Markets unPACKed: Are the Rumblings of Carbon Credits Getting Louder?
Are the Rumblings of Carbon Credits Getting Louder?
It would be extremely unwise to ignore the consistent chatter of ‘carbon credits’ in today’s economy. While working in agriculture, it really has only been the last six months that carbon credits are a topic of conversation. As my team and I head out to the corn belt in a couple of weeks, it is only fitting that we do our homework on all carbon credit opportunities for farmers.
So, what are those opportunities?
This week headlines came across the screen that Indigo Ag has started a department called ‘Indigo Carbon.’ Their website asks farmers to add new practices to chosen fields that increase soil carbon and reduce emissions. The farmer records historical and current season management data in their software, Indigo takes soil samples and then calculates the carbon credits generated on your farm. Then, independent carbon credit issuers verify carbon credits, Indigo sells credits to corporate buyers, and the farmer gets paid for the carbon credits they earn. Indigo Ag states that this opportunity could potentially equate up to $30 per acre per year in gross income. It sounds enticing.
With further research on this program, we came across a FarmProgress article addressing this program. The article, by Holly Spangler, brought up the point that agriculture has shifted from being the scapegoat to the climate crisis to a climate solution since the industry can “…sequester a lot of carbon and create a lot of credits.”
However, what will it take to adopt these practices? The article picks apart Indigo Ag’s program and brings to our attention that the farmer is not getting paid out each year for their credit, but that Indigo Ag is giving a portion of that payout each year to incentivize a long-term commitment to conservation. In addition, the article argues that most farmers are leasing the land plus startup costs are higher in year one than year five. It seems the economics of the producer need to be considered if we are going to make agriculture a climate solution.
While there may be some kinks to work out, politics is certainly moving full steam ahead. The Washington Examiner reported that Senators voted by a wide bipartisan margin to approve a bill to help farmers access voluntary markets to sell carbon credits. This was the Growing Climate Solutions Act.
Regardless of bipartisan support, we believe one still has to convince the producers and speak to their margins.
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