If you’ve read about carbon markets and thought, “I don’t know what I’m supposed to do with this,” you’re not alone.
It’s confusing. And it takes time to sift through. Different companies have different carbon credit programs that function differently and pay differently, over different time periods.
No surprise, enrollment reflects confusion.
Related: Many sides to climate, carbon debate
“There’s tremendous interest in carbon markets, but there hasn’t been a rush of people to sign up. Just a lot of chaos,” says Michael Gill, Illinois Soybean Association’s new director of conservation agriculture. During his career, Gill has worked with Pioneer, Climate and Growmark — and farmers — so he’s earned some perspective on the limits of an emerging market.
“There’s not a carbon market really. It’s a market in development,” he explains.
That feels right, doesn’t it? We’ve covered the carbon market extensively, but it’s tough to get to that essential part of any story we publish: What a farmer is supposed to do with this information.
Production agriculture has shifted to a more powerful role in climate — and conservation — conversations. We’re no longer just the scapegoat. Instead, we’re the industry that can sequester a lot of carbon and create a lot of credits. Companies can buy those credits from farmers and meet their environmental requirements.
Turns out, we’re a climate solution.
More dollars earlier
But it also feels like the market may not understand what it takes for a farmer to adopt carbon-friendly practices. Sure, you can plant cover crops, but you have to get them planted at the right time, and you have to kill them at the right time. Sure, you can reduce tillage and switch to no-till, but that takes different equipment, a different chemical program, sometimes different seed, and you’ve got a learning curve to climb. You may need an agronomist or technical support.
None of that’s the end of the world, but it adds risk to what a farmer’s already doing. Many of us need an incentive to take on more risk — in business and in life.
Related: Be patient on selling carbon credits
But are carbon programs structured around actual farmer risk? Take Indigo Ag’s carbon program, for example. Let’s say your payment is $15 per acre per credit. You get a portion of that the first year, another portion the second year, and you don’t receive the full $15 per acre until year five.
It’s not a bad model because it incentivizes a longer-term commitment to conservation. But it ignores the fact that a farmer’s startup costs are higher in year one than they are in year five. And that by year five, those cover crops have built enough organic matter that the farmer is likely seeing better soil health and structure, which absorbs and retains moisture better. That’s important if you’re an Illinois soybean farmer trying to catch an August rain.
Don’t forget, 62% of the ground in Illinois is farmed by someone other than the landowner. Cash rents make for razor thin margins — and no guarantee the farmer will be the same in five years.
Name the price
Gill has been trying to make a fairly logical point: Maybe it would make more sense to structure a program that pays more initially, when startup costs are high and risks are high, and then less as cover crops kick in on return per acre. But what’s the right incentive? What does it cost a farmer to add cover crops or switch to no-till?
That’s where we need research on the actual benefits of adding biomass back to soil and sequestering carbon, and around potential nutrient cycling.
“The question to the researcher is, what does that mean in dollars and cents on the farm in year one through year five? Will nutrient requirements change? Can removal rates be adjusted to save on fertilizer? We need more research on that,” Gill says.
If researchers can demonstrate those kinds of things — and assign a dollar value to them — the carbon market will get a much clearer signal on what a credit is worth, which is good news for buyer and seller. And it should settle out the confusion and guesswork, paving the way for better enrollment.
Two things are true of Illinois farmers: They’re innovation leaders, and they’re driven by ROI. Or, in other words, they’ll try it, but it’s gotta pay.
Put those two pieces together, and we’ll move the needle on conservation, carbon and water quality. And that’s a whole lot less confusing.
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