A new, secondary market for farmers is on the rise as a carbon commodity market gains traction in the Midwest. In addition to marketing cash crops, producers may have an opportunity to sell carbon stored in the soil on their operation.
There is a lot of truth to the idea that farmers are the ultimate stewards of the land. The soil is their most valuable resource; farmers take great care to keep it fertile and productive. As this new market emerges, Alabama Cooperative Extension System agents and specialists are working to determine what it means for Alabama producers.
What are carbon credits?
Simply put, corporations can purchase carbon stored in the soil to offset their own emissions. Corporations can make initial carbon purchases by using land management history as a measure. However, after the initial purchase, brokerage companies will measure units of carbon in the soil based on the implementation of new on-farm conservation practices.
The idea that producers can voluntarily sell units of carbon in the soil is a foreign idea for many. However, the carbon in the soil is on a fast track to become its own commodity as the United States moves toward a more comprehensive federal carbon market.
An Alabama Extension farm and agribusiness management team member, Jessica Kelton, said there are many unknowns right now — especially for producers in Alabama.
“There is a big focus on carbon credits in the Midwest because there are larger tracts of land,” she said. “The biggest issue right now is that there are no standard regulations across the industry. Our team is working to learn more about carbon credits on the market so that we can help Alabama growers to make informed decisions.”
Things to know
While the idea of carbon credit sales may be appealing to some producers, most major brokerage companies are focusing efforts on tracts of land in the Midwest. However, there are still companies striking deals with Alabama farmers. There are several aspects producers should consider before signing a contract.
One of the most important aspects is the contract itself. Kelton said producers should prepare to thoroughly read each line and requirement as laid out by the brokerage company.
“One of the most important things for producers to determine is what is required as a producer,” Kelton said. “There may be some contracts that require nothing of the producer, while others might require the application of a special soil microbial amendment or another product.”
The going price for units of carbon varies by company and by geographical location. This is one aspect producers can expect to level out as the United States establishes a federal market. Some companies pay more for certified land; others offer a flat fee per acre. This is one aspect growers will need to confirm with individual companies before signing on the dotted line.
Many producers have already adopted conservation and precision agriculture practices on their farm. In fact, producers widely use these practices and have for some time.
Producers need to show sequestration above normal carbon storage in order to receive compensation for implementing conservation practices. This means producers will not receive compensation for the number of years farming with precision agriculture practices thus far. Only the implementation or addition of new practices counts for compensation through contracts.
Kelton said each producer will need to decide if a contract with a given company is the right fit for their operation.
“Read the fine print to decide if the requirements on your part are worth the paycheck you will receive,” Kelton said. “What is worth it to some producers may not be worth it to others.”
Because Alabama is not a focal point right now, the stakes are relatively low for producers who want to get in the game. However, this could all change with a national mandate or legislation related to carbon credits.
Alabama Cooperative Extension contributed this article.