Kansas State University researchers have completed a study that looks at the potential value of carbon credits – and whether it’s an opportunity for farmers to earn some extra income.
“There are starting to be a few more concrete opportunities for producers to sign up for carbon credits, and especially some opportunities in Kansas right now,” said Micah Cameron-Harp, who is a graduate student in agricultural economics.
Carbon credits refer to a tradable permit or certificate that offsets the emission of one ton of carbon dioxide or another greenhouse gas by the credit holder. Large corporations – like McDonalds and Microsoft – have recently announced voluntary efforts to reduce carbon emissions by contributing to a carbon credit market.
“They’re making corporate pledges to reduce how much they’re emitting,” said KSRE agricultural economist Nathan Hendricks. “They’re going to reduce their emissions, but in order to get to their goals, they’re going to buy some offsets.
Agriculture is one of several industries that could benefit from the offsets sought by corporations. In effect, a farmer could be paid for implementing practices on their land that reduce carbon emissions.
“The most common practices that people talk about are no-till, and planting cover crops, but there are others out there,” Cameron-Harp said. “These are practices that sequester carbon from the air and store it in the soil in order to offset carbon emission from the corporations that are buying credits.”
Micah Cameron-Harp, a K-State graduate student involved in the study, said the university’s work was geared toward helping farmers better understand how to enter the carbon market. Cameron-Harp said researchers looked at what’s available and analyzed factors that should go into making a decision.
“We are taking this abstract marketplace where there are many players and distilling it down to what’s pertinent to a Kansas producer,” Cameron-Harp said.
Cameron-Harp said most buyers in the carbon market are paying $15 per carbon removal ton, and the price “is not fluctuating. Right now, there is not an interplay between supply and demand, so that is what you’re going to get at this point in time.”
“Ultimately, the goal is that this will become a free market,” Cameron-Harp said. “In such a case, we would see the price fluctuate as companies like Microsoft make large commitments. That’s what these marketplaces are hoping to achieve in the next couple years.”
Farmers considering getting into the carbon credit should ask some key questions before signing a contract, including:
• How long of a commitment are you making?
• Is there a tenant-landlord relationship to consider?
• What data will you be required to provide?
• How will the buyer use the data you provide?
“There are a lot of factors to consider; it’s not just sign up for the highest payment and go with it,” Hendricks said. “You need to look at the data requirements for each place you go to, and each producer needs to use their best understanding of where this market is going to go.”
Alicia Boor is the Agriculture and Natural Resources agent with K-State Research and Extension – Cottonwood District. Contact her by email at aboor@ksu.edu or call 620-793-1910.
