Carbon market opportunities for ranchers

The past three years have brought more excitement and investment in carbon markets than Debbie Reed saw in her first two decades of working on the concept. She currently serves as executive director for the Ecosystem Services Market Consortium. While ESMC has worked with ranchers since 2019, carbon markets for crop farmers are generally further developed at this point.

Less than a half dozen marketplaces are currently available to ranchers, estimates Chad Ellis, who serves as chair of the ESMC Board of Directors in addition to his roles as CEO of Texas Agricultural Land Trust and chairman of the National Grazing Lands Coalition. A major jump in opportunities came within the past year or two, he says, and the space is constantly evolving.

Carbon and Grazing

Carbon could become a new commodity as companies seek to meet net zero and/or carbon neutral goals. While technology-based solutions can pull carbon dioxide from the atmosphere, agriculture offers a natural answer because plants (both crops and forages) can draw carbon into the soil through the process of photosynthesis.

Grazing lands, especially, have potential as they are generally managed year- round for green growth.

A 2018 study from the University of California, Davis found grasslands can store more carbon than forests because they are impacted less by droughts and wildfires. (Grasslands mostly store carbon underground, whereas most of the carbon in forests is in woody biomass and leaves.)

Carbon Credit Defined

In a carbon market, a company wanting to reduce its carbon footprint will buy a "carbon credit," usually from a brokerage company. The brokerage company contracts with the farmer/ rancher and sets requirements. Generally, the broker works with a third-party verifier to measure how much carbon the farmer/ rancher has stored over a specified period.

A carbon credit represents 1 metric ton of carbon dioxide removed from the atmosphere, or as Jason Sawyer, chief scientific officer for the East Foundation, explained during a webinar hosted by King Ranch Institute, about 273 kilograms of carbon (oxygen makes up the rest of carbon dioxide). Carbon is commonly estimated in soil test analyses as a component of soil organic matter.

On the Ranch

On grazing lands, ranchers can sequester an estimated 0.2 to 0.6 tons of carbon dioxide per acre, though as much as 5 to 7 tons per acre have been reported in response to management, according to the King Ranch Institute. The amount of carbon a rancher can sequester will depend on land-use history as well as environmental and geological factors. Clay soils have better ability to store carbon compared to sandy soils, and drought can limit storage.

Management also plays a major role.

Certain practices, such as tillage, release carbon back into the air. Others that promote forage growth and biodiversity, minimize bare ground, and provide adequate rest to pastures after grazing generally increase soil health and sequester carbon.

Grassroots Carbon

Loy Sneary's focus on improving soil health on his ranch near the Gulf Coast, south of Houston, Texas, set him up to participate in a soil carbon market.

In 2018, he and his son, Adam, switched from minimal rotation and set stocking to high-density, multi- paddock grazing. Their goals were to increase the diversity and production of their forages and more economically graze their cattle. They started with 30 heifers and soon expanded to daily moves with all cattle across the ranch's 4,000 acres.

Jim Blackburn, an environmental attorney and professor at Rice University, approached Sneary in 2017 with an opportunity. Blackburn was working with Henk Mooiweer and others on starting a carbon market. They needed a rancher's input.

Sneary's ranch became the first to sign up for the resulting marketplace, Grassroots Carbon, after providing perspective to the carbon brokerage company on what would and wouldn't work for a rancher like himself.

"If I was going to explore this and actually enter into a contract, I would want to do it with people I knew and trusted," Sneary says. For him, that's been Grassroots Carbon.

How it Works

Grassroots Carbon spent almost a week taking core soil samples at Sneary's ranch in 2020. They brought a mini drilling rig that unearthed a 1-meter sample.

Depth and physical samples (rather than satellite data alone) are key, says Mitch Hagney, vice president of land steward success for Grassroots Carbon, because of debate on whether there is an eventual plateau of carbon accrual with land management practices.

"If there is a carbon plateau on the top layer of soil, deeper levels continue to show increases," Hagney says.

The samples were sent to a laboratory and analyzed for how much carbon was stored at the time. Using sampling data (neither the rancher nor Grassroots Carbon knows the exact sampling sites) and aerial imagery, an independent third-party validated projections for carbon storage. Projections come from a grazing-specific regenerative standard developed by leading soil scientists and technical working groups and endorsed by Applied Ecological Institute.

Based on projections, Grassroots Carbon makes annual payments to ranchers, along with a larger payment after the second sampling at the end of five years, Hagney says. Credits are sold to corporate buyers, including Marathon Oil, Shopify, large grocery chains, and software developers. Grassroots Carbon shares 80% of the profit from carbon credits with ranchers, meaning ranchers are not locked into a price.

The company made its first payments to ranchers in March, a total of more than $200,000 spread among participants. Dozens of ranches across the United States currently have contracts with Grassroots Carbon.

Check the Contract

Grassroots Carbon requires participants to eliminate tillage and, in most cases, choose from additional practices, such as increasing frequency of cattle rotations, to promote the storage of more carbon during the five- year sales period. An additional 10-year storage period follows the sales period.

The company also wants to see the rancher's grazing management plan, which typically is shared via PastureMap, a GPS-based mobile application offered free for Grassroots Carbon participants. Members also have access to the Land Steward Alliance, which gives ranchers the chance to learn from one another and educational programming in partnership with Understanding Ag.

Each brokerage company has its own requirements, which means make sure you understand what is expected before signing a contract, Ellis says.

Grassroots Carbon spent nearly a week taking core soil samples at Loy Sneary's ranch in 2020.

Are Carbon Markets Right For You?

In early 2022, Texas Agricultural Land Trust instigated development of a tool that would outline key questions ranchers should ask before jumping into carbon markets. Find the questions here.

More resources on ecosystem services markets for ranchers are available at:

• The trust's Ecosystem Services Markets page.
• King Ranch Institute's "Should I Sell Carbon Credits? A Decision Guide for Ranchers"