Measuring carbon: An expanding market for farmers?

By Lindsay Humphrey

04 /08 /22

Greenhouse gas emissions are a hot topic for any industry, but it seems like agriculture gets hit especially hard. However, an emerging industry could be creating a lucrative revenue source for crop producers across the globe to help agriculture be part of the solution to reducing greenhouse gasses.

“When producers plant a cover crop for the winter, the roots that grow are pulling carbon out of the atmosphere and locking it back in the soil,” said Adam Heichelbech who is the Assistant State Conservationist for Programs for Indiana’s Natural Resource Conservation Service. “If we can quantify that number [tons of carbon], producers can sell the credit.”

Just about every industry pollutes the atmosphere to some extent, but the easiest one to point a finger at is oil and gas. When an industry is polluting the atmosphere, they’re regulated by the state and federal governments. The idea is to keep their pollution emissions to a manageable number. That’s not always the case. Therefore, environmental markets quickly became an important piece of the puzzle. Environmental markets can loosely be compared to bitcoin.

“One way an industry can offset the pollution they emit is to purchase credits from some other sector of the economy that’s not only emitting but pulling those chemicals out of the environment,” Heichelbech said. “Carbon is the newest market because it’s important for figuring out how to manage the climate crisis. The biggest challenge is trying to quantify the carbon going into the soil; it’s not easy to figure out.”

American Farm Bureau Federation Economist Shelby Swain Myers illustrates the growing carbon market transaction as an hourglass.

new growth concept with young  green leaf tree in nature background“At the bottom of the hourglass you have farmers who are sequestering carbon and pushing those credits into the center of the glass,” Myers explained. “In the center of the glass, at the point, are the market providers who have the platforms and technology to make the credit exchange happen and where the buyers, from the top, come to buy their credits.”

It’s only been in the last 3 years that this emerging industry developed and began drawing the interest of economists and producers alike.

“There are a lot of private sector businesses out there working with growers to enroll acres in their program,” Myers said. “This industry is competing for a finite amount of land; we only have 900 million acres of total farm acres in the U.S.”

What’s a farmer to do?

Carbon isn’t the only market producers should be looking to capitalize on, but it most certainly is the largest presently. The American Farm Bureau Federation has a wealth of information about this emerging industry and all the markets involved.

Unlike number two yellow corn, carbon is difficult to quantify and standardize. That’s making this transaction a bit tricky. Buyers of carbon credits want proof the farmer is sequestering the tons for which he receives payment.

“There are quite a few markets out there and I think that’s what makes it more of an industry overall,” Myers said. “Each buyer is looking for a different verified standard, so they can pick which credit meets that company’s needs.”

Incentivizing additional conservation practices to harness and potentially increase the amount of carbon sequestered is a huge win for the environment as well as the producer. There’s no question that adding more conservation practices – think cover cropping, grazing, crop rotation, and improved nutrient management – can only help the producer, so why wouldn’t they want to delve into the carbon market and receive a payment for the environmental benefit? These practices require extra management and cost quite a bit to implement. Payment for a ton of carbon is still too low in many producers’ minds to be appealing.

As with any emerging industry, breaking in can be difficult. Myers said some of the market providers are going door-to-door, or farm-to-farm, to get more producers enrolled.

“Many agribusinesses that producers work with daily might already be engaged in a carbon market and have the enrollment information,” Myers pointed out. “Beyond that, it’s been difficult for growers to go on their own. They’re already sequestering carbon, but to do the certification, quantification, and verification of the environmental benefits to turn into credit is difficult to do alone. These market operators have found a way to streamline that process and help turn that credit into something marketable.”