More farmers are talking about carbon programs at conferences and workshops. Some farmers have taken the plunge and many more are considering their options -- trying to determine if the return on investment and time is worth it. Since their creation, these programs have been in a wild west phase – an unexplored, little-regulated territory where anything goes. But changes in eligibility, payments and approved practices may make these programs more appealing than you think.

Less strict requirements

One problem with initial carbon programs was that only new conservation practice adopters were welcomed into the club. However, that is changing says Caleb Smith, director of sustainability at Keystone Cooperative.

“In 2021 there were basically no options for long-term adopters of cover crops and reduced tillage systems to enroll and get paid, but that is no longer the case today,” Smith says.

A shift in focus toward inset credits to reduce emissions rather than offset credits is the main reason for that change. Inset credits originate from reducing emissions in a company’s supply chain, while offset credits can be purchased through a registry that connects companies to projects that help reduce their carbon footprint.

“This has put less of an emphasis on the concept of ‘additionality,’ which is what barred early adopters from earlier carbon programs,” Smith adds. “So, there are multiple options in the carbon space for early adopters to get paid today.”

Adopters used to average $20 per acre in 2021, but payments can now top $30 per acre of carbon sequestered through Truterra, a company launched by Land O’ Lakes that houses a series of sustainability programs and partners with retailers like Keystone. Sina Parks, stewardship specialist at Keystone Cooperative, says that a variety of factors will determine payments on a spectrum that ranges from the $2 per acre minimum to over $30 per acre.

“Many factors are evaluated in the model including in-field practices, field data provided by the grower, coupled with soil types, precipitation and other climate-related factors,” Parks adds.

“The ability for long- and near-term adopters to participate in these programs will be instrumental in the growth and success of these programs,” says Sina Parks, Stewardship specialist at Keystone Cooperative. (Photo: Tom J. Bechman)

Shifting to carbon intensity scores

Smith expects to see a shift from payments for tons of carbon sequestered per acre, toward grain premiums. They’ll be determined by a producer’s carbon intensity score for that bushel. Both soy processors and ethanol plants will be incentivized to purchase low carbon intensity grain through 40b and 45z tax credits. Those tax credits were part of the 2022 Inflation Reduction Act, and they reward biofuel producers who lower carbon intensity in their production process.

“These tax credits have been widely discussed, but as of now, we are still waiting for a few key things to be finalized in D.C. before we will know how growers will actually be able to participate,” Smith says.

New focus on sustainability

Another change moving forward will be an overall focus on sustainability, rather than just carbon sequestration alone. Parks says that changing language to call these programs ‘ecosystem opportunities’ or ‘sustainability programs’ can redirect focus to the underlying goal of these initiatives. Truterra, for example, renamed its TruCarbon program to the broader term ‘sustainability programs’. Carbon is just one opportunity that is available through these programs.

“As more opportunities are coming to the market and not all specifically relating to carbon credits, there was a need to pivot on this,” Parks explains. “The ability for long- and near-term adopters to participate in these programs will be instrumental in the growth and success of these programs.”

Parks says that Keystone continues to see increased interest in Truterra’s sustainability initiatives, thanks to the ability for long-term adopters to participate. Smith adds that over 200,000 acres are signed into the Truterra carbon program among Keystone customers in 2024 alone.

Parks adds that there is still some work to do to create a ‘tamed’ carbon market space.

“So, while I would say it’s maybe becoming a little more settled ‘wild, wild west,’ we’re still a long way from standards across this entire space,” Parks concludes.