Agriculture part of carbon solution

GENESEO, Ill. — The notion of carbon markets is not new, but has been pushed to the forefront of recent in ramped-up efforts to sequester carbon dioxide.

“The main reason to reduce those emissions is because of climate change concerns and an often-stated goal is to reach carbon neutrality,” said Gary Schnitkey, University of Illinois farm management specialist, in a Wyffels Hybrids-hosted webinar on April 5.

“Agriculture is seen as an activity that’s part of the thing that can reduce carbon emissions. According to 2019 EPA estimates, agriculture produces 10.2% of the greenhouse gases that are emitted in the United States. By far the larger parts of those emissions are transportation, electricity generation and industry.

“Agricultural activities are looked at as a sink for carbon, not as necessarily a part of the problem, and that’s sort of a good place to be and better than some of the alternatives.”

Government policy and private carbon market sectors are driving the process.

There are some ongoing government policy activities adding standards to the carbon market. There was also support for carbon-friendly agriculture built into the Build Back Better legislative package that did not make it through Congress.

“The administration has been looking at farmers as part of the solution and not part of the problem,” Schnitkey said.

Earlier Efforts

Carbon markets are not new.

“There has been interest in carbon markets for a while. We saw some of the earlier efforts. There was the Chicago Climate Exchange that exchanged emission sources for offset projects. That market worked from 2003 to 2010 and it ceased trading in 2010 primarily because of lack of interest. At that point in time, there was a price between 5 and 10 cents for a carbon credit,” Schnitkey said.

“There’s a lot of belief that it will be different this time. Part of that is because of increased demand.”

Currently one-fifth of the world’s largest publicly listed companies have net-zero emission targets.

“There are some large companies involved with that in setting emissions goals of zero of carbon. If they set that goal they have to have a way of meeting that goal and trading carbon credits is one way for them to meet that goal,” Schnitkey said.

Carbon markets work just as implied in the name — they are markets.

“Those private companies that want to meet their goals are going to buy activities that store carbons. They want climate-smart activities. Often they want new climate-smart activities — those, also, because of sequestering carbon, also have the ability to improve resilience in soil health,” Schnitkey said.

“What we’re looking at in the Midwest is corn and soybean farmers changing practices so that there’s more sequestration of carbon. That would include no-till, cover crops, nitrogen application management and other practices.”

Buyers, Sellers

There are three parts to the carbon market.

“There will be farmers that sell the carbon credits they generated to integrators. The integrators will buy those credits from farmers and hopefully sell them to private companies. The integrator firms will assure those credits are being generated and then selling them to private entities — companies that want to meet their carbon goals,” Schnitkey said.

“It’s important to point out that many companies want new carbon. For example, if a farmer is practicing no-till and cover crops and have been doing that for a while, they may be ineligible for these carbon markets. Whereas, another farmer that hasn’t done those practices and is switching may be eligible.”

The common practices in carbon markets are cover crops, changing nitrogen practices, diversifying crop rotations, reducing tillage and to some extent grazing livestock.

Stackability

“The hope is this is stackable with other government programs. If we had a government program that would provide ‘X’ dollars an acre for adopting cover crops, no-till, reduced tillage, you could combine this with a carbon credit to increase the rate of payments to the farmer and therefore the number of farmers that are interested in it,” Schnitkey said.

As it currently stands, carbon “buyers” are only entering agreements with farmers who start a new conservation practice. Those who have been long-time users of cover crops, reduced tillage and other practices are not eligible at this point.

Schnitkey believes that policy should be changed.

“They’re the innovators, yet they’re left out of these contracts. I think personally that’s something that would have to be addressed by some legislative changes, because if they’re following those practices they should be sequestering the same amount or having that same impact now,” he said.

“At this point in time I would give them the same advice as everybody else, getting into these programs will require some documentation of your practices. So, keeping those practices documented on what you’re doing is about all you can do. It is not a fair or a good idea to leave the individuals that have been practicing conservation tillage and cover crops to leave them out of the program.”

Funding

Funding for the carbon credit market is provided by private companies such as Pepsi, Microsoft and others.

“Those companies are taking the terms of what they want in these carbon markets and they’re the ones largely that are asking for the new credits — practice change,” Schnitkey said.

“Those companies want to be able to say their operation is net carbon neutral and they’re meeting those goals by changing their operation to some extent and buying carbon credits and other businesses that are changing their practices. It’s a combination of the two.

“That also raises the question of how long this market will last because if it gets expensive enough will those companies simply make changes to their practices so they can be carbon net neutral by their own practices rather than buying credits.”

His advice to farmers who are considering entering the carbon credit program is to start on one farm or one field rather than the entire operation.

“Overall, my advice to farmers probably is that these initiatives are not going to go away and that there’s going to be incentives to think about all of these practices in the future. It may ebb and flow over time but thinking about reducing tillage, cover crops, nitrogen management, those sorts of things aren’t going away, so document those,” he said.