There has been a lot of buzz concerning the carbon credit market. This brief article will discuss the importance of carbon and carbon markets, and what they can offer producers.

What is Carbon?

Carbon is the basic building block for all living things. It is present in the atmosphere as carbon dioxide (CO2), in living and nonliving organisms, as organic matter in soils, in fossil fuels, and in the oceans as shells, coral, and sedimentary rock. Carbon is all around us.

While carbon is essential for all life, there is a balance between where the carbon is located and stored within the earth, oceans, and atmosphere. In the past 60+ years, carbon, as carbon dioxide, has accumulated in the atmosphere.

To counter these effects, many US and global companies that emit carbon dioxide are willing to pay for practices that move carbon from the atmosphere into different pools, like soil. Paying for practices is known as carbon “crediting”. Carbon credits can be generated from many different sources. For the purpose of this article, we will concentrate on credit opportunities related to crop production, which incentivizes practices that boost carbon or organic matter in soils. (Soil organic matter is ~50% carbon.)

Farmers using these practices to boost organic matter can realize many other benefits. Organic matter provides nutrients, especially N, to growing crops. Organic matter improves the water infiltration of our soil. This means our soils can absorb large, intense rainfalls in a shorter time period so less water ponds or runs off the field, and there is more water retained in our soils to feed the crop during dry times. Organic matter builds a resilient soil, a soil that can better handle the extreme weather changes while securing our crop yields.

How Does the Carbon Market Operate?

If a company wants to lower their carbon footprint, they contract with a broker to find carbon credits that can be bought and sold on the open market. The broker lines up and verifies on the ground that each carbon credit is legitimate. One carbon credit is equal to one metric ton of carbon dioxide and is currently worth $14-18 per credit.

Carbon can be built on farmland by reducing tillage aggressiveness, switching to no-till, or adding a cover crop. Almost all markets are looking for farmland implementing a new practice, as these acres are easier to verify, so you may not qualify if you have implemented these practices long ago. However, some companies will consider practices recently adopted (~2 years). This means most C markets are a better fit for farmers looking to experiment with something new, rather than those who have a long history of carbon-building conservation practices.

The amount of carbon a farmer can realistically draw down is based on their climate, crop grown, and other factors.

Whether or not carbon credits will help your bottom line will vary farm by farm and maybe field by field. Carbon credit payments are unlikely to entirely cover the cost of a new practice. They may simply reduce the risk of trying something new. However, there is no debate that building carbon in your soil has a long list of benefits for you and the next generation of farmers.