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315234

Carbon markets galore

These days, companies are pitching carbon market offers toward farmers at the same rate that famed New York Mets pitcher Jacob deGrom hurls baseballs. Still, farmers need to connect on these offers rather than strike out, as deGrom’s hapless batters often do. 

Carbon markets pay farmers to raise crops or livestock in ways that sequester or reduce greenhouse gases – carbon dioxide, nitrous oxide, and methane – that fuel climate change. 

USDA Secretary Tom Vilsack says the structure of the current carbon market system doesn’t necessarily address the needs of U.S. farmers and ranchers. 

“I think they were set up and established for a variety of other interests,” he says. “There are significant certification and documentation requirements associated with those markets. The price of the carbon credit is not significant enough to get the attention of farmers.”

That’s why participation and interest among farmers is currently low, he says. He sees USDA’s role as reaching out to farmers and ranchers to garner their input on what will work and what won’t. This feedback will then be used by USDA to help design effective plans that boost participation by farmers and ranchers, he says.

“I’ve often said we need to learn to walk before we run,” he says. 

Private Sector

The private sector, though, is rapidly expanding existing programs. 

“We’re seeing an increasing range of offerings – from carbon aggregation and trading like Nori and Indigo Ag to traditional seed, chemistry, processors, retail packaging carbon benefits – as [major ag company] leaders look for an additional lever to retain and defend market share for their mainstream products,” says Arama Kukutai, cofounder and partner, Finistere Ventures.

Firms such as Bayer, Corteva Agriscience, and Nutrien Ag Solutions have recently offered carbon programs to farmers. 

“When you look at BlackRock and other investment companies, they’re essentially saying they will not support a company unless it has a climate plan,” says Ben Gordon, Corteva Agriscience carbon and ecosystem services global portfolio leader. “We’re seeing dollars flow into a lot of these solutions in a way that wasn’t happening even two years ago.”

Wild West

The certification process accompanying carbon programs remains sketchy. 

“Right now, it’s the Wild West,” says Sen. John Boozman (R-AR). This can lead to farmers being taken advantage of by unscrupulous parties, he adds.

“I think everybody can agree that we don’t want a situation where you’re overselling what the farm is doing regarding carbon sequestration,” says Boozman. “Just as importantly, you don’t want farms that are underrepresented in regard to their carbon sequestration.”

Boozman has co-sponsored the Growing Climate Solutions Act, a bipartisan bill that includes creation of a USDA certification program that provides technical assistance for enrollment in a carbon credit market.

“It allows farmers to gain entry into the system, particularly small- and medium-size farms,” says Boozman. “It allows USDA to interface with the farmer and provide them the information they need to get started.”

Planting corn into residue close up
Photo credit: Gil Gullickson

Details, Details, Details

Carbon markets have some perks they didn’t have several years ago. 

“The science and the technology are now better than when we started in this two to three years ago,” says Gordon. “We feel much better about going to a farmer and saying, ‘If you can generate an asset, we can sell it,’ with full confidence.”

Farmers can now better access digital tools and conservation machinery like strip-till rigs or no-till planters. 

“The whole farming system is starting to adapt,” says Gordon.

Practices first have to make sense from a return on investment (ROI) standpoint before carbon payments occur, he says. 

“We need to get away from just talking about carbon programs and address the full system,” he says. “This is more about what is right for the whole farm short-term and long-term.”

Also, farmers must realize that carbon programs differ among firms. 

“The biggest misconception is that a carbon credit is a carbon credit is a carbon credit,” says Gordon. “It’s not.”

He adds that initial carbon market decisions made now may greatly impact what carbon revenues a farmer may glean down the road. Signing up now for a low-rigor carbon program with no third-party verification may reduce future payments, says Gordon. 

For example, he says, European farmers who enrolled in rigorous programs several years ago are currently gleaning the equivalent of $40 per ton – several times over what U.S. farmers currently receive.

“Scientific rigor leads to a premium price, which leads to a better financial outcome for a farmer,” says Gordon.

Corteva’s Carbon and Ecosystems Services program takes a simplistic approach, says Gordon. Farmers enroll either online or through a Corteva adviser. They earn an estimated $5 to $20 per acre per year by introducing cover crops, reducing tillage, or both. Carbon sequestered is verified by the third-party Ecosystem Services Market Consortium, a nonprofit group that works to compensate producers who improve the environment through their agricultural practices.

The Corteva Carbon Initiative obtains carbon soil measurements through a combination of soil samples and models. This is needed to scale measurable on-farm carbon sequestration to buyers of soil carbon assets, says Jennifer Soong, a Granular (Corteva’s digital ag division) carbon scientist.

“It gives us confidence in soil carbon accounting that we’re verifying a model with soil samples,” says Soong. “We’re using a lot of the existing data that we have about soil distribution and soil types to stratify the sampling in a way that we can detect even small levels of change in carbon.”

Carbon measurement is key to making markets work, adds Gordon. 

“If you’re going to jump on the easiest carbon program that isn’t using the right science or a third party for verification, you’re putting cash flow at risk,” says Gordon.

Early Adopters

If there’s one thing about carbon markets that gets Clay Pope’s dander up, it’s leaving out farmers who have been farming climate-smart for years. 

“From a policy standpoint, we have to make sure we recognize those early adopters,” says the Loyal, Oklahoma, farmer, who also consults for the USDA Southern Plains Climate Hub. “I can think of no bigger federal policy mistake than to leave out those soil health champions who pioneered the way.”

“This was common feedback that we had received from growers in our year one program,” says Lisa Streck, Bayer Crop Science carbon business model grower program lead.

In April, Bayer enhanced its 2021-2022 program to include eligibility for growers who have adopted strip- or no-till or cover crops on fields on or after January 1, 2012.  

“We will work with growers on an individual basis as to when they started implementing these practices on their farm, and what data we need to collect from those growers,” says Streck. Participants will receive up to $9 per acre based on practices that the grower has implemented or plans to implement.

Bayer’s program also is flexible, says Streck. 

“Growers can select what fields they want to participate in the program and which practices they want to implement on those fields,” says Streck. “What we’ve tried to do with our offer is simplify a complex and evolving market and provide certainty to growers on a per-acre basis.” 

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