How carbon may become another crop for farmers

Folded arms and furrowed browsamong frustrated farmers greeted former Rep. Bob Inglis (R-SC) at a National Corn Growers Association (NCGA) meeting in the mid-2010s.

Inglis was then a rarity among Republican legislators. He made his case for market-based solutions to mitigate the impact of human-influenced climate change.

On that day, though, not many farmers wanted to hear it.

"You could just feel the tension in the room, the feeling that this guy was full of it," recalls Brandon Hunnicutt, a Giltner, Nebraska, farmer, who is involved with several NCGA boards.

Many farmers skeptically view the concept of climate change. This skepticism, though, may be as much rooted in fear of government control as distrust in climate science, says Ben Riensche, a Jesup, Iowa, farmer.

"They worry someone who's never even planted a potted plant in some distant urban environment will start telling them how to farm," he says.

The Dawn of Carbon Markets

These days, though, this anxiety is morphing into anticipation over a potential new market. Even if some farmers don't believe in climate change, they believe in money.

That's the motivation behind carbon farming. Several agricultural firms plan to pay or are paying farmers to raise crops or livestock in ways that sequester greenhouse gases that fuel climate change: carbon dioxide, nitrous oxide, and methane.

Many plans revolve around carbon dioxide sequestration. Businesses that range from beverages to bedding want to claim the mantle of carbon neutrality. This is production that nixes actions or makes swaps to drive carbon dioxide emissions down to zero.

Firms such as Indigo Ag help match firms aiming to be carbon neutral with farmers. Its Indigo Carbon program aims to pay farmers for verified metric tons of carbon sequestered in soils through practices such as no-till and cover crops.

In theory, carbon markets follow this scenario, says Carson Reeling, a Purdue University agricultural economist.

• A regulator issues a permit that caps the greenhouse gases a company can emit.
• If the firm cannot stay within this cap, it offsets the extra amount through a carbon credit measured in metric tons of carbon.For example, a farmer may offset an amount like 100 metric tons of carbon in his or her soil for a firm that exceeds its cap.
• Carbon offset values depend on where the regulator sets the cap. The lower the cap, the more carbon offsets a firm will have to buy from entities such as farmers to meet its cap.

It's here where reality enters and confusion reigns, says Reeling.

"Except for California, we don't have a regulatory cap in the United States," says Reeling. "There is no coordination by the federal government in setting permits and offset credits."

This can create a volatile and perplexing marketplace, he adds. It also runs counter to 67% of U.S. adults who say the federal government is doing too little to reduce the effects of global climate change, according to a 2019 Pew Research Center survey.

Enter the private sector. Indigo Carbon plans to eventually pay farmers $15 per metric ton of carbon sequestered from companies striving to meet carbon-neutral goals. Payments could tally an estimated $30 to $60 per acre, depending on soil type and the region's climate, say Indigo Ag officials.

Nutrien Ag Solution's 2021 program will pay farmers for carbon they preserve based on soil levels at the start and end of the year.

Bayer's Carbon Initiative will generate carbon credits for farmers who adopt new practices like no-till and cover crops. Depending on individual cases, Bayer will pay farmers at year's end $10 per acre, say Bayer officials.

"As a science-based company, we see climate change as a threat," says Andy Knepp, agricultural sustainability leader for Bayer Crop Science. "Farmers are a crucial part of the solution."

Bridging Diverse Views

Some farmers are skeptical, though, about the occurrence of climate change: 68% of farmers believed climate change was happening, although just over 10% believed humans cause it, according to a 2013 article in the journal Environment and Behavior. Also, 27% of farmers believed insufficient evidence existed to determine whether climate change is occurring, while nearly 5% said climate change is not happening.

Skepticism also exists about carbon markets. Strategies like no-till coupled with cover crops can build soil carbon levels that help soils better blunt weather extremes like drought and flooding, says Craig Cox, senior vice president for agriculture and natural resources for the Environmental Working Group. Whether carbon stays sequestered is another matter, he says.

"The amount of carbon sequestered long term varies by soil type, weather, and location," Cox says. "So to simply say, 'By planting cover crops, you will put this much carbon in the ground and it will stay there' is not sufficient if you're selling carbon credits that allow industries to avoid reducing their own emissions. Another point is that if you abandon the practice that sequesters carbon, some or all of it can be lost into the atmosphere."

Riensche, though, says carbon markets may bridge diverse views.

"There have been several attempts at this over the years," he says, "but the public's never been more concerned about climate change, greenhouse gases, and emissions than they are now. Farmers worry about the same things, but they talk instead of erosion, soil health, nutrient removal, and runoff. We both have the same goal in mind, but we don't speak the same language. Carbon is the common denominator we can agree on."

Riensche enrolled 2,000 acres in the Indigo Carbon program for 2020. Payments had not been determined at press time, but Riensche is realistic about the program's merits.

"This was just year one," he says. We tried some things. Some will work, some will fail, and others will be unforeseen successes."

Moving Too Quickly?

"It's remarkable to me how quickly all this has occurred," says Ferd Hoefner, senior strategic adviser for the National Sustainable Agriculture Coalition. "In the last two years, many companies have proposed carbon markets or [carbon] policy proposals."

Such programs duplicate many components within existing federal programs, he says. Programs such as the Conservation Stewardship Program (CSP) or the Environmental Quality Incentives Program (EQIP) already pay farmers for practices such as conservation tillage or cover crops.

"All those programs help increase long-term carbon sequestration and increase soil health, reduce runoff, and conserve water," Hoefner says. "To me, this is a more straightforward approach, and the return is more secure."

Shortcomings exist, though. Federal programs are subject to the whims of congressional budget cutters, adds Riensche.

Lack of flexibility is also a drawback to federal programs, he says.

"Even well-intentioned people in our government don't have the same incentives to innovate [as private firms]," he says. "The last thing you want is a system that cancels innovation. Using carbon as a proxy, I can change my model. I can do some things that aren't in the current recipe and see if they are better, whether that's planting filter strips, strip cropping, changing a crop rotation, or more accurately applying nutrients."

Problem Solvers

"Carbon markets have been working in the energy sector for some time," says Debbie Reed, executive director of the Ecosystem Services Market Consortium, a nonprofit partnership of 61 private-sector companies and soil health and environmental groups. The difference, though, is that they developed around point sources of pollution. Since agriculture is a nonpoint source with biological emissions, criteria used in the energy markets don't fit with agriculture, she says.

That may be changing. "There is now the feeling that we're at a new tipping point and these things [in agriculture] will take off," says Hoefner. "The jury is still out, but companies like Indigo have been enormously successful in getting investment money in place. There is a lot of money assuming they are making the right bet."

Ben Pederson, a Lake Mills, Iowa, farmer who uses carbon-sequestering practices like cover crops and reduced tillage, believes the time has come for carbon markets.

"It's positive as long as we don't make it into a talking point that is frivolous and doesn't have any substance," he says. "We live in a society that rewards problem solvers. At the end of the day, all this can solve a problem and also add value to our crops."

Carbon Sequestration Synergy

Kelly Garrett, who farms near Arion, Iowa, makes extra money for practices he is already doing – such as no-till – through a pilot carbon sequestration program from Locus Agricultural Solutions called CarbonNOW, which uses Nori's carbon marketplace. Besides no-till, this pilot program also helps farmers pay for practices like cover crops and applications of compost, green manure, or animal manure. Garrett sold 5,998 carbon credits in the Nori carbon marketplace last year (one credit equals 1 metric ton of carbon) for $15 per credit, with 16,752 remaining credits to sell.

Future payments may be more or less than $15 per carbon credit, depending on market conditions, say officials for the companies.

Garrett also builds soil carbon by applying manure from his cattle operation on as many fields as possible. He's also examining planting cover crops and has diversified his corn and soybean rotation by planting 300 acres of winter wheat in 2020 on soybean ground that was harvested early.

"All these factors form a synergy that ties into carbon sequestration," he says.

Carbon market questions and answers

Carbon market payments perk the interest of Brandon Hunnicutt, who farms with his brother Zach and father Daryl near Giltner, Nebraska. Still, he has carbon market questions for practices they use such as conservation tillage and cover crops.

"I compare it to selecting corn hybrids, where every company says theirs is the best one," says Hunnicutt. Unlike corn hybrids, however, Hunnicutt says data on carbon sequestration programs aren't as readily available.

This concern is justified, says Carson Reeling, a Purdue University agricultural economist. The lack of a federal regulatory structure can create marketplace confusion, as numerous carbon credit coordinators try to align buyers and sellers, he adds. "Farmers are on their own in determining which is worth their time and how it will benefit their farms," he says.

Questions to ask of carbon market companies include the following:

• Are there up-front costs?

"In my case, the up-front costs were minimal," says Kelly Garrett, an Arion, Iowa, farmer, who enrolled part of his farm in the CarbonNOW program offered by Locus Agricultural Solutions. Still, checking on this in advance can prevent unpleasant later surprises, he says.

• How will I be paid?

Firms compensate farmers for carbon differently, with some paying for the past year while others pay for measures taken in preceding and current years. "Make sure the money goes to the farmer, and not through a broker or account person," advises Garrett.

• How will you use my farm's data?

"These companies accumulate data that could be turned into profitable new enterprises for them," says Ferd Hoefner, senior strategic adviser for the National Sustainable Agriculture Coalition. "Farmers have to decide if they want companies to profit off their own data."

• Ask how programs coexist with federal and state conservation programs.

Firms offering carbon payments may be wary of additionality – payment of an environmental or conservation benefit that's already occurring. "If a farmer is paid by a pre-existing federal or state conservation program to improve water quality, these practices may already generate carbon sequestration 'for free,' " says Reeling. Carbon markets may then not want to pay farmers for a benefit already covered under the government program, he adds.

• What happens if I violate an agreement?

"In a long-term contract, you may have compaction or drainage issues where you have to till," says Reeling. "Will you have to give back payments from preceding years for [previously sequestered] carbon that goes back into the atmosphere?"

What are my practices worth?

Farmers may be underselling the worth of their climate-friendly farming practices used in carbon farming systems.

Current carbon payments that hover between $10 and $15 per acre do not include the whole value of environmentally friendly practices such as cover crops, says Aliza Wasserman-Drewes, director of Rural Investment to Protect Our Environment (RIPE), a nonprofit group that supports bipartisan climate policy.

Since agriculture is also a solution to mitigating climate change and other environmental goals, RIPE proposes a stacked ecosystem service payment that places a $115-per-acre value on a corn farmer's contribution of planting cover crops .This per-acre value is for environmental benefits that include:

• Water quality $50
• Soil health $21
• Water conservation $19
• Carbon sequestration $18
• Air quality and health
• Benefits $7

RIPE estimates the plan's initial phase could cost $2 billion, with a full plan tallying $40 billion. Potential funding sources include anticipated stimulus spending, refundable tax credits, expansion of the Commodity Credit Corporation, or inclusion in future bipartisan climate legislation. The $40 billion cost is significant, but it pales in comparison with the $500 billion that President-elect Biden is proposing to spend on his climate change legislation, says Wasserman-Drewes.

"This is not a handout from the government," says Jamie Powers, RIPE director of outreach. "It's payment for services rendered."

Other greenhouse gases

Markets that sequester carbon dioxide are akin to a bright shiny penny that glistens at the bottom of a swimming pool. However, markets that mitigate less-discussed greenhouse gases like nitrous oxide and methane can garner more payoffs for farmers, says Debbie Reed, executive director of the Ecosystem Services Market Consortium (ESMC). ESMC partners with 61 private-sector companies and soil health and environmental groups to pilot projects that include water conservation and methods to sequester and mitigate greenhouse gas emissions.

"Emissions from nitrous oxide and methane are far more potent greenhouse gases than carbon dioxide," says Reed. Many methane emissions result from the making and use of fertilizer, while livestock emit much methane gas.

Curbing these emissions, though, isn't as easy as planting a cover crop to sequester carbon dioxide. One promising avenue to slice methane emissions is through livestock feed additives, Reed says.

"These additives also tend to produce more protein per feed unit, so these can be a win-win," she says.

Systems, Not Practices

Payments based on a production system rather than a specific practice will also better help garner goals like reduced greenhouse gases and improved water quality, Reed says.

"There are areas that are strapped for water, and it could be problematic if you plant a cover crop just for soil carbon [sequestration] and do not pay attention to lack of water," says Reed.

Systems approaches use a symbiotic suite of practices, such as a cover crop that fixes both nitrogen and also provides a high-quality forage for cattle in an integrated crop and livestock system, she says.