At dawn of carbon markets, farmers get up to $20 per acre

A small fraction of U.S. farmers who have pursued contracts for capturing carbon in the soil – an incentive for climate mitigation – say the going rate is $20 an acre or less, said Purdue University on Tuesday. Companies that sell carbon credits to entities trying to offset their greenhouse gas emissions say the market is still in its infancy and prices will become more robust as demand rises.

Payment rates of $15 or $20 are commonly mentioned at present for each ton of carbon dioxide that is sequestered or preserved through reduced emissions. The carbon credits created when carbon is sequestered are sold to those who are trying to reduce their own carbon emissions, such as manufacturers and airlines. Growers who adopt practices such as cover crops or minimum tillage can remove from 0.2 to 1.5 tons of carbon per acre per year, says Nori, a carbon removal marketplace.

Agriculture Secretary Tom Vilsack has listed income from carbon markets as one of three potential revenue streams for mitigating global warming. The others include the conversion of agricultural wastes into products ranging from chemicals to fabrics, and capturing methane from manure for use as a renewable fuel. President Biden has a goal of seeing American agriculture being the first in the world to achieve net-zero emissions.

Around 30% to 40% of producers are aware of the opportunity to earn money by capturing carbon on their farms, said Purdue, which surveys large-scale farmers and ranchers monthly for its Ag Economy Barometer.

“Among the relatively small percentage of respondents who reported carbon sequestration rates that were offered, approximately 80% said payment rates were $20 per acre or less, with about half of those indicating a payment rate of $10 per acre or less,” wrote Purdue economists James Mintert and Michael Langemeier in the April edition of the barometer. Two months ago, Purdue said 6% to 7% of farmers were actively engaged in discussions about carbon payments.

At those prices, growers could spend more on cover crops than they would see in a carbon payment. The seed, equipment, and labor for cover crops ranges from $15 to $75 an acre, says the Sustainable Agriculture Research and Education Outreach initiative. On the other hand, Midwestern farmers spent hundreds of dollars an acre to grow corn and soybeans in recent years with relatively small returns, if any, on rented land.

“The good news is there is growing demand for these services,” said Land O’Lakes vice president Jason Weller at a farm conference last month. “We need to have more consistent demand and larger demand” to put carbon markets on steady footing. A Land O’Lakes subsidiary, Truterra, announced a deal early this year in which Microsoft will pay $20 per ton for carbon sequestration.

On its website, Nori said its Nori Carbon Removal Tonnes sold for $15 each plus a cryptocurrency token in 2020. Another carbon marketer, Indigo Agriculture, said “potential gross income from enriching your soil” was up to $30 per acre per year, based on adoption of sequestration or abatement practices that generated two carbon credits per year. Growers average 0.3 to 1 credit per acre in their first year, it said.

To capture carbon, growers often are required to adopt practices such as cover crops, diversified crop rotations, less or no tillage, and less use of fertilizer or more precise applications of it. Advocates of cover crops say they carry benefits of their own, such as lower fertilizer and herbicide costs or modest increases in yields from improved soil health.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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