alzari evson's blog : How Can a Farmer Sell Carbon Credits?
As the world becomes increasingly concerned with climate change, many farmers have been exploring opportunities to reduce their carbon footprint while earning income. One way to do this is by enrolling their land in a carbon credit program. While this may be an exciting opportunity, there are a number of things to consider before making the commitment.
A carbon credit is a financial instrument that represents ownership of one metric ton of CO2-equivalent greenhouse gas (GHG) removed from the atmosphere. Companies buy them to offset their own GHG emissions or comply with government climate regulations. Agricultural land can be a great source of carbon credits as crops and grasses capture and store large amounts of CO2. Global cropland and grasslands alone are capable of storing up to 8.6 gigatons of CO2 per year, according to U.S. Department of Agriculture estimates.
Farmers can capture these credits by adopting regenerative practices such as no-till farming and cover cropping, which help retain soil moisture and nutrients while sequestering carbon. The carbon markets value these credits because they represent an alternative to burning fossil fuels for energy. Depending on a farm’s size, soil conditions and tree canopy, it can produce between 0.5 and >5 carbon credits per acre each year.
Once a farmer enrolls their land in a carbon.credit program, they upload all data about their production, including field boundaries, historical yield, current season management and soil samples to a proprietary platform. They also add in any additional new practices they are adding to increase their soil carbon and/or reduce their GHG emissions. These practices are then tracked and verified by the program provider or an independent verification body to determine the total carbon dioxide equivalents removed or reductions generated.
These figures are then translated into carbon credits, which are sold on the voluntary market to end buyers who want to purchase them to offset their own GHG emissions or meet compliance obligations. The price of these credits varies depending on the project, country and buyer requirements. In addition to their primary purpose of avoiding or removing GHGs, these credits can generate additional co-benefits such as water quality improvement and economic inequality reduction.
Carbon credits are traded through brokers and retail traders, similar to any other commodity. These traders bundle the credits into portfolios ranging from hundreds to thousands of equivalent tons of CO2 and then sell them to end users for a fee.
While this may be an exciting revenue source, it’s important to note that carbon credit programs require a long-term commitment from the farmer. Unlike a corn crop that can be stored in the bin for sale next year, a farm that wants to enter the carbon market must own the land it is enrolling and plan to do so for a substantial length of time, often 20+ years. This requirement may be a barrier for some farmers, but there are private, state and federal funding options available that can support these initiatives.
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