Farmers can find a lot of reasons to enhance soil health practices that sequester carbon on their farms. Making a lot of money from the carbon market might not be one of them, at least not yet.
“It’s a rapidly changing market,” says Luis Ribera, professor and Extension economist, Texas A&M AgriLife Extension, College Station.
Ribera, speaking at the recent Texas Plant Protection Association Annual Conference in Bryan, said the cap-and-trade carbon markets are driven by industry willing to buy credits in lieu of making expensive changes to facilities and practices.
Driving the market are government regulations dating back to the American Clean Energy and Security Act of 2009. “Because polluters’ emissions were capped, their costs would increase either by adopting technology to reduce emissions or from buying offsets,” Ribera explained.
Goals include a 50% reduction in greenhouse gas emissions by 2050, compared to 2005 levels.
Agriculture offers an opportunity to sequester carbon and build credits through enhanced conservation measures. Reduced tillage and adding cover crops are two options farmers might consider.
Ribera cited several opportunities where farmers might make changes to build carbon credits. Improving agriculture soil management, managing methane production in livestock operations, and managing manure treatment are possibilities.
Other agriculture sources of greenhouse gas include rice cultivation, urea fertilization, liming, and field burning.
“Agriculture is responsible for 9.6% of all U.S. greenhouse gas emissions,” Ribera said. “That’s a pretty good deal for our food supply. But we can do better depending on market incentives.”
He said the Biden Administration has considered mostly carbon banks and climate smart practices, but a push by the environmental community has upped the ante to include regenerative agriculture.
“Farmers are already doing many of the recommended practices,” Ribera said.
Monetizing those practices might not be as lucrative as some reports have indicated.
“Some discussions in the press indicate that companies are buying carbon credits and paying up to $100 per ton,” Ribera said. “That has not been verified.”
A market does exist, mostly in the Midwest—Illinois, Indiana, and Iowa—offering farmers who switch to no-till and cover crops an opportunity to sell credits. “Average payment for those actually receiving payment in the Midwest is $20 per ton,” Ribera said.
He said much of the revenue from carbon credits goes to brokers, the middlemen who work between those who sequester carbon and the industries that need to buy the credits.
Payments to farmers, Ribera said, may be closer to a $4 to $12 per acre range.
He said carbon buyers, “based on discussions with farmers, require a substantial amount of information. Most brokers only want to sign up farmers who will begin to use no-till. They do not want to pay for practices that were adopted in the past. A number of Texas producers have already been using no-till as a management practice.”
He added that the number of tons that can be sequestered will vary across regions. Most of the carbon activity for now is in the Midwest.
Ribera advises producers to watch the carbon market and analyze how changes that would meet carbon market requirements would affect their operations.
For more information on cap-and-trade systems, Ribera refers producers to AFPC Research Report 08-3, Carbon Markets: A Potential Source of financial Benefits for Farmers and Ranchers. (Ribera, Zenteno and McCarl)