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Inside Profitability – Ecosystem Credits: An alternative source for revenue?

Agriculture ecosystem credit markets, like carbon credit markets, have been described as the Wild West. Right now, anything goes. Farmers are being besieged by several entities seeking their participation in credit programs. Private companies, start-ups, even Congress and the USDA are including agriculture in their sustainability initiatives.

During the Aug. 26 Inside Profitability Webinar: Ecosystem Credits, Nebraska Farm Bureau wanted to take a closer look at this developing program and offer Nebraska Farm Bureau members accurate information about the possibilities and challenges of these developing markets. Nebraska Farm Bureau News spoke with Shelby Myers, Nathan Thompson and Lukas Fricke on the topic. Myers is an economist with the American Farm Bureau, who can give background on what’s driving these ecosystem markets and how they work. Thompson is an agriculture economics professor at Purdue University, who just finished a survey on what farmers are thinking regarding carbon credits. Lukas Fricke is a young farmer, who is a member of the Butler County Farm Bureau. He participates in these ecosystem markets and shares his firsthand experiences. If you would like to listen to our Inside Profitability Series podcast go to series or watch it on YouTube.

Shelby Myers, economist AFBF

Q1. Why are we having a conversation about ecosystems credit in agriculture right now?
A1. Sustainability matters to all of us, and we are seeing the public understands we all have a stake here. We are seeing an increased interest from consumers, employees and company stockholders for products that contribute to a reduction in the overall impact of greenhouse gas emissions across the supply chain. Agriculture is a leader here. With these initiatives have come the call, primarily from grower groups, for voluntary, market-based incentives to help farmers and ranchers adopt conservation practices that meet the demand to offset other industries as well. Ecosystem services markets are one of the many voluntary, market-based incentive options available.

Q2. What role do you see farmers and ranchers playing in this discussion?
A2. Farmers and ranchers are at the forefront of climate-smart farming, putting scientific solutions, technology and innovation to work to protect our land, air and water. U.S. agriculture contributes  around 10% to overall greenhouse gas emissions by economic sector. Thanks to farmers’ dedication to conserve natural resources, that share drops to negative 2% when additional carbon absorbing practices are factored in.

Q3. What can you tell us about the Growing Climate Solutions Act that recently passed in the Senate?
A3. The Growing Climate Solutions Act is a bipartisan bill that was reintroduced this Congress by Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) and Sen. Mike Braun (R-Ind.). It passed the Senate by an overwhelming vote of 92-8 on June 24 and is awaiting action in the House. The bill would establish a technical assistance and certification program through the U.S. Department of Agriculture to assist producers and forest owners seeking to participate in voluntary carbon markets and would work to help solve technical entry barriers for participants.

Nathan Thompson, Purdue University

Q1. What were farmer and rancher responses to opportunities in the Carbon Credit Market?
A1. We asked 1,201 commercial farms about their awareness of, interaction with and participation in carbon markets (responses were collected as part of the February, March and April Ag Economy Barometer surveys). Of the producers in our survey, 465 (39%) said that they were aware of opportunities to receive payments for storing carbon on their farms; 85 (or 7%), said they had sat down with a company to discuss opportunities to store carbon on their farm; and 16 (or 1%), said that they had actually signed a contract to store carbon on their farms.

Q2. Can you give us some examples of what farmers and ranchers should think about when they enter into a carbon credit agreement?
A2. There is a myriad of questions that producers should be thinking about as it relates to participating in a carbon market. I will try to distill it down to a few of the most important ones: l First and foremost, producers need to evaluate the costs and benefits of participating. To participate in a carbon market, producers are going to have to implement new practices (e.g., cover crops, reduced tillage, etc.). Those practices are going to have costs associated with them. What are the costs of implementing those practices on your farm? Once you have determined the cost, you then need to compare them to the benefits of participating. Most notably, how much will you get paid for stored carbon and how much carbon should you expect to store on your farm? Is that enough to offset the costs of the practices?

  • It is also very important to understand the contract terms.
  • What is the price I will be paid for carbon? Will that change over time?
  • How will carbon sequestration be measured?
  • How long is the contract for? How long do the practices need to be maintained after the contract ends?
  • What are the penalties for contract noncompliance?

Lukas Fricke, farmer Butler County Farm Bureau

Q1. How do you participate in Carbon Credit markets?
A1. I had the distinct privilege of getting to work with TruTerra, a Land O’ Lake’s company, to sell in their TruCarbon offering to the Microsoft company. The reason that I really liked the TruCarbon offering was because of the farmer control of the process through the data control and ability to be involved in future offerings. It was also extremely easy for us as a family farm to be involved because we utilized the TruTerra Sustainability Insights Engine, the data collection part helped us implement strip till to gain ROI and help the environment. When the TruCarbon offering came around, we had the necessary data at our fingertips to be involved instantaneously.

Q2. What is your message to farmers and ranchers who want to sell Carbon Credits?
A2. It is a long-term commitment so make sure that you own the ground or have a long-term lease. Also, you don’t have to be organic or implement “crazy” new farming practices. Things like cover crops and tillage practices changes are becoming easier to implement with availability and new science around them. The biggest piece of advice I have is do what works for your bottom line and operation. As farmers, we have always put the environment first because it is our livelihood.

Q3. How has this experience been for you?
A3. Extremely easy and pleasant. I am very happy with my sale because it looked back and offered me the ability to participate in future credit opportunities; we didn’t have to implement something far out to participate – and what we were doing was already ROI proven (strip-tilling). Lastly, I used a company that didn’t require me to buy a product to participate (which is totally fine, those companies are great!), they are Ag-Data certified, and I had an existing relationship with them as well.

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