Farmers earn money from no-till in a deal to reduce carbon emissions.
The speculation that farmers will be paid to store or sequester carbon in their soils through conservation practices has turned into reality. A group of 10 Canadian energy companies will pay Iowa farmers a fee for reducing carbon emissions or capturing additional carbon in soils. This earns the companies credit for cutting carbon dioxide emissions should a future treaty on global warming be enacted.
About 100 Iowa farmers will be among the first paid to practice no-till or minimum-till farming to lower carbon emissions. As part of an agreement with the utility companies, IGF Insurance Company, Des Moines, IA, will contact its crop insurance policyholders and other potential clients to ask if they would like to participate in the program.
Modest first deal. This first deal is modest: only 1.3 million tons of carbon credits for 2000 and up to 6 million tons by 2012. But new demands for carbon trading should grow, along with the price for carbon credits, according to Steven Griffin, IGF vice president for strategic development. The price for IGF's first agreement varies from $0.50 to $2.50/ton of carbon credits. Farmers should be able to deliver 4 to 5 tons of carbon credits/acre, depending on farm practices.
"We're talking $10 to $15/acre," Griffin says. "That is 15 to 20% of net earnings/acre without giving up anything. Farmers still produce a crop, improve their soil and receive extra income. It is manna from heaven. The only catch is the need to maintain their soils' productivity."
The amount of carbon emissions U.S. farmers could reduce is staggering. Griffin says some experts estimate U.S. farmers could sequester 300 million tons of carbon emissions annually. However, he adds that research must continue to determine optimum practices and locations and how much carbon is stored in different soils. As these figures are determined with greater accuracy, more agri-cultural carbon trades should unfold.
IGF, the nation's fourth largest crop insurer, is working on the deal in partnership with CQuest Ltd. of West Des Moines. The deal is unique because it is the first time a group of companies signed an agreement with a firm like IGF, which will collect the credits from many farmers.
Previous carbon credit trades have focused on a single buyer with a single producer. The deal between the utility companies and IGF builds a market infrastructure that can be expanded to hundreds of millions of credits and involve thousands of farmers and landowners.
IGF became involved in the carbon credit business as a new opportunity for its policyholders and agents. Plus, the company already handles 85% of the information required to document carbon credits as part of its crop insurance operations, Griffin explains. The company, along with its partner CQuest, will be responsible for verifying, auditing and assuring the creation and transfer of credits.
Allowed practices. Farmers in the program must complete farm practices that reduce carbon released into the air. "Tillage is the enemy of carbon sequestering," Griffin ex-plains. The major method to earn sequestration credits is through no-till or minimum-till farming.
"In addition, since you aren't tilling the soil and running the tractor as much, you get credit for avoiding emissions [from tractor fuel]," he adds. Other cre dits are awarded for using livestock manure as fertilizer instead of commercial nitrogen fertilizer, which is produced by natural gas. If manure is injected into the soil and not left in a lagoon, still more credits are awarded for avoiding the gases that escape from a lagoon. Waterways, buffer strips and other conservation methods earn farmers carbon credits as well.
All of these sources of credits are combined to determine how many credits each farmer is entitled to. The farmer may elect to sell his or her credits or bank them for future sale, just like crops. IGF and CQuest receive a portion of the total credits as compensation for services.
Although the first emission credits are destined for the Canadian power companies, U.S. companies are expected to follow suit, Griffin says. No federal regulations currently require companies to reduce carbon emissions. But some companies anticipate these regulations in the future. Companies such as Exxon, BP Amoco and Arizona Public Service are examining carbon emission reduction programs, Griffin says.
There is also a movement underway to attach carbon credits to consumer products, including electricity and natural gas. This would enable consumers to purchase products and services whose net contribution to global warming has been reduced to zero.