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Intervention needed on ag carbon markets

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Witnesses during House Ag Committee discuss the Wild, Wild West of carbon markets for farmers.

In a rush to take meaningful actions on reducing harmful emissions, farmers are seen as part of the climate solution, but without a referee and consistent standards, they may be taken advantage of, warns those who testified recently during a hearing on voluntary carbon markets in the ag and forestry sector.

When Michigan wheat farmer Dave Milligan recently appeared before the House Agriculture Committee, he was asked directly whether he understands how carbon credits are valued and how it is determined what a farmer receives for the carbon credit.

“No, I do not at this time,” said Milligan, who also serves as the president of the National Association of Wheat Growers.

Milligan highlighted NAWG’s interest in voluntary carbon market opportunities that work for diverse wheat production systems across the country, but those growers still have many questions.

“The carbon credit will be generated on the farm. The farmer needs to have an equitable return as the carbon credit increases in value,” Milligan says. “NAWG is cautiously optimistic about voluntary carbon efforts, and while we see the potential to have both an increasingly positive environmental impact and additional revenue stream for those ecosystem services, there is still a lack of transparency in program details and growers have questions about the voluntary carbon markets.”

Milligan told Congressional members that just like there is a standard for grain, carbon credits too could benefit from standards on how to measure and provide consistency, just as how wheat is graded.

Scaling-up adoption

More than a year ago, Bayer began enrolling farmers in a carbon program that pays them to adopt agronomic practices – primarily no-till and cover crop planting – to sequester carbon in the soil of their fields.  Unlike many carbon markets, Bayer pays farmers for the practices up front so they can easily make an economic decision and enter the carbon marketplace. 

Leo Bastos, senior vice president and head of Global Commercial Ecosystems at Bayer, says Bayer determined the price to pay farmers based on public information for other products in the marketplace ranging from $15 - $25 per carbon credit. In addition, if the price goes up, Bayer has committed to share those increases with the farmer.

“We hear from farmers that this confusion reduces their ability to participate in carbon markets when they can’t be sure they are making a capital investment that will ultimately produce a verified carbon credit,” Bastos testifies. “In order to move carbon markets forward we must tackle this uncertainty and the resulting confusion.  We must recognize that while U.S. agriculture is diverse, we need consistent standards to accurately measure, track, and evaluate decarbonization over the long-term.”

Referee needed

Callie Eideberg, director of government relations of the Environmental Defense Fund, says that there is still a lot to learn about agriculture’s role in reducing carbon, and voluntary markets should remain the focus. Policies should prioritize practices now that are shovel ready and have a high level of confidence in greenhouse gas reductions and avoided emissions, she says.

Yet, as the carbon credit continues to be compared to the Wild, Wild West, farmers are faced with varying amounts of payments, verification requirements and sometimes unattainable commitments. Eideberg says approaches to accounting for environmental benefits from actions taken at the farm-level by farmers are “all over the map.”

There is currently no referee to ensure consistency and verification of emission reductions. “Now is precisely the time for Congress to step in and provide direction and guidance,” Eideberg suggests.

“If we don’t have a referee on the field, if we don’t have someone setting standards and providing consistent measurement, farmers are probably going to get the short end of the stick,” she warns. “They need to be able to have a consistent target to shoot for. And then buyers want to make sure that the credits they are buying are quality credits and not going to be eliminated or discounted later.”

She says USDA can step in as the role of a referee, or another neutral third party.

The Senate’s Growing Climate Solutions Act direct USDA to step in and provide that third party certification in the confusing carbon markets. Bastos urged passage of the Growing Climate Solutions Act, which provides a foundation for assisting farmers navigating a complicated system so that they have confidence in their information about enter the carbon business.  Bastos also urged the committee to work with USDA to eliminate the confusion created by a lack of information about the carbon bank concept. 

“Farmers and companies are waiting to make investments and decisions until we know what the carbon bank is,” he shares.

More farm bill conservation funding

Another role USDA can provide is ensuring early adopters are not left out, one part of how USDA could pay farmers for past actions. The Food and Agriculture Climate Alliance also supports a one-time payment to farmers who were early adopters of environmentally-friendly practices and make sure they’re continuously enrolled in state or federal conservation programs, Eideberg adds.

Jeanne Merrill, policy director for the California Climate and Agriculture Network, detailed in her testimony how since 2003, carbon markets have proved themselves an inadequate tool to reach the diversity of farmers and ranchers. She outlined the rise and fall of the Chicago Climate Exchange, California’s carbon market in 2012 and then California’s transition to grants-based programs to pay farmers for climate-smart agriculture programs.

She says carbon markets have failed to deliver on their promises due to high transaction costs for project development and verification. In addition, the complexities of developing offset protocols for compliance markets which must be additional, verifiable and permanent, means it can take years to develop credible offsets. This is the case in California with its rice/methane protocol which took seven years to develop. And now not a single rice farmer has signed up for those carbon credits because the cost does not make economic sense.

Low carbon prices do not come close to compensating farmers for the true costs of their new practices, resulting in only the largest producers participating, and often because there are additional public and private funds to offset initial start-up costs.

“Time is ticking,” she says of a looming deadline of 2030 to bend the curve on global greenhouse gas emissions to avoid the very worst of climate change impacts. “We cannot waste time on complex and ultimately ineffective approaches like carbon markets. We have tried for nearly 20 years to make carbon markets work for agriculture and they have failed.”

Merrill advocated for time-tested and proven farm bill conservation programs that can deliver the research, technical assistance and financial assistance that farmers and ranchers need to reduce their greenhouse gas emissions, improve their carbon sinks and build their resilience to greater weather extremes.

Deb Reed, executive director of Ecosystem Services Market Consortium, says these voluntary carbon markets are entirely complementary to USDA’s conservation programs. USDA can continue to provide conservation payments in the form of upfront financing to help farmers and ranchers adopt practices that also could qualify them to participate in markets which can provide an additional income stream.

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