Walmart and Amazon may not be the first entities that come to mind when farmers are thinking about environmental stewardship. But the two business giants have begun playing a role by helping breathe new life into the once moribund carbon market.
They and other companies are making commitments to lower their greenhouse gas footprint and purchasing carbon credits to follow through on those pledges, according to David M. “Max” Williamson, an attorney with Williamson Law & Policy in Washington, D.C.
This isn’t the first time carbon markets have been poised to play a role in helping farmers contribute to reducing greenhouse gas emissions, Williamson told participants in the Mid-South Agricultural and Environmental Law Conference, which was held online again this year due to Covid-19 concerns.
“We were pretty much there before the economic crisis with mortgage-backed securities and the global economic recession occurred in 2008,” said Williamson, an environmental and energy lawyer who began working on carbon credit contracts in the early 2000s. “There was a lot of momentum building for ag carbon in that timeframe.”
Williamson said some might remember the Chicago Climate Exchange. The CCX was essentially a pilot project that was set up in conjunction with the Chicago Board of Trade, which at one time handled most of the corn, soybeans and soft red winter wheat futures trading in the U.S.
“They had an interesting focus on soil and range land, and the payments were not bad,” he said. “They averaged about $750 a ton and that's for carbon dioxide that you could show was absorbed or taken up in the soils on these farmlands.”
Investing in carbon credits
Fast forward to 2019 and companies like Walmart and Amazon have begun investing in carbon credits to demonstrate to consumers that they are trying to lower their carbon or greenhouse gas footprint and reduce the impact of global warming.
“They can buy credits from landfills or the dairy farms we talked about, from forestry or industrial emissions projects,” he said. “But this trend of companies making voluntary commitments for their sustainability reports has driven an enormous amount of money into the market.”
A 2019 market report puts the value of the purchases at $282.3 million dollars, but Williamson believes the estimate is understated.
“It's lagging the actual numbers – that’s from 2018,” he noted. “I think today in 2021 it’s well over a billion dollars and growing exponentially. That’s what’s really driving the market opportunities right now.”
Third-party verification is one of the cornerstones of the more recent carbon market activity. “If you have a dairy farm, for example, and you’re collecting methane, which is a powerful greenhouse gas, and keeping it out of the atmosphere, how do you prove that?” he asked. “You would go to one of these three nonprofit entities that have set up standards and act as a clearinghouse for auditing.”
Those are the Climate Action Reserve or CAR, the American Carbon Registry or ACR and the Verified Carbon Standard, which is often referred to as VERRA. Participants submit data to them and, if the standards are met they issue carbon credits, which can be sold to Walmart, Amazon or some other buyer.