As efforts intensify on climate mitigation and encouraging adaptation strategies, one topic commonly discussed is a USDA carbon bank. But what is it and how would it work?

These are questions many are asking, but actually haven’t been formulated as the Biden administration, including as it relates to farmers under the leadership of Secretary of Agriculture Tom Vilsack, looks to encourage and incentivize practices at the farm level that could benefit the environment.

Bill Hohenstein, director of the Office of Energy and Environmental Policy in USDA’s Office of the Chief Economist, says when you think about a carbon bank, it’s a loose term that continues to be fleshed out as USDA looks at comments received under a recent request on the agency’s climate strategy.

“At its core, it is how we invest in activities on the farm, create greenhouse gas benefits and capture those greenhouse gas benefits,” Hohenstein explains. “It relates to potentially private markets where these benefits can be bought and sold, but it also means they might be accrued and accumulated and aggregated.”

The bank itself has a way of aggregating environmental benefits, where they might be able to encourage greater investment.

Related: Carbon bank is different than a carbon market

“The concept of a bank is basically a way or a place where these benefits get aggregated, investors can come in and make an investment, and farmers can receive those benefits for the activities that they're undertaking,” adds Hohenstein.

Deb Reed, executive director of the Ecosystem Services Market Consortium, notes the purpose of a carbon bank can have multiple benefits. It’s important to balance the important role private markets play in offering financial incentives to purchase carbon credits generated by the ag sector while also not creating a situation where the federal government is competing with private markets, explains Reed. But you also don’t want farmers to generate credits that don’t get purchased.

The carbon bank can also play an important role in rewarding early adopters. Private markets today only pay for environmental benefits going forward. But you wouldn’t want those early conservationists to go and erase their built-up benefits over decades just so they can qualify for more payments going forward. Similar to how the Conservation Security Program pays farmers for what they are already doing that offers positive environmental benefits, the USDA through a carbon bank could similarly pay farmers for doing the right things.

Pilot projects

Vilsack has said that any USDA action on climate should take a “walk before you run” approach and test drive actions before wholesale changes.

Pilot projects are also a major component of new recommendations from the more than 70-members of the Food and Agriculture Climate Alliance. In an update to their 40 recommendations offered in November 2020, FACA developed more detailed recommendations on how a USDA-led voluntary carbon bank could help reduce barriers that may prevent participation in voluntary carbon markets and the deployment of critical climate infrastructure on working lands.

Ben Thomas, senior policy director of agriculture at the Environmental Defense Fund and co-chair of a working group at FACA on a carbon bank, explains that when discussions first started in January 2021 on what a carbon bank looks like among FACA members, there were many different preconceptions. But as USDA looks ahead, they agreed it’s important the agency should take a similar test drive approach and see how ideas could work.

Related: Calls come for USDA to develop climate bank

FACA recommends that USDA lay the foundation for a potential carbon bank by first developing a series of pilot projects that would focus on the following four areas:

Jenny Hopkinson, senior government relations representative for the National Farmers Union, says the pilot projects do not necessarily denote a smaller size of project, but the flexibility for USDA to determine what could work best.

Although much focus has been on the buying of credits, Hopkinson says the pilot projects offer the opportunity to look at the much-needed information on carbon sequestration, adaptation and mitigation on working lands.

Concerns on funding

Sen. John Boozman, R-Ark., ranking member of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, expressed skepticism about evolving concepts described as a “carbon bank” that fail to consider whether the secretary of agriculture has the authority to pursue such proposals without congressional authorization.  

How to pay for any USDA efforts continues to be debated on Capitol Hill. Vilsack has said he believes the Commodity Credit Corporation could be used to pay for actions similiar to how the Trump administration paid for trade mitigation and COVID relief payments to farmers. Meanwhile Republicans have said legislation would be needed to give USDA the authority to use CCC funds for climate efforts. 

“I appreciate the interest from food and agriculture organizations to develop proposals intended to provide for a greater role for agriculture in addressing climate change. The reality is that the secretary does not have the authority to create and operate a ‘carbon bank’ as proposed by the Biden administration," Boozman says.

"Since it was first proposed, the concept of a so-called ‘carbon bank’ has shifted many times. Today, it is unclear whether the term ‘carbon bank’ is a noun, a verb, or an adjective," adds Boozman. 

Science-based foundation

Hohenstein, who has served over multiple administrations studying the impact of climate on farmers, says that there’s a misconception that the previous administration, including Secretary Sonny Perdue, did not support the climate hubs created under Vilsack’s tenure in the Obama presidency.

“There’s a little bit of a misconception that Secretary Perdue was very supportive of the climate hubs program and our research program,” says Hohenstein. “The program is actually strong. All 10 hubs have directors; their programs are active.”

He notes the President’s 2022 budget called for a significant investment and additional funds in USDA’s climate hubs program as the information gained at these facilities can become a cornerstone of taking the science and applying it in the field.

Hohenstein says USDA continues to ensure the programs USDA implements are science-based. “We do great research on the technologies and practices that have benefits in terms of building resilience in the ag economy and reducing emissions and storing carbon,” Hohenstein says. “And the programs we’re implementing are based on that science.”