During the past decade, the carbon credit market has experienced significant growth and transformation. Initially driven by regulatory compliance with the European Union Emissions Trading System, the United States market has expanded to include a robust voluntary sector where corporations actively purchase credits to offset their emissions and demonstrate climate leadership. Demand for carbon credits increased throughout the past 10 years as more corporations set net-zero targets that created an opportunity in agriculture to become part of the solution and generate carbon credits from farming operations.
For a Missouri row-crop operation, carbon credits can be generated through the adoption of soil conservation practices such as no till, reduced till, nutrient management and cover crops. These techniques enhance soil health, reduce erosion, reduce emissions and increase the amount of carbon stored in the ground. By minimizing soil disturbance, no-till farming preserves organic matter and helps sequester carbon, while cover crops capture atmospheric carbon dioxide and return nutrients to the soil. Farmers who implement these methods can quantify their greenhouse gas reductions and soil carbon removals and receive payment.
It’s important to note that in the United States, trade in carbon credits primarily operates as a voluntary market driven by the private sector. Within the carbon market industry, there are two sections: carbon insets and carbon offsets. Carbon insets are carbon credits purchased within the company’s supply chain, such as an agriculture company tracking its use of soybeans or corn, then purchasing the carbon credit from a corn/soybean growers. Whereas carbon offsets are not tied to a supply chain or product, and the carbon credit is offsetting the emissions from another industry. Think of technology companies purchasing carbon credits from corn and soybean growers.
A leader in the carbon credit industry is the Soil and Water Outcomes Fund (SWOF). Housed in Iowa, SWOF operates as a subsidiary of the Iowa Soybean Association and began in 2019 to work with corporations looking to buy carbon credit insets from Midwestern farmers. SWOF’s business model is to have the demand from the buyers (corporations) then seek out suppliers (growers) within the sourcing regions of the corporate partners. Once growers commit to the additionality of no till, reduced till and cover crops in their operations, SWOF verifies the practices in the spring, and the grower receives payment on the verified carbon generated. Carbon credits can only be generated and paid on an operation if the practice is an additionality and above the current baseline. For example, credits would be earned by a grower who eliminated tillage in a field and moved to a no-till operation. Extending crop rotations (adding wheat, alfalfa or clover) or using cover crops qualifies as well.
Although the carbon credit market has grown within the past several years and market transparency and standardization of verifying credits have improved, there are still market challenges, including concerns about additionality, corporation environmental goals and the effectiveness of credits in achieving genuine emission reductions. As our world seeks solutions to decarbonize, the carbon credit market is poised for continued expansion and creates an excellent opportunity for Missouri farmers to participate and profit from generating carbon credit on their operations.
In addition to the niche incentive the carbon credit market opportunities create, participating in several of the above listed soil conservation practices will give a field mitigation points to be in compliance with Environmental Protection Agency (EPA) Endangered Species Act (ESA) requirements. No-till fields receive 3 points and long-term cover crops with no till will receive another 3 points. The EPA Mitigation Menu can be found at: https:// www.epa.gov/pesticides/mitigation-menu#mitigation-options.
