RENVILLE — Farmers looking to adopt practices that improve soil health have an opportunity to tap into a growing market for carbon credits, and put a little more green in their pocketbooks.
“It’s not going to pay the bills,” said Bethany Huls, carbon customer success manager with Bayer. But farmers can earn revenues from carbon credits that they would not otherwise while improving soil health for the long-term benefit of their farms, she explained.
Huls was joined by representatives of Cargill, Truterra, which is the Land O’ Lakes sustainability division, and Indigo Ag, an agricultural start-up, in outlining the opportunities and challenges that come with the emerging carbon credits market. They spoke Wednesday in Renville at a “Profitability of Soil Health” event hosted by the Hawk Creek Watershed Project and the Renville County Soil and Water Conservation District.
The carbon credit market totaled $300 million in 2020, but is projected to grow to as large as $5 billion to possibly $30 billion in 2030, according to Huls.
Truterra rolled out its carbon credit program for farmers in Midwestern states south and east of Minnesota last year. It paid $4.3 million in 2021 to farmers, with the average farmer receiving $20,000 and some seeing more than $100,000, according to Anthony Robinson of Truterra.
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Indigo, which was started in June of 2019, enrolled 3.5 million acres of farm land in its carbon credit programs, according to Steve Ficocello, senior account manager.
The carbon credit market is a private sector, voluntary market, the speakers emphasized. Many of those who are buying credits are large, Fortune 500 companies. They have pledged to reduce their carbon footprints, and need to buy carbon offset credits to do so.
Consumers are demanding it, the speakers said. “Really what’s happening is companies and customers are increasingly aware of their sustainability impact,” said Huls.
American agriculture represents the lowest-cost source for carbon offsets. Ficocello said the Midwest corn belt sequesters as much carbon dioxide during the growing season as the Amazon rainforest.
He and the other speakers are confident the carbon credit market will grow, but said that they believe it represents a 10-year window of opportunity for farmers. Most of those buying carbon credits intend to have the offsets they need acquired within that time frame. They also believe that technological advances will provide other means of carbon sequestration in the years ahead.
Farmers are paid for carbon credits in different ways. Cargill and Truterra pay by the metric ton of carbon dioxide that is calculated to have been offset by the changes on a farm, based largely on data collected on the enrolled land, such as crops yields and changes in the soil, according to Sara Koenig, with Cargill, and Robinson.
Bayer pays farmers directly by the carbon reduction practices they adopt: Converting to conservation tillage is worth $3 an acre, and planting cover crops is worth $6 an acre, for a total value of $9 an acre if both are done, according to Huls.
Indigo pays farmers according to the value of the carbon credits sold by the company. Farmers receive 75% of the revenues and Indigo the remainder, according to Ficocello.
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Calculating how much carbon is offset on a farm requires soil testing, remote sensing and ground truthing — and with it comes paperwork.
The speakers emphasized that what Robinson called the “heavy lifting” in certifying the carbon offsets on farms is handled largely by the companies. They also assured the audience of more than 100 that their individual farm information is kept confidential.
There’s plenty of controversy about carbon credits, and some of it surfaced at the event. What Huls called the “elephant in the room” is the frustration felt by farmers who have already implemented carbon-reducing practices. For the most part, the speakers acknowledged that credits are provided to farmers for implementing changes on cropped acres, and that “historical” or “legacy” acres do not receive carbon credits.
“What we’re trying to do is provide the incentives to get more people to think like you,” said Ficocello.
He and the other speakers believe some changes are coming to reward those who implemented sustainable practices years ago. Some cereal food companies are paying a premium for what is being termed “sustainable grains” raised on acres where regenerative or sustainable practices are already in place.
Some producers at the event expressed skepticism about carbon credits, and their long-term viability. The speakers continued to emphasize that the carbon credits are part of a voluntary, private sector market, and that all of the current projections see demand exceeding supply for some years to come. And while there are other sources for carbon offsets, such as in forestry, “none of them achieve the success you can achieve through the American farmer in the next 10 years,” said Ficocello.
He urged anyone who is thinking about adopting sustainable farming practices to at least look into the opportunities of carbon credits before the window closes on them. “We’ve got 10 years to really take advantage of something like this,” he said.
