WEST LAFAYETTE, Ind. — As the United States looks to become more green, a program to trade carbon credits from farmland could play a role.
When carbon is emitted into the atmosphere, by vehicles or other means, it can be absorbed and stored by trees and other plants and may eventually wind up in the soil as organic matter. No-till fields store carbon in the form of soil organic matter, which can be sold by farmers, providing them with an additional source of income.
“Carbon credits are currently a voluntarily method used by organizations that want to offset their carbon emissions,” said Lenny Farlee, Purdue University Extension forestry specialist. “But it also creates an opportunity for farmers that may have no-till fields or landowners who replant forest trees.”
Like stock exchange
Carbon offset credits are sold through the Chicago Climate Exchange (CCX), which operates like a stock exchange. Offsets typically come from agriculture methane capture, no-till farming, grasslands and planting trees.
The CCX will accept a minimum of 100 tons of carbon at a time. Most landowners sell credits through an aggregator, comparable to a stock broker, who will combine multiple landowners’ credits together.
“An aggregator will lump several accounts together until it reaches 100 tons or more and sell the carbon to the CCX,” Farlee said. And the aggregator can handle most of the administrative work associated with selling the credits.
No get-rich scheme
Carbon from grasslands and no-till farming is sold to the CCX at a fixed rate per acre. Carbon from trees also is sold at a fixed rate based on tree species, age of the planting and region.
“Two years ago the market for carbon offsets was $7.50 a ton, but because of the economy and uncertainty about the future structure of carbon markets it is 10 cents a ton today,” Farlee said.
Mandatory emission control?
As the voluntary program becomes more popular, the federal government is debating whether to make reduction of carbon emissions a mandatory system.
“There have been legislative proposals in place for about a year,” Farlee said. “Part of the debate is over making the carbon emissions reduction system a carbon tax or a market-based offset and reduction system or whether to have a mandatory reduction system at all.”
Tax or offset
Under a carbon tax, emitters might be charged based on emission rates above some established threshold. If an offset market system is used, those entities emitting carbon could be allowed to buy and sell carbon offset credits based on their carbon emission reductions and offset credits to meet a required total emissions target.
“Europe has installed a mandatory carbon reduction and offset system, and the price per ton of carbon offset credits has been between $20 and $35 a ton,” Farlee said. “It is hard to predict what the future will bring here in the United States in terms of legislation related to reduction of greenhouse gas emissions.”
Farlee advised farmers and landowners to wait until the proposal is decided on before they sell their carbon because the market is depressed at this point.