Carbon Credits and Climate-Smart Ag

OMAHA (DTN) -- Iowa farmer Brad McDonald's advice to other farmers looking at carbon credit programs is to make sure you are focusing on soil-health practices first before you go "chasing the carbon carrot."

McDonald spoke Tuesday on a video for the DTN Ag Summit about his work in regenerative agriculture. Farmers must be comfortable installing practices on their fields that will increase organic matter in the soil and improve profitability at the same time, he said.

"If you're going to improve your soil health, that's where you can utilize that to sign up for a carbon program," McDonald said. "But to me, it's always about focusing on the farmer profitability. That's the real big hindrance when it comes to getting farmers to sign up for this is the fear of losing yield. Right off the bat, there's a non-familiarity and a learning curve when it comes to putting in a no-till, cover-crop system."

Leaders from Agoro Carbon Alliance, Bayer Crop Science and Corteva joined DTN on a panel discussion Tuesday about the evolving carbon credit programs and how those programs now interact with USDA's climate-smart initiatives. With an announcement on Monday, USDA now has approved more than 140 projects and $3.1 billion in funding under the Partnerships for Climate-Smart Commodities with the goal to reduce greenhouse-gas emissions in agriculture and increase carbon sequestration in the process.

Right now, there are about a dozen active carbon credit programs enrolling farmers and acreage around the country. And the options keep growing.

One of the major challenges facing farmers is how do they get involved in carbon markets when they lease a high percentage of their ground.

"That's one of the questions is how do you start to navigate this maze of options?" said Anastasia Pavlovic, chief operating officer for Agoro. "I think this is one of the first areas that a lot of farmers are considering, so right now, there are a lot of different ways you can do this. The programs each do that differently, but roughly, just proving that you have sort of the legal right to operate on this land."

Pavlovic said other countries, such as Australia, have created some legal structures to deal with how leased land is managed in a carbon program. "I suspect that is the way that we as a carbon industry in the U.S. will need to go, but it is something that is not that hard to deal with today, but I think we need better solutions and more infrastructure around this problem for sure."

Casey Mattke, U.S. digital and systems lead for Corteva, said their carbon program involves multiple partnerships that may have different options for both the landowner and the farm operator.

"It's a great opportunity as a tenant to have a conversation with a landlord," Mattke said. "There's nothing like a long-term commitment from an operations perspective to enter into one of these agreements and share in the upside if that's an opportunity you want to explore."

Farmers also continue to have questions about exactly who is buying the carbon credits generated by agriculture. Global companies have made commitments to reduce their carbon footprints, but in a lot of cases, the technology or the investments they have made haven't caught up to their emission goals.

"We are marketing those credits to global companies," said Leo Bastos, head of global commercial ecosystems for Bayer Crop Science. "So, the companies have, first of all, commitments to reduce their own emissions. They have a science-based target or a program like an organization that is reputable in terms of tracking what companies are actually doing. And lastly, it's companies that have a vested interest in agriculture and making food production actually more resilient. So, these are the type of companies that are interested in carbon products actually comping from agriculture, which is a very narrow set of companies."

Bastos noted agricultural carbon offsets compete against forest restoration projects in other parts of the world such as Southeast Asia. "So, it's an interesting way of talking about agriculture to companies that are not necessarily in the space of agriculture and showing what agriculture can do not only from food production but for the environment."

Pavlovic agreed that people have the perception that agricultural carbon markets are simply selling to big companies with a lot of greenhouse emissions, but there are also companies and financial institutions that are focusing their attention on food systems.

"They are really excited about agriculture, in the kind of systems, and of course, we've mentioned these other nature-based systems and land-use systems as well," Pavlovic said. She added, "Being able to harness the power of what is in the soil is a story that a lot of people get behind in a way that has surprised me. At the beginning, I was wondering if it was only really people who touched the food system somewhere tangentially that would be excited about this and excited about credit, and I think we see now that everyone understands agriculture, it exists everywhere, and think that's been something that has made this an even bigger opportunity for farmers."

Looking at the farm-level view for producers, McDonald emphasized in his interview with DTN the importance of providing farmers with the technical support they need to be successful with soil health practices. He again reiterated the ability to get paid a carbon credit stacks on top of the profitability from the practices, such as using soil health practices to reduce chemical inputs. McDonald talked about using the Haney soil test that looks at organic nitrogen in the soil to understand his available nutrients.

"I was able to shave off 20% of my fertilizer just from that," McDonald said. "And so that is a key component as far as improving soil health is reducing your inputs. So, from that standpoint, I was able to save money right off the bat."

McDonald's getting paid in a carbon program for practices in his system, mainly tied to no-till and cover crops for a payment. But he said he wants the ability to use the carbon program to quantify the net carbon sequestered in the soil.

"Eventually, we want to move away from just the practice changes themselves to actually quantifying what's the carbon sequestered and my carbon footprint and get paid based on that instead," he said.

Watch a video of DTN's interview with McDonald here: https://www.dtnpf.com/….

See DTN/The Progressive Farmer's Farm Climate Smart series articles from November here: "The New Cash Crop: Farmers Venture Into Carbon-Sequestration Market," https://www.dtnpf.com/….

You can also hear a podcast about the series at https://www.dtnpf.com/…. Go to Field Post E124: Get Smart on Climate Smart.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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