of $100 and a NPV for the benefits 
of $50, per tonne carbon. With the presently low Carbon Credit in the 
US, TP implementation success will depend strongly on the NPV of its 
benefits.

If the selling price of TP grade Charcoal is $US 200 per tonne, the NPV 
of the Charcoal Addition must be in the range of $150 and $90 in the US 
and and Brussels, respectively, assuming the same value for Carbon Credits.

Best wishes,

Kevin