Conservation Programs and Carbon Markets

This article was published by Nebraska Farmer on July 8, 2021 and is excerpted here with permission.

Recent headlines, analyses and policy discussions have been full of developments and proposals regarding climate policy and carbon markets. The climate commitments from numerous corporate entities and the growth of several carbon market integrators point to the promise of economic rewards for producers who can successfully earn credits for sequestering carbon or reducing other greenhouse gas emissions, and market those credits to potential buyers. In just the past few weeks, the CME Group in Chicago announced a new futures market for carbon credits that could provide a price discovery mechanism that has been largely absent since the Chicago Climate Exchange tried and failed with a carbon credit futures market more than a decade ago.

Early phases

While there have been numerous developments and potential opportunities promised regarding climate and carbon markets, the markets and producer contracts remain in an early phase of development. Many producers have been early adopters in carbon markets and are working with various providers or market integrators. However, there are also many questions that remain about markets, practices, economics, policy and legal implications that will continue to evolve as carbon markets grow and mature.

In the meantime, there have also been numerous policy proposals, including the Growing Climate Solutions Act of 2021 that recently passed the Senate and was referred to the House of Representatives for further consideration. The proposed legislation targets the USDA to support technical assistance and verification programs to assist farmers, ranchers and private forest owners pursuing environmental credit markets.

Other policy proposals have included the potential to use USDA conservation programs as a tool to reward carbon sequestration practices or even bank carbon credits. In early June, USDA announced a small cover crop incentive payment for producers this year as part of the larger Pandemic Assistance Program. And, of course, the Biden administration’s 30x30 conservation plan fits into the discussion as well — although the details, while much discussed, remain relatively lacking about the role of the federal government in controlling and managing resources, versus incentivizing stewardship of private land and resources.