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Emerging issue: Carbon and Ecosystem Services Markets

Image credit: NRCS
Date Posted: May 17, 2022

In recent years, there has been a surge in private sector programs focused on generating carbon credits or ecosystem services credits, in part due to companies focusing on reducing greenhouse gas emissions. Ecosystem services credits can be generated for water quality improvements, water use efficiency improvements, and more. In terms of agriculture, carbon credits are generated when 1 metric ton of carbon dioxide is sequestered in the soil or carbon dioxide equivalent (generally, methane or nitrous oxide) is reduced (think manure and nutrient management). Depending on the program, farmers could be paid for familiar conservation practices such as cover crops, reduced tillage, buffer strips, and more. Some components of these programs to consider:

  • Permanence: How long do you have to keep the carbon in the soil? Does that align with how long you are being paid to do the practice?
  • Additionality: What practice adoption or practice change (e.g. single species cover crop to multi-species cover crop) is required to participate? In most cases, existing practices are not eligible for payments, due to the market demand for new carbon sequestration and greenhouse gas reductions.
  • Bad year: What happens if something out of your control, like weather, prevents you from putting your practice in? Do you owe the program money?

In addition, USDA released a $1 billion funding opportunity geared towards funding climate-smart agriculture and measuring climate-related outcomes. It is anticipated this will bring a variety of programs to incentivize climate-smart conservation practices. Looking into the future, there is also consideration on how climate should or should not play a role in the 2023 Farm Bill.

Policy References

MFB Policy #73 Carbon Sequestration and Ecosystem Services Markets

MFB Policy #74 Climate Change

AFBF Policy #237 National Conservation and Environmental Policy

AFBF Policy #503 Climate Change

Additional Resources

MFB Climate Website

Partnerships for Climate-Smart Commodities

AFBF Market Intel Sustainability Markets

Thoughts to Consider

  • Currently there is little to no federal government oversight or coordination. Is there a role for the federal government to play in these private programs and markets?
  • How do we ensure farmers remain at the table and able to provide input for any climate change or sustainability discussions happening at the state or federal level?  
  • What barriers/concerns exist with how ecosystem services and carbon markets currently function?
Media Contacts
Tess Van Gorder

Tess Van Gorder

Conservation & Regulatory Relations Specialist
517-323-6711 [email protected]
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