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Economist compares carbon credit, ecosystem service programs

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FORMATIVE STAGES: Plastina says when it comes to carbon credit programs, much is still unknown, or at least is not yet known publicly. "What we are seeing so far is more a patchwork than a market," he says. "There are different rules, incentives and penalties depending on the program. The market is still in its formative stage and is very dynamic, focused on testing protocols through small-scale pilot programs, and lacks transparency and liquidity."
ISU's Alejandro Plastina compares programs based on payments per new carbon credit, cost of participation, eligible crops, credit verification and more.

With multiple carbon credit options and incentives now available, an economist with Iowa State University Extension and Outreach has compiled a comparison of programs and what is being offered to farmers.

Alejandro Plastina, associate professor in economics and Extension economist at ISU, compared 11 private voluntary programs across 26 characteristics, in a new report called "How to Grow and Sell Carbon Credits in U.S. Agriculture."

The report is featured in the July Ag Decision Maker and was co-written with Oranuch Wongpiyabovorn, a graduate research student at ISU.

The programs compared include two carbon and ecosystem services credit entities (Ecosystem Services Market Consortium, or ESMC; and Soil and Water Outcomes Fund), two carbon credit entities (Indigo and Nori), four input suppliers (Agoro Carbon Alliance, Bayer, Corteva and Nutrien), and three data platforms (CIBO Impact, Gradable and TruCarbon).

Comparisons are made on such things as payments per new carbon credit, cost of participation, eligible crops, credit verification and much more.

"We thought that creating these comparisons would serve as a baseline for farmers, policymakers, Extension personnel and others, to help understand what is known and unknown at this point," Plastina says.

As it turns out, Plastina says much is still unknown, or at least is not yet known publicly.

Market patchy so far

"What we are seeing so far is more a patchwork than a market," he says. "There are different rules, incentives and penalties depending on the program. The market is still in its formative stage and is very dynamic, focused on testing protocols through small-scale pilot programs, and lacks transparency and liquidity."

According to the report, programs are offering $15 to $20 per carbon credit for pilot program participation, and each company calculates credits differently based on a different set of conservation or carbon sequestering requirements.

While most programs pay per carbon credit, some pay per farming practice; others, such as the Soil and Water Outcomes Fund, pays per acre for selected farms in selected counties that are making improvements related to carbon, water quality, etc.

Plastina says it's important to pay close attention to the contracts, especially the length of agreement and practices required. Many are 10-year contracts, outside of the pilot program, which is usually for one or two years.

While all programs require farmers to do something "different" to reduce carbon and receive ecosystem services payments, programs vary according to what exactly they consider "different." In some cases, it's a change with respect to what the farmer has done in the past, or a change based on what has been done in a specific geographic area.

He says farmers should also be mindful of future market changes. Although a price might be guaranteed upfront for pilot participation, that price will likely not hold for the duration of the long-term contract.

"Once those pilot programs go away, it will be up to supply and demand to determine the price," he says.

Plastina says he plans to update the comparison as more information is made available. So far, most information is based on what can be found through internet searches.

Source: ISU Integrated Crops Management News, which is responsible for the information provided and is wholly owned by the source. Informa Business Media and its subsidiaries aren't responsible for any of the content contained in this information asset.

 

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