The Future of Carbon Credits: Q&A with Jessica Kelton

This article was originally published in PQ 44.

An emerging way for farmers to make extra money is through the rising carbon market. According to Time Magazine, carbon markets are createdwhen businesses are given an allowance of how many metric tons of carbon dioxide they can emit. Those who emit less than their allotment can sell their extra credits to other businesses. One carbon credit is equivalent to 1,000 kilograms of greenhouse gas emissions. One way to reach emissions targets is through carbon sequestration, which is the process of capturing and storing atmospheric carbon dioxide. Farmers can contribute to carbon sequestration by storing carbon dioxide in soils, trees andplants. Jessica Kelton is a Cooperative Extension Service regional agent based in Headland, Alabama. She currently works on the ACES farm and agribusiness team and observes the carbon market from a Southern viewpoint. 

NPB: Southern soils are known to be lower in organic content. How realistic are carbon credits for peanut farmers?
KELTON: Southern soils, particularly sandy soils, are typically lower in organic matter than some regions, such as the Midwest. Over time these soils can gradually build soil organic matter and have the potential to sequester carbon. However, whether it is due to the acreage of farms or soil type, many companies offering carbon credit contracts are focusing efforts on Midwest farms. To date, there are a few companies with a presence in Southern states with eligibility that might allow peanut growers to take advantage of carbon credits. It is important for growers to understand what requirements each company sets and if peanut production and their operation would qualify.

NPB: Some companies seem to offer more for carbon credits; and some don’t give credit for current conservation practices, only new ones. How will a farmer go about selecting a company?
KELTON: Finding the right company is a challenge for growers. To start, the industry currently isn’t standardized in how sequestration is determined or in price structure. Some companies utilize audits of farming practices, while others use modeling to determine how much of a credit is earned per acre. Companies may vary in contract length and management practices that qualify for a payment. There is concern that companies offering carbon credit payments may only sign-up acres that are newly converted to some conservation management practice and exclude acres currently in conservation practices. This is due to the idea of additionality that is mentioned frequently with carbon credits. Credits are based on how much ‘extra’ carbon equivalent is stored in the soil over current or baseline practices. In this case, current use of conservation practices already set that baseline at a higher level, so implementing an additional practice that increases carbon storage even further would be necessary to realize an increase over the current sequestration level. However, there is discussion about how to include those acres in payments for carbon credits, but it may not be available yet.
Ideally, growers would compare multiple contracts before deciding what company to work with, but that may not be realistic due to only having a few companies offering contracts or only qualifying for payments with a small number of companies. Ultimately, a grower should read any contract and be comfortable with practices, contract length and pricing listed before signing.
NPB: What are some practices that a farmer might be able to use to earn carbon credits?
KELTON: Practices that would qualify for a payment will vary by company, but will most likely include conservation practices, such as adopting minimum or no-till practices, planting cover crops or any practice that leads to carbon storage in the soil. For peanut producers, it will be important to understand how any of these conservation practices could impact peanut yield, especially in the first few years of adoption. Speaking to other producers about what types of cover crops and tillage practices are easily managed, easy to plant into, result in similar yields, etc., would be beneficial before adopting new practices.
NPB: How much per acre could farmers earn from carbon credits?
KELTON: That is tricky because there is no set standard on carbon credit value. Some companies make a flat-rate payment while some allow growers to ‘bank’ the credits for some amount of time and price them in the future. Currently, in most cases, payments being offered may help offset the cost of adoption of some conservation practices, but the payment itself shouldn’t be the primary reason for deciding to implement a practice.

NPB: Farmers dispose of peanut vines and leaves by baling them for hay for animals or leaving them behind for fertilizer and carbon regulation. What is the value for each and what is the potential carbon credit that farmers can get?
KELTON: While all the companies offering carbon credits differ in eligibility for payments, most have focused on the addition of a winter cover crop as a qualifying practice, and removal of crop residue may or may not affect payment or eligibility. In some cases, a grower may be able to continue to bale peanut hay, plant a cover crop and still qualify for a carbon credit contract. Again, this would be specified in a contract as to what would be allowed or not and specific to each company. Bottom line, each practice a grower uses has some amount of costs and value, so growers need to evaluate practices for their farm from an overall perspective rather than just from a perspective to qualify for a carbon credit payment. At this point, a carbon credit payment would probably not equal what a grower could get for peanut hay but leaving the residue in the field and adding to soil organic matter can have value, though not always easy to calculate, even without a payment from carbon credits.
Nugent, C. (2019, December 12). What are carbon markets and could they help fight climate
change? Time.  

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