Carbon credits could offer additional cash flow to farming operations

Carbon credits are now giving farmers a unique opportunity to add cash flow to their operation like never before.

Dr. Alejandro Plastina gave a carbon credits seminar at the North Ag Expo. Photo taken Nov. 30, 2021 in Fargo, North Dakota. Emily Beal / Agweek

FARGO, North Dakota — When farmers and producers think of ways to garner extra cash flow from their operation, many times adding another form of livestock or perhaps another row-crop to their acres is the first thing that comes to mind. However, there is another way agriculturalists can capitalize funds from their operation: by selling carbon credits.

According to Dr. Alejandro Plastina, an assistant professor for Iowa State University and an Extension economist who spoke Tuesday, Nov. 30 at the Northern Ag Expo, a carbon credit is a tradable asset that represents the right to release or emit carbon into the atmosphere. Plastina stated that typically one credit represents one metric ton of carbon dioxide or an equivalent amount of another greenhouse gas. Carbon credits are created when entities (such as farmers) reduce their carbon emissions or sequester carbon itself.

“I would say that farmers have a great opportunity in front of them from the carbon credits market. But, it is up to them to really go into the details, learn what’s required from them and whether it is convenient for their operation,” Plastina said.

In order for farmers and producers to receive carbon credits, some changes will need to take place or be implemented into their operation. Plastina said agriculturalists could add cover crops to their soil or begin to adopt methods of no-till or strip till. However, if the producer has already integrated these practices or methods into their management plan, they are most likely not eligible as a carbon credit.

“They require always a change from the traditional or baseline situation,” Plastina said. “It’s a major drawback right now for farmers that have been doing conservation practices for multiple years because there is little interest from these carbon programs to pay for farming practices that have been already implemented.”


However, some of the carbon programs do have a “look back period” where they will pay out carbon credits from two to five years prior for conservation practices that have already been implemented. But according to Plastina, additionality is key in order for producers to be successful in the carbon credits arena.

The agricultural sector has to go through many phases to produce a commodity or a product, thus making it much harder for the agriculture industry to defend the quality of its carbon credits. With the multiple steps that agriculture products go through, it is much harder to prove that carbon was actually removed from the process. Plastina said that this is why the verification process for carbon credits in agriculture is of the utmost importance.

“That is why it is so critical to have a strong measuring and reporting verification system. To be able to convey with certainty that a change of practices is actually generating these carbon credits, these assets, that can be later traded,” he said.

Carbon credits are not for everyone and Plastina urges producers and farmers to make sure it is right for their operation and to do diligent research, along with asking any questions they may have.

Emily grew up on a small grains and goat farm in southern Ohio. After graduating from The Ohio State University, she moved to Fargo, North Dakota to pursue a career in ag journalism with Agweek. She enjoys reporting on livestock and local agricultural businesses.
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