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What are ag carbon credits?

Tough Decisions: A UNL agricultural law specialist answers basic questions about how to tap into the ag carbon market.

April 25, 2023

4 Min Read
Field of cover crops with farming equipment
BUILDING CARBON: There are many companies interested in purchasing carbon from farmers, but it is crucial to have your attorney involved in reviewing any potential contracts and to ask plenty of questions before enrolling. Curt Arens

by David Aiken

I often get calls from Nebraska crop and livestock producers wanting to know about carbon credits. This article provides the basics regarding what carbon credits are and how they work.

Here are some common questions and things to know:

What are carbon credits? Carbon credits are created when farmers or ranchers increase the rate of carbon storage on their land by changing production practices or adding a new practice. Adding cover crops or reducing tillage in row crop operations are common examples.

Who will buy my carbon credits? Probably a corporation that wants to reduce its carbon footprint — at least on paper — to satisfy corporate carbon reduction claims or goals.

What can I get paid for my carbon credits? That depends on how many you generate. You can get a good estimate of your operation’s carbon credit potential at the NRCS website One ton of carbon storage equals one carbon credit. Carbon credits reportedly have sold recently between $10 and $15 per ton. Nebraska producers are likely to get less than one ton of carbon stored per acre per year. The U.S. average is 0.6 ton per acre per year.

How do I get my carbon credits sold? You need to work with an ag carbon company, such as Agoro, Bayer, Cibo, ESMC, Nori and many others. After you sign a contract with them, they will work with you to implement practices that will lead to additional carbon storage. Each carbon company usually has its own system to measure and verify your carbon storage, such as taking soil samples at the beginning and the end of the contract period.

Are carbon credits traded? Not on a public exchange. So, it is difficult to get current pricing information other than from carbon companies.

What do I need to know before I sign a carbon contract? Take the contract to your attorney for a legal review. This cannot be overemphasized. There will be lots of legal fine print in the contract, and you need your attorney to explain to you what all that fine print means. There is no “standard” carbon contract yet, and each company has its own.

Here are some legal issues to watch for:

  • What practices will you be required to implement to receive payment? Is the payment enough to cover the costs of changing your production practices? Are you paid for implementing the practice or are you paid based on how many tons of carbon you store from the new practice? Payment per ton is more common.

  • What happens if you generate less carbon on your operation than was originally expected — will you pay a penalty or just receive a smaller payment?

  • What costs will the carbon company deduct from the carbon credit sale proceeds? Measurement and verification costs? Soil sampling expenses? Certification costs? Will you pay directly for some of these costs?

  • What happens if the carbon company goes out of business — can you still get paid for your carbon credits? Can you sell any unsold carbon credits through a different company?

  • On rented land, is the contract with the landlord or the tenant? Can you work out an arrangement with your landlord regarding how to divide the carbon credit payments?

Carbon contracts are essentially business contracts. If you don’t take the carbon contract to your attorney for a legal review, you will have only yourself to blame if things don’t work out to your satisfaction.

It seems difficult to get information about ag carbon credits. It is, and that is frustrating. Fortunately, under the Growing Climate Solutions Act, signed by President Joe Biden in December, USDA is preparing a study of ag carbon credit markets past and future, trying to determine how these markets could be made more producer friendly. If USDA determines that there is a need for greater ag carbon market information, it will develop educational materials about ag carbon markets for producers and will also create a website where producers can find ag carbon companies that operate in their area. But not until mid-to late 2024.

What else does the future hold? Recent federal legislation authorizes the U.S. Environmental Protection Agency to establish guidelines for corporations making carbon footprint reduction claims, basically to establish minimum quality assurance for carbon credits among other things. The European Union and the United Nations both have similar efforts under way.

The U.N. is also working to develop an international trading system for carbon credits. This all means that in time, agricultural carbon credits will be subject to greater (and more expensive) verification requirements. It also probably means any international carbon market will be more transparent. Part of the USDA ag carbon market study will include a survey of current and future carbon credit verification standards, which could help guide the EPA, EU and U.N. carbon marketing and carbon market efforts.

Where can I get more information? A good place to start is the ag carbon page of the University of Nebraska Center for Agricultural Profitability website, You can also find many resources online, including webinars by searching “agricultural carbon or agricultural carbon credits.”

Aiken is a University of Nebraska agricultural law specialist.

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Carbon Credits
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