carbon credits
Sometimes a legislative proposal stalls, appears dead, then emerges in another piece of legislation in a slightly different form. That’s exactly what happened with the Growing Climate Solutions Act and its plan to help farmers with carbon and environmental credit markets. First introduced in 2020, the bill gained some momentum and passed the U.S. Senate before coming to a standstill in the House. But Congress added the bill, with some negotiated changes, into the Consolidated Appropriations Act it passed in the final days of 2022. The USDA is now charged with implementing its provisions.
Purpose of the bill
The bill aims to reduce barriers for farmers, ranchers, and foresters who want to enter into voluntary markets that establish environmental credits for greenhouse gas emission reductions resulting from agricultural or forestry practices (also known as carbon credits). It allows the USDA to create the “Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Program” if it appears, after an initial assessment, that the program would accomplish these purposes for farmers, ranchers, and private forest landowners:
- Facilitate participation in environmental credit markets
- Ensure fair distribution of revenues
- Increase access to resources and information on environmental credit markets
Advisory Council
If the USDA determines that the program would meet the above purposes, it must establish an Advisory Council to help guide the program. At least 51% of the Advisory Council must be farmers, ranchers, and private forest landowners, including beginning, socially disadvantaged, limited resource, and veteran members. Other members on the Advisory Council would include representatives from agencies, the agricultural and forestry industries, the scientific research community, non-governmental organizations, and professionals and private sector entities involved in credit markets.
Protocols
A primary concern with the environmental credit market is uncertainty and variations in how to establish, quantify, and value environmental credits. An important component of the new program is for USDA to publish lists of widely accepted protocols that are designed to ensure consistency, reliability, effectiveness, efficiency, and transparency of the markets along with documents relating to the protocols. The act directs the USDA to include protocol documents and details on calculations; sampling methodologies; accounting principles; systems for verification, monitoring, measurement, and reporting; and methods to account for issues such as additionality, permanence, leakage, and double counting of credits.
Vendor registry
Another concern for landowners who want to participate in environmental credit markets is knowing who to turn to for technical assistance. To address this issue, the program would require the USDA to create a registry of third-party vendors of environmental credits who can help farmers, ranchers, and forest landowners measure the carbon reduction benefits of different types of practices. Unlike an earlier version of the bill, the USDA would not establish a certification program for these vendors, although the agency must ensure that the vendors possess demonstrated expertise in practices that prevent, reduce, or mitigate greenhouse gas emissions.
Assessments
The USDA, in concert with the Advisory Council, must submit an initial and ongoing assessments to the agricultural committees in the Senate and House. The initial assessment must examine ways to ensure certainly for farmers, ranchers and forest landowners in the marketplace. Ongoing assessments would examine the environmental credit market itself, including actors in the market, participation, credits generated and sold, barriers to entry, opportunities for other voluntary markets, and more.
Program funding
The act provides an appropriation of at least $1 million per year to fund the program through 2027 and another $4.1 million of potential unobligated American Rescue Plan Act funds. It specifically prohibits the USDA from using funds from the Commodity Credit Corporation for the program, a demand of the House Agriculture Committee Chairman Glenn Thompson, who states that those funds are obligated for Farm Bill program payments.
What’s next?
Farm Bill negotiations this year and other climate initiatives recently undertaken by the Biden administration, such as the USDA’s Partnerships for Climate-Smart Commodities, could reduce the focus the Growing Climate Solutions Act would have received if it had passed when first introduced back in 2020. Even so, the timeclock has started for the USDA to make its initial determination of whether the program would meet the intended purposes. Secretary Vilsack must make that determination by late September, and the expectation is that the program will proceed. We should then see the Advisory Council established by fall and and can expect program outputs such as protocols and the third-party registry as early as 2024.
Read the provisions of the new law beginning on page 1,512 of the Consolidated Appropriations Act of 2023, H.R. 2617.
Tags: Growing Climate Solutions Act, greenhouse gas, carbon credits, carbon market, environmental credit
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There’s a lot of talk about carbon markets and agriculture these days. While carbon markets aren’t new, recent proposals in Congress and announcements by the Biden administration are raising new interests in them. Some companies are actively pursuing carbon trading agreements with farmers, further fueling the discussion in the agricultural community.
As is common for any new opportunity, the talk on carbon markets may be tinged with a bit of skepticism and a lot of questions. Do carbon sequestration practices have real potential as an agricultural commodity? That’s a tough question and the answer isn’t yet clear. There are answers for other questions, though, as well as resources that may be helpful for those considering carbon markets for the first time. Here’s a sampling.
What is a carbon market? A carbon market revolves around carbon credits generated by carbon reduction practices. In the farm setting, a producer who either lowers the farm’s carbon emissions or captures carbon through “sequestration” practices can earn carbon credits. Like other markets, a carbon market involves a transaction between a seller and a buyer. The seller sells a carbon credit to a buyer who can use the carbon credit to offset or reduce its carbon emissions.
Do carbon markets already exist? Yes, although they may be private markets with varying names occurring in different regions. For example, Bayer Crop Sciences began its Carbon Initiative last year, paying producers for adopting carbon reduction practices that will help Bayer reach its goal of reducing its greenhouse gas emissions by 30% in 2030. Indigo Ag began entering into long-term carbon agreements with producers in 2019, paying $15 per ton for carbon sequestration practices. Food companies and agribusinesses including McDonald’s, Cargill, and General Mills formed the Ecosystem Services Market Consortium, which will fully open its private carbon market in 2022.
Are legal agreements involved? Yes. Using a written agreement is a common practice in carbon market transactions, but the agreements can vary from market to market. Provisions might address acceptable practices, calculating and verifying carbon reductions including third-party verification, sharing data and records, pricing, costs of practices, minimum acreage, and contract period. As with other legal contracts, reviewing a carbon agreement with an attorney is a wise decision. Watch for more details about carbon agreements as we share our analysis of them in future blog posts.
What is President Biden considering for carbon markets? The Biden administration has expressed interest in developing a federal carbon bank that would pay producers and foresters for carbon reduction practices. The USDA would administer the bank with funding from the Commodity Credit Corporation. Rumors are that the bank would begin with at least $1 billion to purchase carbon credits from producers for $20 per ton. The proposal is one of several ideas for the USDA outlined in the administration’s Climate 21 Project.
What is Congress proposing for carbon markets? The bipartisan Growing Climate Solutions Act would require USDA to assess the market for carbon credits, establish a third-party verifier certification program overseen by an advisory council, establish an online website with information for producers, and regularly report to Congress on market performance, challenges for producers, and barriers to market entry. An initial $4.1 million program allocation would be supplemented with $1 million per year for the next five years. The Senate Agriculture, Nutrition and Forestry Committee has already passed the bill. The Rural Forest Markets Act, also a bipartisan bill, would help small-scale private forest landowners by guaranteeing financing for markets for forest carbon reduction practices.
Is there opposition to carbon markets? Yes, and skepticism also. For example, a recent letter from dozens of organizations urged Congress to “oppose carbon offset scams like the Growing Climate Solutions Act” and argued that agricultural offsets are ineffective, incompatible with sustainable agriculture, may further consolidate agriculture and will increase hazardous pollution, especially in environmental justice communities. The Institute for Agriculture & Trade Policy also criticizes carbon markets, claiming that emission credit prices are too low and volatile, leakages and offsets can lead to accountability and fraud issues, measurement tools are inadequate, soil carbon storage is impermanent, and the markets undermine more effective and holistic practices. Almost half of the farmers in the 2020 Iowa Farm and Rural Life Poll were uncertain about earning money for carbon credits while 17% said carbon markets should not be developed.
To learn more about carbon markets, drop into an upcoming webinar by our partner, the National Agricultural Law Center. “Considering Carbon: The Evolution and Operation of Carbon Markets” on May 19, 2021 at Noon will feature Chandler Van Voorhis, a leading expert in conservation and ecological markets. The Center also has a recording of last month’s webinar on “Opportunities and Challenges Agriculture Faces in the Climate Debate,” featuring Andrew Walmsley, Director of Congressional Relations and Shelby Swain Myers, Economist, both with American Farm Bureau. A new series by the Center on Considering Carbon will focus on legal issues with the carbon industry and will complement our upcoming project on “The Conservation Movement: Legal Needs for Farm and Forest Landowners.” There’s still more talking to do on carbon markets.
Tags: carbon markets, carbon trading, carbon credits, Growing Climate Solutions Act, Rural Forest Markets Act, conservation, National Agricultural Law Center
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President Biden announced a major goal this week--for the U.S. to reduce greenhouse gas emissions by half over the next decade as compared to 2005 levels. Agriculture will play a key role in that reduction by “deploying cutting-edge tools to make the soil of our heartland the next frontier in carbon innovation,” according to President Biden. Several bills introduced in Congress recently could help agriculture fulfill that key role. The proposals offer incentives and assistance for farmers, ranchers, and forest owners to engage in carbon sequestration practices.
Here’s a summary of the bills that are receiving the most attention.
Growing Climate Solutions Act, S. 1251. The Senate Agriculture, Nutrition and Forestry Committee passed S. 1251 today. The bipartisan proposal led by sponsors Sen. Mike Braun (R-IN), Sen. Debbie Stabenow (D-MI), Sen. Lindsey Graham (R-SC) and Sen. Sheldon Whitehouse (D-RI) already has the backing of over half of the Senate as co-sponsors, including Ohio’s Sen. Sherrod Brown. The bill has come up in prior sessions of Congress without success, but the sponsors significantly reworked the bill and reintroduced it this week. The new version includes these provisions:
- Requires the USDA to conduct an initial assessment of the domestic market for carbon credits, to include assessing market actors, market demand, estimated credits in process, supply and demand of offsets, barriers to entry, monitoring and measurement technologies, barriers for small, beginning and socially disadvantaged operators, among other factors.
- Creates a Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Certification Program to ensure that technical service assistance providers who work with farmers to establish and sell carbon credits have sufficient expertise, including agricultural and forestry knowledge. Certified parties are to act in good faith to provide realistic estimates of costs and revenues and to help farmers, ranchers and forester receive “fair distribution of revenues” derived from carbon credit sales.
- Establishes an online website providing information for farmers, ranchers and foresters interested in participating in carbon markets.
- Creates an advisory council that would oversee the certification program. At least 16 of the committee’s 25 members must be farmers, ranchers, or private forest owners.
- Charges the USDA with producing a report to Congress identfying barriers to market entry, challenges raised by farmers and forest owners, market performance, and suggesting additional ways to encourage voluntary participation in carbon sequestration practices.
- Authorizes up to $9.1 million in USDA funding for the program, including $4.1 million immediately and an additional $1 million per year for the next five years.
Rep. Don Bacon (R-NE) and Rep. Abigail Spanberger (D-VA) will soon introduce companion legislation in the House of Representatives.
Rural Forest Markets Act, S. 1107. A second proposal in Congress aims to remove barriers for small-scale private forest landowners and help them benefit from carbon markets and other climate solution markets. Senators Stabenow and Braun are also sponsors of this bill, along with Sen. Angus King (I-Maine) and Sen. Shelley Moore Capito (R-WV). The bill echoes previous similar legislative attempts and includes these provisions:
- Directs the USDA to create a Rural Forest Market Investment Program to guarantee up to $150 million to finance eligible projects for rural private forest landowners to participate in an “innovative market for forest carbon or other products.”
- States that eligible projects will be those developed by private entities or nonprofits to aggregate sustainable practices by rural private forest landowners for sales in a carbon or environmental market, using approved methodologies.
- Requires that eligible tree planting projects may take place only on historically forested lands using native species and be planted at ecologically appropriate densities without causing negative impacts to biodiversity or the environment.
The interest in carbon reduction practices and monetizing carbon sequestration at the federal level doesn’t end with these two proposals—there are several more that may gain interest. While not addressing private landowners, another Senate proposal focuses on public land reforestation. The “Repairing Existing Public Land by Adding Necessary Trees Act” (REPLANT Act), with Ohio’s Sen. Rob Portman as a sponsor, proposes increased funding in the Reforestation Trust Fund for replanting 1.2 billion trees over the next ten years on public land in need of reforestation. The USDA is weighing in on the issue as well, and has recently announced plans to target carbon reduction through existing programs such as the Conservation Reserve Program. And just after passing the Growing Climate Solutions Act today, the Senate Agriculture, Nutrition, and Forestry Committee held a hearing on “Farmers and Foresters: Opportunities to Lead in Tackling Climate Change” featuring testimony from several farmers and groups. Readers may get a sense of what more is to come by viewing the hearing on the committee’s website.
Tags: carbon, carbon markets, forest land, climate change, carbon credits, CRP, Rural Forest Markets Act, Growing Climate Solutions Act
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