Carbon Market Kickoff

OMAHA (DTN) -- Trying to stem the tide of land conversions to crops in the Prairie Pothole region, a pilot program spurred by a USDA grant has gotten a greenlight to sell carbon offsets from grasslands in North Dakota.

By next summer, at least 114 landowners in an eight-county area in North Dakota could be collecting carbon payments that would range from $16 to $25 an acre, as long as the land stays in prairie or pasture.

Several environmental and conservation groups last week, as well as USDA, issued news releases praising the development of a new carbon market for ranchers. The project began with a $161,000 USDA Conservation Innovation Grant in 2011 to Ducks Unlimited, specifically to stem the tide of land conversion to crops.

The critical element in creating a carbon program is getting a verified methodology for measuring the carbon. That was a key to last week's announcement. The American Carbon Registry certified carbon offsets from grasslands, based on the work done in the North Dakota project.

Now that a methodology is approved, groups can put together a project plan to enroll landowners and offer up an approved number of acres and carbon offsets.

Groups such as Climate Trust, Environmental Defense Fund and the Nature Conservancy all worked with USDA and Ducks Unlimited to establish the new protocols. It will create incentives for companies to invest in protecting grasslands.

"That's important. These lands are going to stay in agricultural use, but we think we can promote good conservation, promote good agriculture while we create opportunities for land owners who are doing good," said Robert Bonnie, USDA's undersecretary for Natural Resources. "Our hope is there will be investment down the road in this -- that folks will see this as an opportunity."

Land conversion is a growing problem. Last year, USDA reported 398,200 acres of new land broken out into crops with Nebraska topping the list at 54,878 acres, more than double the conversion of any other state. North Dakota had 9,908 acres converted from grasslands to crop production.

To slow conversions, the Senate farm bill has language that would reduce crop insurance subsidies for newly broken land -- a provision commonly known as sodsaver. The House has similar language, but restricts sodsaver to the Prairie Pothole region in parts of Iowa, Minnesota, Montana, North Dakota and South Dakota.

The 114 landowners so far involve about 50,000 acres. That reflects a strong interest in both a carbon offset program and finding ways to keep that land preserved, Bonnie said.

Eric Lindstrom, a government affairs representative and biologist for Ducks Unlimited, said there is a buyer for the offsets that is a large manufacturer in the auto industry, though Lindstrom said there is currently a confidentiality clause to keep the name of the company undisclosed. The actual transaction on the offsets could be disclosed by next summer, he said. "We hope to make an announcement in June or July on a large carbon transaction," Lindstrom said.

Lindstrom said the estimated price range for those eligible producers would be somewhere between $16 and $25 per acre, in addition to an easement payment.

Besides the carbon offset, the landowners in North Dakota also collect easement payments that collectively come from a variety of federal sources such as migratory bird stamp revenues, land and water conservation funds, the North American Wetlands Conservation Act funding and other groups such as Ducks Unlimited. The U.S. Fish and Wildlife Service holds the easements.

Carbon offsets are largely piecemeal now and scattered. A $500-million-a-year voluntary carbon market remains in the U.S., mostly driven by larger companies wanting to show they are reducing greenhouse gas emissions.

"People who are doing that are doing so largely for public-relations benefits," said Joe Fargione, director of science for the Nature Conservancy in North America. "This kind of grasslands project, we feel, has a good opportunity of breaking into the market and getting some of that market share because it has strong co-benefits for biodiversity and wildlife."

A national regulated carbon market failed to get a vote in the U.S. Senate in 2009-10, killing legislation known as "cap-and-trade." USDA and Ducks Unlimited have a project in North Dakota. A few states such as Oklahoma run their own offset programs. The California Air Resources Board is working on a specific protocol for rice growers in the state. Such programs will grow as EPA pushes states to further cut greenhouse gas emissions from major polluters.

"The situation we find ourselves in is we don't have national legislation and we don't have a national program that would allow for these types of offsets, but we still see there is significant opportunity and there's real interest in the regulated community," Bonnie said.

The offset piece has always been a bit abstract. People never seem to understand what it means on the ground. The hope is to show how offsets work in a practical manner and what it means for landowners and farmers. That was largely the basis for Conservation Innovation Grants so Congress could see projects and how partners would bring additional leverage to sequestering carbon. Farmers would also get more interaction and understanding.

"There are multiple benefits from carbon offsets. There is less soil erosion. Water quality also is improved. Wildlife habitat grows," Bonnie said. "When you take the concept of trapping carbon in the soil, it translates on the ground into protecting the long-term sustainability of that soil. Carbon sequestration discourages farmers from plowing up the fields."

More information about the offset program can be found at http://www.ducks.org/…

Chris Clayton can be reached at chris.clayton@telventdtn.com

(SK/CZ)

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