By Matt Reese
It is very clear the Biden Administration is putting emphasis on climate change and plans to move forward with, or without, the cooperation of U.S. agriculture.
“President Biden announced a major goal –— for the U.S. to reduce greenhouse gas emissions by half over the next decade as compared to 2005 levels,” said Peggy Kirk Hall, director of agricultural law, Ohio State University Agricultural and Resource Law Program. “Several bills introduced in Congress recently could help agriculture fulfill that key role. The proposals offer incentives and assistance for farmers, ranchers, and forest owners to engage in carbon sequestration practices.”
The most noteworthy for agriculture is the Growing Climate Solutions Act.
“The Senate Agriculture, Nutrition and Forestry Committee passed S. 1251. The bipartisan proposal led by sponsors Sen. Mike Braun (R-IN), Sen. Debbie Stabenow (D-MI), Sen. Lindsey Graham (R-SC) and Sen. Sheldon Whitehouse (D-RI) already has the backing of over half of the Senate as co-sponsors, including Ohio’s Sen. Sherrod Brown,” Hall said. “The bill has come up in prior sessions of Congress without success, but the sponsors significantly reworked the bill and reintroduced it.”
Hall said the bill:
• Requires the USDA to conduct an initial assessment of the domestic market for carbon credits, to include assessing market actors, market demand, estimated credits in process, supply and demand of offsets, barriers to entry, monitoring and measurement technologies, barriers for small, beginning and socially disadvantaged operators, among other factors.
• Creates a Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Certification Program to ensure that technical service assistance providers who work with farmers to establish and sell carbon credits have sufficient expertise, including agricultural and forestry knowledge. Certified parties are to act in good faith to provide realistic estimates of costs and revenues and to help farmers, ranchers and forester receive “fair distribution of revenues” derived from carbon credit sales.
• Establishes an online website providing information for farmers, ranchers and foresters interested in participating in carbon markets.
• Creates an advisory council that would oversee the certification program. At least 16 of the committee’s 25 members must be farmers, ranchers, or private forest owners.
• Charges the USDA with producing a report to Congress identifying barriers to market entry, challenges raised by farmers and forest owners, market performance, and suggesting additional ways to encourage voluntary participation in carbon sequestration practices.
• Authorizes up to $9.1 million in USDA funding for the program, including $4.1 million immediately and an additional $1 million per year for the next 5 years.
As it stands, there is not a solid, consistent framework for the carbon credit market, which presents some significant concerns for agriculture. First, while it is very clear that plants growing in soil sequester large amounts of carbon, delving into the details of a functioning carbon market immediately bring up a host of questions at the farm level. Fred Yoder farms in Union and Madison counties and he has traveled the world to learn about and share his insights on the topic of agricultural carbon sequestration. The more he learns, the more questions he has.
First, different plants sequester different amounts of carbon in different environments and soil types.
“Not only are we going to see differences in Ohio sequestration rates, we are going to see differences in county sequestration rates and in different soil types. Not all soils are created equal. You really can’t compare Ohio soils with Nebraska soils or soils in Illinois. We need to develop metrics that are based on science that truly are based on the sequestration of that one acre,” Yoder said. “Then If you do get an accurate metric, the verification of that sequestration costs as much as the value of the sequestration itself. Then the question becomes, do you pay someone for the practice and just not worry about the verification costs or do you come up with some system to sell to the private sector to pay for that. The other part of the problem is permanence. There are an awful lot of folks out there in the private sector trying to market carbon today, but none of them have an agreement on what a true carbon ton is worth and how it can be verified. I look at this as ambulance chasers out there trying to get farmers to sign up for an agreement that may be 10 years or even 30 years in some cases. You really don’t know what you are going to get paid for and how it is permanent. And what do you do about a farmer who has already been doing these things and is not going to be sequestering additional carbon? Are you going to entice farmers into bringing out the ripper again to qualify for a carbon program?”
Another major factor to consider is the amount of carbon released in the process of growing the crop.
“One of the things people always question me about is: what about the carbon footprint? If a farmer applies nitrogen in the fall and loses half of it, that nitrous oxide is 300 times more potent than CO2. What is the net worth of the carbon being sequestered by the no-till corn?
I think we really have to take a look at the carbon footprint of growing that crop too,” Yoder said. “Corn is like a giant solar panel out there and it sequesters a bunch of carbon. At the same time it takes a lot of nitrogen, which is produced with fossil fuels. It is important to understand the carbon footprint for producing that corn crop versus what you’re actually going to sequester. A lot of times we are only looking at the sequestration and not necessarily the cost of the carbon footprint to raise that crop. It is not comparing apples to apples.”
Also, as it turns out, many of the farming practices that sequester the most carbon also make the most money for the farm.
“You are not going to get paid in perpetuity for something you are going to be doing as a natural part of your production system. The taxpayer is going to be the one paying the bill for this. We have to demonstrate that there is going to be value so they can see agriculture is doing their share,” Yoder said. “I have been no-tilling and cover cropping for years because I wanted to find a better way to farm. It has done wonderful things to my soil and the resilience of my farm. What do we need to do to get farmers to change their practices to where they can be a natural sequesterer of carbon and lower their carbon footprint and, at the same time, demonstrate that agriculture is part of the solution and not the problem?”
Another issue, in terms of policy on the subject, is the global nature of carbon and climate change.
“Whatever policy we come up with on this has to pass muster with the rest of the world. The United States can lower our carbon footprint, but if the rest of the world is not doing it, we’re not going to move the needle as far as getting carbon reduced,” Yoder said. “Whatever we do, we have to show the rest of the world how to do it as well.”
Brent Sohngen is a professor of environmental and resource economics in the Department of Agricultural, Environmental and Development Economics at The Ohio State University and he has been studying the concepts of carbon markets, and the science behind them, for years.
“There are so many moving parts here that it is hard to keep track of them all. The data is starting to catch up. There is broad recognition that soil type matters a lot in terms of carbon sequestration. The USDA has models for that right now and they are being increasingly supported with good data they are collecting through the rapid soil carbon assessment. They are starting to pin these numbers down on the science side and people are more comfortable now with where we are,” Sohngen said. “Policy issues are emerging as bigger issues. There is the government policy side and we also need to think more about the private sector side. They are making huge, ambitious goals to be net zero. Most big companies in the country have said they want to be net zero by 2030 or 2050. You can only do that by storing carbon in soils or trees or things like that. It is the Wild West out there because a lot of these questions have not been worked out yet.”
In terms of contracts in carbon trading, there are two goals.
“You have to think about the two parts of the carbon cycle that are important. One is drawing it out of the atmosphere. Corn is one of the most productive crops in the world at doing that. Soybeans are pretty good as well. The downside of the corn, of course, is a lot of that goes back into the atmosphere at the end of the season,” Sohngen said. “The reason we like no-till is that it locks that carbon up in the soils. You have to think about taking it out and holding it out of the atmosphere. Trees do that really well. Trees take carbon out of the atmosphere at roughly the same rate as corn on the same kind of land, however they keep it out of the atmosphere by putting it into the tree material.”
As private sector companies and the government seek to reduce total carbon emissions and move toward net zero they want to “rent” carbon from agriculture. If they are emitting carbon, they want to offset it somewhere else by sequestering it over a given time period.
“There is a concept that you can rent carbon for a couple of years and then it can go back up into the atmosphere. One issue is the carbon itself and the other is what you’re getting paid for the carbon,” Sohngen said. “The Biden Administration is looking at something like $50 a ton for carbon dioxide. If you are a farmer getting paid $10 for a ton, clearly someone is not buying your whole ton, they are just renting it for some period of time. You need to think about that contract and think about what it is you are actually getting paid for. Then if something bad happens, what are the conditions on that where I can lease that carbon for a couple of years and put it in my soils and still have that $10. That is perfectly valid. You don’t have to permanently take carbon out of the atmosphere as long as you don’t get paid that full $50. The businesses are thinking about these contracts in that way. Farmers have to learn to quantify and value that carbon.”
Sohngen also pointed out that agriculture will be viewed more as a source of sequestration and less of a societal carbon emitter.
“Remember the Biden Administration is going to have regulations associated with the use of fossil fuels in other sectors like the transportation sector. The person who purchases that fuel is likely to be paying a tax on that fuel in order to count for that carbon emission there. Or they may be required in the transportation sector to offset those emissions. So the Administration is not going to impose the regulation that the entire agricultural sector try to be carbon neutral,” Sohngen said. “They are just saying they want the agricultural sector to sequester an increasing amount of carbon out of the atmosphere to maintain in the soil. In most other countries where carbon taxes have been implemented, farmers have been exempted from the taxes on fossil fuels. My expectation is that the U.S. will go the same way.”
In terms of funding the sequestration efforts, government and private sector will likely be footing the bill.
“I would let the private sector flourish on this one with payments. I think they have bigger pockets for this than the public sector does. It also avoids the need to find a pot of money for this in the federal government to pay for carbon. Companies are likely going to be regulated in some other way to be carbon neutral, even beyond their current commitments,” Sohngen said. “It creates a natural incentive for them to pay for carbon in agricultural soils. Right now we have some pretty good verification companies out there that have created pathways for these practices to make their way into commodity type things. I think the private sector can get this done and actually bring more money to the table to farmers than the government can.”
As this moves forward, the participation of the agricultural community is vital to maximize the ultimate value to farms, Yoder said.
“It is a great time to be a part of agriculture where we can be part of the solution. Farmers need to control some of this dialogue because they are going to be the ones doing the work. Status quo is not going to get this done,” he said. “You can make money by doing the right things here. One of the things I am really impressed with is the dialogue we’re seeing today in agriculture. This conversation that was taking place on cap and trade back in 2010, it ended because it looked like it was going to be totally detrimental to agriculture. We actually have a chance now to be a part of this, but farmers have to be involved in the decision-making process.”