They called it a “four-year pilot project,” but it sounded more like something out of a fairy tale — companies paying farmers for something you can’t see, can’t smell and can’t touch.But as the Iowa Farm Bureau Federation prepares to enter the second phase of its Carbon Credit Aggregation Program, there are some very real signs that farmers are warming up to the idea of generating income by utilizing conservation practices that scientists believe will reduce greenhouse gas emissions.Although the science of it all can become a bit complicated, maybe even mind-numbing, the basic concept is simple: Environmentally friendly farming practices build up carbon in the soil — which is then sold as an “offset” or credit on a commodity exchange to companies in need of reducing greenhouse gas emissions.Those farming practices include no-till planting, restoring wetlands, converting cropland to permanent grass or trees, planting conservation buffers and using cover crops. All of these help reduce carbon dioxide, one of several greenhouse gases contributing to the warming of the atmosphere.How much does it help? Well, it’s not an exact science but research shows that a no-till planted corn or soybean field stores a half-ton per acre of carbon dioxide annually. Establishing a new grass stand on previously cropped land sequesters, or holds, at least three-quarters of a ton of carbon dioxide per acre. The Iowa Farm Bureau Federation, recognizing that no-till is not only good for the soil but also the environment, launched the Carbon Credit Aggregation Program as a pilot program in October 2003. At the time, Dave Miller, IFBF’s director of commodity services, had hopes of enrolling 100,000 acres in Iowa in the program. Today, the program has far exceeded those expectations. Iowa alone has 250,000 acres enrolled, but that’s just the beginning. Miller said a total of 900,000 acres are enrolled nationwide with Nebraska accounting for more than half of that at 496,000 acres.Further underscoring the program’s success, membership in the Chicago Climate Exchange (CCX) — a voluntary market for reducing and trading greenhouse gases — has grown from 20 entities in 2003 to about 200 today, and includes such names as Ford Motor Company, Rolls-Royce, IBM and the State of New Mexico. The first sale of verified CO2 offsets generated from agricultural soil sequestration took place on the CCX in April 2005 when the Iowa Farm Bureau, as the aggregator, sold 20,000 tons of pooled credits.In addition to the agricultural soil offset credits, the Chicago Climate Exchange also issues carbon credits for initiating forestation and forest enrichment projects.”From a broad sense, it’s fared very well,” said IFBF’s Miller. “Trading volume has continued to grow, total reductions are approaching about 8 percent, and the market value has increased over time. So, all the key parameters would probably be looked at very positively.”It’s been a real learning experience,” Miller added. “I think it’s been a very positive experience as to how agriculture participates in the exchange. We’re becoming more comfortable with agriculture participating in the exchange. We’re getting more experience on ag methane digesters and forestry participation. I think all those are indications that the initial goals and objectives of the project are being met and bode well for the future.”To be eligible for the soil offsets, land enrolled must be capable of being cropped — that is, the land could be utilized for row crop or small grain production even though it may currently be in a hay or forage crop. If such lands are farmed with row crops during the project period, such crops need to be produced in a compliant no-till manner. The contractual commitment is for five years.Alabama, however, is not yet eligible for soil offsets, which are rated by the CCX offset committee. “At some point, hopefully in 2007, the offset committee will get a rate established for Alabama and other states,” said Miller.Miller also points out that the state is eligible for forestry offsets, a fact that doesn’t surprise John Besh of Livingston. An Alabama Farmers Federation member and Sumter County timber owner, Besh believes the value of carbon credits is greater in forestry than in soil offsets.”It’s easier with trees than it is for a farmer doing no-till versus conventional tillage,” said Besh. “Who’s to say how many tons of carbon he’s sequestering?”While carbon has traded at $3.75 to $4.25 per ton (or $1.80 to $2 per acre) on the CCX, Besh said it commands higher prices on foreign exchanges. “I don’t think weve seen the value attached to it that you are finding in Europe,” said Besh, who is holding off enrolling 1,650 acres of farmland he owns in Iowa until the price is right.Like any commodity, the value of carbon credits will likely be based on supply and demand. As more companies join the CCX and more farmers sign up, the market prices will likely rise. “You always want more,” said Miller. “The higher that rate is, the more people will be willing to commit to long-term contracts and continuous no-till. Obviously, it’s a relatively minor payment, but it’s an additional incentive.”Besh said he gave up rights to about 85 forest acres of carbon credits several years ago when he partnered with Alabama Power Company on a 30-year cost-share forestation project. Besh said if carbon prices were more “monetarily attractive,” he would most likely participate in the program. But, for now, he sees forestation and no-till practices as more of a public service in reducing greenhouse gases. “I’m also the president of my local TREASURE Forest program, and we’ve considered doing it a service,” he said. “Between the stems and roots of a forest and the grasses of pastureland there’s a tremendous amount of carbon, and it’s doing a real service to humanity, but does it have a value? I don’t know. Could it have a value in the future? Possibly. Whoever thought we’d be paying for water?”For more information, contact Dave Miller of the Iowa Farm Bureau Federation at (515) 225-5431, or visit www.iowafarmbureau.com/special/carbon or www.chicagoclimatex.com.
CREDIT WHERE IT COUNTS: Carbon Program Breath of Fresh Air