Credit Generator – Carbon Dioxide Sink

Credit Generator – Carbon Dioxide Sink

The credit generator removes carbon dioxide (CO2) from the atmosphere or prevents carbon dioxide from entering the atmosphere.

A Credit Generator could be a farmer or green energy producer.

The credit generator removes carbon dioxide (CO2) from the atmosphere or prevents carbon dioxide from entering the atmosphere.

A Credit Generator could be a farmer or green energy producer.

For example, harvest, tillage, and cover crop conservation practice data would be gathered by a farmer.

For a farmer, implementing conservation practices such as reduced tillage or cover cropping sequesters carbon dioxide in the soil. Data proving a practice change (ex: harvest, tillage pass, fertility, cover crop planting date) allows that farmer to turn that trapped carbon dioxide into a carbon credit.

$ is exchanged for metric tons of carbon captured, while data is supplied to prove the change.

Credit Aggregator – Carbon Credit Marketer

Credit Aggregator – Carbon Credit Marketer

The credit aggregator manages large scale (regional, nationwide, international) carbon projects. They either source carbon credit buyers directly or provide a platform for growers to sell carbon credits on their own. Farmers provide data to the aggregator and the aggregator provides money for credits back to the farmer.

Data goes in, money comes out.

The credit aggregator manages large scale (regional, nationwide, international) carbon projects. They either source carbon credit buyers directly or provide a platform for growers to sell carbon credits on their own. Farmers provide data to the aggregator and the aggregator provides money for credits back to the farmer.

Data goes in, money comes out.

Data from the farmer turns into carbon credit.

$ is exchanged for metric tons of carbon captured, while data is supplied to prove the change.

Carbon registries set the standards of what is acceptable to create a carbon credit. The aggregator reports to the carbon registry. In general, the registries require any models utilized by the carbon aggregator to be 90% correct 90% of the time.

Credit Buyer – Carbon Dioxide Source

Credit Buyer – Carbon Dioxide Source

The credit buyer purchases carbon credits to offset carbon dioxide emissions.

The credit buyer purchases carbon credits to offset carbon dioxide emissions.

Money for carbon credits goes in,

data in the form of verification of carbon captured comes out.

The credit aggregator verifies the carbon was captured through data verifying practice changes, satellite imagery, and soil sampling a subset of enrolled fields.

Carbon Market – Inset Programs

Carbon Market – Inset Programs

The credit buyer is within the agricultural value chain. For example, the buyer could be an agricultural input provider or an end user of grain.

The credit buyer is within the agricultural value chain. For example, the buyer could be an agricultural input provider or an end user of grain.

For example, certain programs may incentivize adding a winter wheat crop to increase crop diversity and keep living roots in the soil during the winter.

A beer company then purchases that wheat. The credit buyer is WITHIN the agricultural value chain.

The contracts are often shorter than those used for offset programs and last from 1-5 years.

Carbon Market – Offset Programs

Carbon Market – Offset Programs

The credit buyer is outside the agricultural value chain.

The credit buyer is outside the agricultural value chain.

For example, a clothing factory making polyester t-shirts produces subscript CO2 emissions.

They purchase an agricultural carbon credit to offset their emissions. The credit buyer is OUTSIDE the agricultural value chain.

Buyers require sequestered carbon dioxide to be both permanent and additional . The contracts are often longer than inset programs and typically last between 5-10 years.

Ecosystem Service Market

Ecosystem Service Market

Ecosystem Service Market
 Many of the same conservation practices that capture carbon also improve water quality, reduce sediment erosion, and can improve biodiverisity and wildlife habitat.

Ecosystem Service Market
 Many of the same conservation practices that capture carbon also improve water quality, reduce sediment erosion, and can improve biodiverisity and wildlife habitat.

Currently, the most common agricultural ecosystem service markets generate credits for carbon + water quality (N+P runoff reductions).

Because these markets also include a water quality credit payment, they generally result in higher total per acre payments for the farmer.

Ecosystem Service Market Credit Buyers

Ecosystem Service Market Credit Buyers

Entities that would purchase these credits are often government funded, usually through water treatment districts or the USDA.

Entities that would purchase these credits are often government funded, usually through water treatment districts or the USDA.

For example, Soil & Water Outcomes Fund is an ecosystem service market that generates carbon and water quality credits.

$ is exchanged for metric tons of carbon dioxide captured along with water conservation practices, while data is supplied to prove the change.

These are often funded through the government, either locally through water treatment districts or nationally through USDA. If you are currently enrolled or planning to enroll in a federally funded conservation program, pay attention to who is buying the water quality offsets because you cannot be paid twice with federal dollars.

MARKET MECHANICS

Current Market List

Check out this list from the Illinois Sustainable Ag Partnership highlighting carbon markets available as of Summer 2021.

COMMON MARKET MECHANICS QUESTIONS

  • Carbon registries currently exist to set standards for carbon offset markets from many industries, including agriculture, forestry, and waste management.
  • In the United States, Climate Action Reserve and Verra are two offset registries that allow agriculture projects to be registered.
  • Carbon registries set the standards and approve protocols that ensure
    permanence
    and
    additionality
    . They also approve models used to estimate carbon sequestration.

  • Additionality is a foundational principal of carbon markets. Greenhouse gas emissions are additional if they would not have occurred in absence of a market that offered credits. If the carbon would have been sequestered anyway, without an opportunity for a credit to be produced, they are not considered additional.
  • Credit buyers are paying for a ton of sequestered carbon that would not have been sequestered if they had not paid for it.
  • This principal applies to credits generated by row crop agriculture as well as credits generated by other industries that can produce a carbon credit.

  • It depends on the credit buyer. A few companies have purchased lookback credits, which are carbon credits produced from past practices.
  • It also depends on the goals of the companies, whether that be carbon negativity (offsetting all of the CO2 emitted since the formation of that particular company) or carbon neutrality (reducing or offsetting all CO2 emissions starting at a certain time point and into the future).

  • Many markets have contracts between 5-10 years.
  • CO2 credit buyers, markets, and registries want to ensure that their investment in carbon offsets is keeping CO2 out of the atmosphere permanently, which is referred to as
    permanence
    .
  • Carbon markets and programs often commit to keeping the CO2 sequestered in the soil for 100 years across the entirety of the acres in their market.

  • Modeling – Models can be utilized to quantify the amount of CO2 different practice changes will sequester or trap in the soil. Many markets use some sort of model to estimate your carbon sequestration, which is why so much data is needed to enroll.
    • If you’re planning to enroll in a market, be sure to ask which model the market is using as some are public and some are private.
    • COMET Model –
      • This USDA funded model is housed by Colorado State University and can be used by farmers for free.
      • It allows you to model your farms current carbon sequestration levels and the potential once new practices are implemented.
  • Satellites – Satellites are utilized to verify presence of cover crop or changes in tillage.
  • Soil sampling – Many carbon markets/programs soil sample either a subsample of fields in their program or all of the fields in their program to assess carbon levels in the soil. For programs that are working with a registry, the registry will approve the amount of fields in a program that are subsampled to ensure sampling integrity.