Carbon Credits, Carbon Farming, and Carbon Programs
The following narrative is an update to information provided in a previous article about the title subject that was posted on this website. It contains a summary of additional information provided in the linked publications from Iowa State Univ. Since carbon farming and associated carbon programs are new and thus in a state of flux, information pertaining to these subjects will likely change rather quickly. Thus, producers should monitor potential forthcoming changes closely to ensure that contracts they may enter into are in their best interest over the long-term.
An Iowa State University Fact Sheet titled “Net Returns to Carbon Farming” [File A1-78] by Plastina and Jo presents the following facts about carbon farming.
• Current carbon programs seek to incentivise the development and adoption of less environmentally-contaminating agricultural practices such as cover crops and reduced tillage intensity.
• Scientists have developed conversion factors to express global warming potential of greenhouse gas [GHG] emissions into a CO2 equivalent [CO2e]. For example, the global warming potentials of nitrous oxide [N2O] and methane [CH4] over a 100-year period are 298 and 28 tons of CO2e, respectively.
• Agriculture is one of the few sectors of the U.S. economy that can remove GHG’s from the atmosphere and store C in the soil using existing technologies.
• U.S. carbon programs for farmers involve contracts that have them adopting regenerative farming practices such as minimum/no-tillage and cover crops, and certifying this environmental service in exchange for financial compensation from a private company. The stipulated regenerative practice or practices vary by carbon program.
• Some carbon programs compensate producers by type of practice that is adopted [“payment per practice”–less common], while most compensate producers for the amount of service the adopted practice provides [“payment per outcome”]. With the latter, a dollar amount is offered per ton of CO2e reduction.
• The measurement of the amount of CO2e reduction varies across carbon programs [click here–ISU File A1-76 for details], but all measurements involve a comparison of GHG emissions with the baseline of the current production system. The decline in emissions from the baseline is the carbon farming output or yield.
• Currently, carbon farming with “payments per outcome” is challenged by the lack of reliable measurements of the reduction in CO2e [click here–ISU File A1-77 for details] resulting from adoption of the various conservation farming practices.
• Calculations for carbon programs with “payment per outcome” payments assume that the only penalty for less CO2e being produced than projected is a decline in the payment to the producer.
This publication [File A1-78] also provides access to a decision tool for U.S. states that can be used to estimate the CO2e that is realized from a producer’s carbon farming. This tool is organized into four sections as follows: 1) location by county within each state; 2) current farming practices; 3) carbon farming plan; and 4) expected annual returns to adoption of a carbon farming practice or practices. The attributes for each of the sections are selected from drop-down menus once a state is selected.
There is no doubt that carbon programs will further evolve as the carbon farming component of agriculture in the U.S. expands and more producers decide to participate. The potential monetary gain from participating in the carbon farming market will likely prove attractive to those producers who need financial incentive to adopt conservation farming practices.
Composed by Larry G. Heatherly, Apr. 2023, larryh91746@gmail.com