Carbon credits have been attracting fresh headlines and capturing the attention of more farmers than ever over the past year. But the history of carbon credits may be much older than you realize.

Arguably, the practice started as far back as 1988, when the World Resources Institute oversaw the first land-based carbon offset scheme as a philanthropic exercise.

It’s been a slow burn ever since, and the ag industry has been targeted in the ensuing decades as one of the best ways to offset carbon emissions through practices such as cover crops, no-till and much more.

“I’ve always been interested,” says Colorado farmer Scott Scheimer. “I’ve researched, interviewed and pursued most who offer it.”

And his efforts to join carbon programs have had mixed results, but he hasn’t regretted the journey.

“I make the best decisions by writing a check for my mistakes — or my successes,” Scheimer jokes.

Currently, he is enrolled in the Locus Ag CarbonNow program, which offers two annual payouts. First, farmers are paid after providing historical data and soil samples that set a baseline for how much carbon they have already captured over the past several years. Then, they receive a second payment after using Locus Ag biologicals as a practice change and providing additional end-of-season farm data. In year two of the program, farmers receive the two annual payments, along with a revenue share from the sale of carbon credits.

Related:Farmers: How to actually get paid for carbon

That’s just one setup. Each carbon credit program offers its own special recipe for collecting data, prompting operational changes and soliciting potential buyers for the credits generated. It can get confusing very quickly, which can also put farmers into a “fight, flight or freeze” situation very quickly. But Scheimer urges would-be participants not to overthink it too much.

“Too many farmers spend too much time reading publications, asking questions, going to meetings … and then they do it again the next year,” he says. “They never pull the trigger and actually make a decision. So I just challenge guys to actually give it a shot. If you’re really curious, just try it. You can’t lose trying.”

WORTH A SHOT: Colorado farmer Scott Scheimer says,”You can’t lose trying” a carbon credit program, but recommends starting small to “test the waters.” Credit: Kyle Bloom

Long-term viability?

One big question farmers tend to have is whether the programs they partner with will have any long-term viability. That’s a fair ask, says Turner Polzin, a partner with Adams Brown accounting firm.

“Is it too soon to sign up? That’s on a lot of farmers’ minds,” he says. “Another school of thought is, ‘Have I already missed it? Can it disappear down the road?’ It’s not a government mandate, after all.”

Related:Checklist: Evaluating, understanding carbon contracts

Polzin gives a possible scenario: Say Disney, or any corporation, starts losing money and needs to tighten its budget to appease shareholders. If the company is spending millions each year to buy carbon credits, that might be an easy budget item to slash to get back in the black.

Those moves could be risky. More consumers are demanding environmental stewardship from the companies they deal with. In return, many firms have pledged to be carbon neutral by 2050, or even 2030.

Public pressure has even hit private citizens. Take singer Taylor Swift, who was outed by a marketing firm who tracks celebrities’ carbon dioxide emissions, finding she has one of the largest carbon footprints of anyone on the planet. One expert told Vice Magazine that her carbon footprint could range between 8,000 to 10,000 tons of carbon dioxide yearly, compared to the average American’s 20 to 30 tons.

In response, Swift’s team bought carbon credits to offset emissions her Eras Tour generated by twofold.

“It’s a voluntary market, but it’s real and true,” Polzin says. “Some farmers are just waiting for better deals.”

Reward long-term adopters?

Kansas farmer Kevin Bahr had been watching carbon credit programs come and go for several years before he pulled the trigger with Truterra, Land O’Lakes Inc.’s sustainability business.

“It’s connected with our local co-op, so there was an added level of trust,” he says. “They also showed some flexibility early on, and the data collection has gotten better.”

A top controversy permeating various carbon credit programs is whether long-term adopters will be rewarded for conservation already deployed on their operation.

If you’ve been planting cover crops for a decade or more, it’s prudent to explore whether a potential carbon credit partner will recognize that, or if they are only seeking farmers who aren’t planting cover crops but are willing to do so moving forward.

Increasingly, however, carbon credit programs are willing to look at historical data if you have it.

“I look at this as being a reward for something I’ve already done for a long time,” Bahr says of the Truterra program. “I think that’s a home run.”

Bahr also appreciates meeting some of the end users of these credits, which he believes establishes a bond throughout the supply chain that has been sorely lacking.

Recently, Bahr’s co-op initiated a meeting with growers and Campbell Soup Co., one of dozens of corporations that are buying carbon credits. He says it was an illuminating conversation, and the Campbell representatives were good about asking questions about his day-to-day obstacles, among other things.

“It’s good to tell our story — and we have a great story to tell,” Bahr says. “It helped to enlighten them and helped to build our partnership.”

Create an on-farm trial

Farmers who participate in carbon credit programs tend to have similar advice for getting started. The primary recommendation is to set aside a modest amount of acres to get started — you don’t (and probably shouldn’t) commit 100% of your farmland right away. For Scheimer’s part, his operation has set aside a field that serves as a test farm for his operation.

“It’s a standalone farm that nobody pulls any revenue from — it’s our trial farm,” he says. “We run an ROI on everything to see where we’re at. If it’s successful, we move it into the rest of the operation.”

That attitude is shared by Iowa farmer Kelly Garrett, who has paired with Truterra since 2021.

“Research 10% of your farm to see what it can do on your operation,” he suggests.

Garrett is exploring a new tactic for a 100-acre field, which is less than 10% of his total acres. He took the field out of row crop production, planted cover crops and is using it to graze cattle. By doing that, he hopes to be able to measure an even bigger capture of carbon. Time will tell if that ends up being true.

“It’s not a big risk, and we hope to learn something along the way,” Garrett says. “It isn’t always black or white, all or nothing. The truth usually is somewhere in the middle.”

Everything has risk

Every decision on your operation does bear some risk, Garrett says, but that shouldn’t be a deterrent to dipping your toes in the water.

“You may look like a rock star, or you may feel not so smart, but it tends to balance out,” he says.

Bahr also recommends talking to other farmers who are already enrolled in carbon credit programs.

“You can learn from anybody, and I’m lucky to be surrounded by
a lot of smart farmers,” he says. “I’d definitely visit with somebody just to get some ideas.”

If you only devote a few of your total acres, that keeps flexibility in play, Garrett adds. “I’m happy with where I’m at, but I do shop around and look at other programs,” he says.

Ready to sign a contract? There are favorable terms out there, Polzin says, but you still have to be cognizant of what you’re actually signing. He suggests running it by your accountant, lawyer or both before inking your signature.

First, look at the term of the contract, Polzin says. Most renew annually, but there are still some out there that require a longer commitment.

“Let’s say I signed a contract that’s for four years, and two years goes by and I want to sell the ground,” he says. “What happens?”

Second, look for any restrictions for use on the ground. And finally, look at payment structure, especially regarding any potential limitations.

“A minimum is fine, but I wouldn’t sign anything with a maximum attached to it,” he says.

Farmers who worry they will have to make radical changes to their operations to qualify shouldn’t lose sleep over the decision, Polzin says.

“There’s a large volume of farmers who don’t understand how little you have to change,” he says. “There are very minor things you can do to qualify — you don’t have to upend everything. I’m just not seeing a huge downside.”

CIS is coming

Until now, carbon credit programs have been fueled by interest in the private sector. But starting in 2025, farmers will get paid to deliver corn to ethanol plants if they have a favorable carbon intensity score.

CIS is a part of the Biden administration’s Inflation Reduction Act, which seeks to reduce greenhouse gases. While not technically a carbon credit program, it functions similarly to one.

Each bushel of corn to produce ethanol will be issued a CIS. A perfect CIS is zero (i.e. carbon neutrality), and the higher the score, the poorer the environmental impact of that particular bushel. The current national average CIS for corn is 29.1 grams of greenhouse gases per mega joule (GHC/MJ).

Why does this matter? Farmers with a favorable CIS may be able to capture some premiums, while farmers with an unfavorable CIS may end up getting locked out by some potential grain buyers.

Another concern with the program is its lack of specifics. Dropping your CIS to zero is theoretically worth a tax credit of $1.57 per bushel, but it’s unclear how those gains will be split between farmers and biofuel companies.

Also, acres enrolled in a carbon credit program cannot participate in CIS — it is seen as “double dipping” on the carbon you have sequestered. Because of that, you may need to weigh the pros and cons to see what will bring the best returns.

“Keep your eyes and ears open” is Polzin’s best advice for now.

Researchers at Iowa State University did major legwork to compile a list of popular carbon credit programs that is current as of December.

ISU looked at the nuts and bolts of each program, including qualifying practices, eligible crops, limitations, contract length, payment type and payment structure. It’s a useful resource to compare programs on the market.

7 red flags

Alongside the reasons to sign up with a carbon credit program are some red flags that should give you pause. Here are some of the more common stumbling blocks to watch for: