Farm Climate Smart -- 4

Growth and Profit Potential in Carbon Sequestration

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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(Photo by Joseph L. Murphy)

Carbon credits give farmers a chance to get paid for practices that sequester carbon in the soil or reduce greenhouse gas emissions, such as lowering fertilizer inputs.

The entire voluntary carbon market -- of which agriculture is just a small slice -- was worth an estimated $2 billion in 2021. Still, that was four times the value from 2020, according to Forest Trends' "Ecosystem Marketplace" report, released in August.

DTN/Progressive Farmer is continuing its special series of articles called Farm Climate Smart that examine what the term means, looks at current and future economic opportunities the movement offers for farmers and ranchers, and highlights what some producers are doing now to make their land and crops more resilient to a changing climate. Today's article, the fourth in the series, lists some of the major carbon programs that have been established, as well as some of the requirements for each one.

VALUE TO GROW

The growth of the carbon market is exponential. Bloomberg's analytical arm projects carbon offsets could become a $190-billion market by 2030. Bloomberg and others project companies will move aggressively toward carbon offsets to achieve their sustainability goals, and there won't be enough supply of projects such as direct carbon capture to meet the demand. That's going to lead the price of carbon to spike to as high as $200 per metric ton for some markets.

Forestry and renewable energy are the dominant markets for voluntary carbon credits. In 2021, agriculture overall traded slightly less than 1 million metric tons (mmt) for about $8.7 million, though the average price for agricultural offsets at $8.81 per metric ton (mt) was the highest of any category. Offsets for forestry were running around $5.80 per ton.

California's compliance market on Nov. 9 was trading at just $28.99 per mt, down about 9.5% since the beginning of the year, but up from a month ago. The federal government pegs the "social cost of carbon" at $51 per mt. However, a study led by Resources for the Future puts the social cost of carbon -- the estimated economic damages of climate change -- as high as $185 per mt. That same study pegged the cost of carbon pollution to agriculture at $84 per mt.

Credits are traded on a purely voluntary basis largely because corporations have set specific goals to lower greenhouse gas emissions in their supply chains. Some companies are selling agricultural carbon credits to buyers across corporate America, including airlines and technology companies. Others are specifically looking to offset their own supply chain emissions through existing relationships with farmers, known as "carbon insets."

MANY PROGRAM OPTIONS

Every agricultural carbon credit program is unique. Some pay by acre, some pay by (metric) ton, and some pay by the practice. They have different rules, payment plans and requirements, and they are enrolling farmers based on their commodities or region of the country.

Yet, each company already in the game claims it is looking to enroll millions of acres over time. If each company hits its acreage targets, then roughly 1 in every 3 farm acres would be part of a carbon program by 2030.

Right now, there are roughly a dozen companies enrolling and paying farmers, though some of those programs are simply pilot projects.

In some cases, farm organizations are working with companies to sign up farmers for certain cropping practices, as well.

The payments in summer 2022 can range from as low as $2 an acre to as high as $40 per mt of carbon. Pricing for carbon credits is opaque in a lot of cases because there is no defined pricing platform in a voluntary carbon market.

As of now, there are no standards for carbon markets. Legislation passed by the U.S. Senate in 2021, the Growing Climate Solutions Act, allows USDA to set standards for carbon markets and create a certification program. The bill also authorizes USDA to provide technical service to producers so they can qualify for a carbon contract. That legislation, however, has been stalled in the House of Representatives for more than a year.

CARBON CREDIT PROGRAMS

While there are new players in the carbon space popping up, these are some of the major carbon programs in the U.S. already established by the end of summer 2022.

-- Agoro Carbon Alliance. Formerly part of the fertilizer company Yara, Agoro is working to enroll 1 million acres of crop, pasture and rangeland in the U.S. Several payment options are available based on the program selected. Agoro is offering its program in 48 states but is focusing on the Midwest. Farmers working with Agoro sign 10-year contracts.

https://www.agorocarbonalliance.com/…

-- Bayer Carbon. Bayer has enrolled more than 2,600 farmers in 10 countries, involving 1.4 million acres. The program was offered in 17 states in 2022. Bayer Carbon pays farmers $5 to $12 an acre for on-farm conservation practices. The program uses Bayer's Climate FieldView platform. Bayer launched a new digital platform, ForGround, in August.

On Oct. 24, Bayer also announced a collaboration with Nori on its Bayer ForGround product.

https://bayerforground.com/…

-- Cargill RegenConnect. Cargill references advancing 10 million acres of regenerative practices, though Cargill has not set an acreage goal in its RegenConnect program. The program was offered in 15 states for 2023 with a payment of $25 per metric ton. Cargill's program will enroll farmers for contracts as short as a single year. https://www.cargillag.com/…

-- CIBO. CIBO has signed up a small number of farmers in a pilot project for carbon sequestration, mainly to determine how well its software tools work. https://www.cibotechnologies.com/…

-- Corteva Agriscience. About 1 million acres are enrolled in Corteva's program, which it operates using its Granular program to verify practices. Credits are measured and marketed through Indigo. Corteva guarantees a minimum $20 per credit, projected to go to $30. https://www.corteva.us/…

-- Farmers Edge. Growers enrolled in the Smart Carbon program collect data using the company's digital platform. They are credited for practices such as reduced tillage/no-till, cover crops and reducing nitrogen use. The company conservatively estimates a payment of $10 per acre. https://www.farmersedge.ca/…

-- FBN Sustainability Using Gradable Technology: Part of the Farmers Business Network, once dubbed "Gradable Carbon," Farmer Business Network now calls its program FBN Sustainability using Gradable Technology. The program has a $20-per-carbon-credit floor price. Farmers can sell credits or bank them for selling later. Credits are generated through practices like cover crops, conservation tillage and nitrogen management. https://www.fbn.com/…

-- Indigo Ag. With more than 5 million acres enrolled, Indigo is signing up farmers in as many as 30 states. Indigo has no limit on the number of acres it looks to enroll. It's selling credits at $40 a ton, of which farmers get 75% of the market value of the credit. https://www.indigoag.com/…

-- Locus Ag Solutions CarbonNOW. About 320,000 acres were enrolled last year with plans to quickly reach 1.32 million acres by the end of the year. CarbonNOW is available in all 50 states. Farmers are guaranteed a minimum of $12 an acre, of which 75% is paid up front.

https://locusag.com/…

-- Nori. As mentioned earlier, Nori got a recent boost by announcing a collaboration with Bayer. As of October, Nori had enrolled 35,387 acres with another 10,466 acres under verification, as well as projects for another 24,000 acres. Most of Nori's projects currently are in the Midwest and Atlantic states. Nori doesn't have a specific acreage goal but does have limits on crops and practices that are part of the program. Currently, Nori's projects are paying $20 a ton.

https://nori.com/…

-- Nutrien Carbon Program. At the end of 2021, Nutrien reported 225,000 pilot acres in three Canadian provinces and 15 states in the U.S. Nutrien's program uses several partners including other carbon programs. Nutrien looks to reach 1 million tons of carbon equivalent sequestered in the soil or in emission reductions. Payment is up to $15 per acre.

https://www.nutrien.com/…

-- Rabobank. Growers upload data into Rabo Carbon Bank's farmer portal, create future regenerative plans and agree to have on-site soil sampling done. Minimum number of acres required. Payment info is unavailable.

https://www.rabobank.com/…

-- Soil and Water Outcomes Fund (AgOutcomes Inc.). The Fund looks to finish 2022 with 200,000 acres enrolled in 13 states. A subsidiary of the Iowa Soybean Association, the Fund pays farmers in two yearly installments, including 50% when signing a contract. AgOutcomes pays for carbon sequestered but also pays for nitrogen and phosphorus prevented from entering waterways. https://www.theoutcomesfund.com/…

-- Truterra, part of Land O'Lakes, did not detail its acreage enrollment but paid out $4 million in 2021 for sequestering more than 200,000 tons of carbon, which equates to $20 a ton. Payments ranged from $2 per acre to up to $25 per ton. Truterra markets its program through the Land O'Lakes cooperative network. https://www.truterraag.com/…

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For more information:

-- https://www.unitedsoybean.org/…

This is the fourth story in DTN/Progressive Farmer's Farm Climate Smart series.

To see Farm Climate Smart - 1: https://www.dtnpf.com/…

To see Farm Climate Smart - 2:

https://www.dtnpf.com/…

To see Farm Climate Smart - 3:

https://www.dtnpf.com/…

To see a related blog, go to 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

Chris Clayton