Ecosystem Credits As Alternative Revenues?
Soil health, carbon sequestration, regenerative agriculture, sustainability—all terms being bandied about with increasing frequency regarding agriculture and its role in combating climate change. Some of the increased focus is due to the election of President Biden and his priority of addressing climate change.
Many private companies are looking to agriculture as part of their sustainability initiatives presumably in response to consumer expectations. Kevin O’Donnell, Global Director, Sourcing & Operations Sustainability at General Mills said, “We strongly believe farmers have a massive role to play in being a part of the solution. In fact, we don’t believe the world can adequately address climate change…without engaging agriculture.”
What does this heightened role for agriculture in addressing climate change mean for producers? The discussion thus far has centered around voluntary, incentive-based, market approaches to achieving the sustainability goals. Under the approaches, producers can sell credits earned for specific sustainability outcomes (Figure 1). Such outcomes could be increases in soil carbon (carbon sequestration), improved water quality, less water usage, or the adoption of specific practices. Producers selling credits would have to agree to data monitoring and measuring to certify and verify outcomes. Credits could be in the form of cash payments, input discounts, or premiums on commodities produced. Private companies are already moving forward offering producers per acre payments for certain cropping practices, per carbon credit payments, and identity preserved premium payments for crops produced using certain practices through pilot projects and other programs.
Figure 1. Producers’ Revenue Potential
Source: American Farm Bureau Federation
Nebraska producers could be uniquely situated to pursue new ecosystem markets as they develop. Nebraska producers are already near the top in the nation with 10.3 million acres of cropland under no-till with an additional 5.9 million acres under reduced tillage according to the USDA 2017 Census of Agriculture. The Census also showed the number of acres planted to cover crops in Nebraska increased 109 percent between 2012 and 2017. Moreover, research by three natural resources districts showed irrigation application rates had dropped 20 percent on average in corn and 8 percent on average in soybeans between 2004 and 2013. It would seem the potential for alternative revenues for Nebraska producers exists in these new ecosystem markets.
But many questions for producers remain. How will data privacy be encouraged and maintained? How will outcome verification be achieved? What technical support is provided? How can the financial soundness and credibility of firms offering payments for credits be assured? Will farmers who are already using a number of conservation practices earn credits? These and many more questions must be addressed before producers can feel truly comfortable enrolling acres and selling credits within ecosystem credit programs.