Why Carbon Credits?

Carbon credits are still around and farmers should pay attention because it can be a profitable revenue stream. A carbon credit is a tradeable certificate for 1 metric ton of carbon dioxide removed from the atmosphere or recycled through sustainable farming practices.

Farmers can sell these credits to companies as carbon offsets in voluntary markets. Practices like no-till farming, cover crops, and even using some biologicals increase carbon in the soil. For the farmer, getting paid to increase carbon or soil organic matter (SOM is 54% carbon) is a win-win proposition. Higher SOM increases yields and retains fertilizer nutrients and water for better crops. For farmers, up to 60% higher profit is possible by cutting back on fertilizer and still maintaining or even increasing crop quality and crop yields.

Environmental benefits are also better. Less fertilizer used means less nutrient runoff and higher water quality. Improving SOM leads to less soil and wind erosion. For the consumer, that means less money is spent cleaning up water for consumption and bathing. Other benefits include better wild life habitat so better hunting, fishing, and recreational activities.

Farmers can participate in several ways. No-till farming preserves SOM and keeps carbon in the soil. Cover cropping adds roots and carbon to make more SOM through microbial digestion. Manure management practices like methane reductions from anaerobic (lack of oxygen) digesters which reduce greenhouse gas (GHG) emissions. Reducing commercial synthetic fertilizer lowers nitrous oxide another GHG. Planting trees or installing wetlands help sequester (recycle) carbon and reduce GHG emissions. In order to get carbon credits, extensive soil testing and documentation is required by a third party. Companies are buying these carbon credits to offset GHG emissions.

You may wonder, why would a company voluntarily pay to reduce GHG emissions? First, many companies are world-wide conglomerates meaning they operate in many countries. European companies are required to reduce GHG emissions. Some do it for managing climate risk or simply for PR purposes. Companies have found that reducing their GHG emissions leads to higher profits by reducing their energy needs. It is also more profitable to pay farmers to sequester or recycle carbon than it is for them to convert their factories. They are allowed to pollute while the farmer benefits from absorbing and converting that carbon dioxide into plant food. For the farmer it’s another way to make money, and in tight commodity markets, that’s a way to survive.

The GHG emissions refer to carbon dioxide, methane, and nitrous oxide (NO) that trap heat in the atmosphere. A leading GHG emission is water but that is often left out. Water and carbon dioxide are critical for plant growth. Methane is often associated with manure and cow’s belching methane gas. In the USA, when we reduced the 60 million bison and replaced them with 100 million cattle, that was about a wash for methane. Nitrous oxide is the worst GHG emission and agriculture uses a lot of synthetic fertilizer that emits NO. That’s the one that is getting more attention especially in transportation (engines).

There are three types or scopes of GHG emissions including Scope 1, 2, and 3. Scope 1 GHG emissions are those a farm or company use directly on their operation. For example, heating on site or fuel for transportation or farming. Scope 2 GHG emissions are indirect emissions like electricity where the emissions are created off site. Finally, Scope 3 GHG emissions are for purchased supplies. In agriculture think crops, food, fiber, meat going offsite. Scope 1 & 2 GHG emissions are fairly easy to track. It’s the Scope 3 GHG that usually estimated and harder to track. This is where agriculture and companies are starting to spend more money to quantify, so this greatly benefits farmers.

For a quick example, think about popcorn eaten at a theatre, mall, or grocery store. What is the carbon footprint or GHG emissions for that product. Scope 1 and 2 come from the business. The fuel to truck or heat the product and packaging costs plus the electricity. The hard part is estimating the Scope 3 emissions. We’ll concentrate on just that coming from making or growing the popcorn.

Scope 3 includes purchased goods and services going offsite to the theatre which includes the corn kernel and everything it took to produce that popcorn kernel. That includes the farmland soil, the fertilizer and pesticides, the fuel for the tractors and the trucks to haul it, etc. It gets complicated, but for farmers, those numbers are huge and that means if farmers can produce that crop sustainably, they can get higher carbon credit payments. In some cases, that can be $70 per acre per year!