By Anne Miller and Charles White
Pennsylvanians, both Farmers and Forest Owners, will find themselves presented with an opportunity to receive compensation (cash or other value such as seed/fertilizer) for carbon sequestration over the next year. Penn State Extension is here to guide farmers in evaluating the risk and rewards of entering into an agreement. The global market in 2016 of $200 million is expected to exceed $1 billion in 2022. This economic opportunity merits some attention.
The total global soil organic carbon pool is estimated to be over 1.7 trillion tons, over three times that of the atmospheric carbon pool (1). Soils can potentially sink 60 to 86 billion tons of carbon, although attainable measures may be closer to half to two-thirds of that number. In simplest terms, carbon-sequestering takes carbon dioxide (CO2) out of the air and stores it in the soil via plants and organic material. For carbon credits, this is incentivized through a change in agricultural practices relative to a baseline of farm history or commonly applied practice for a given area.
A credit is a quantifiable amount of carbon sequestered in the soil – usually by acre. A company will then sell those "offsets" to other companies to mitigate/decrease their carbon footprint or, in a few cases, keep the credits for their own offset. There is no regulated market in PA – so the standards, value, and quality in credit offerings will vary. However, there are some similarities about what practice changes are deemed credible.
Certain criteria need to be met for a carbon credit to count. One is additionality, the idea that a practice would not have occurred without the incentive offered by the credit. The second concept is permanence, or the length of time that a practice will sequester carbon from the atmosphere. Both can prohibit one from being eligible to receive carbon credits; those with a long history of cover cropping may not meet the criteria of additionality and those that are not able to maintain the sequestered carbon may not meet the criteria of permanence.
Practices for sequestering carbon
There are multiple ways to sequester atmospheric carbon in soils or reduce the emission of greenhouse gasses from agricultural systems. Most are currently focusing on removal of carbon, while there is other practice that can reduce emissions of other potent compounds.
The prices per acre will vary from provider to provider with some offering a minimum per acre starting around $15 for a 1-year contract to multi-year contracts with the possibility of extended "look back" periods. It is critical to understand the time commitment, requirements, and economic benefits.
Reducing Tillage
The turning over of soil with a moldboard plow or aeration through chisel plowing exposes soil bacteria to higher-than-normal levels of oxygen. This exposure speeds up the bacteria's respiration, which excessively "burns" soil organic carbon, converting it to carbon dioxide. Conversely, tillage can take soil surface residues and incorporate them deeper into the soil profile where carbon is not liberated as quickly. This can result in scenarios where no-till can accumulate greater levels of carbon within the plow layer but have lower levels of carbon at greater depths (2).
The amount of atmospheric carbon that can be sequestered is influenced by a variety of factors. Soil type, cropping system and climate zone can all affect whether a cropping system will gain or lose carbon under no-till practices, and tilled systems under certain circumstances sequester more carbon than no-till systems (3, 4). However, the reduced inputs associated with no-till often favors the practice for overall contributions to atmospheric carbon. For temperate regions such as Pennsylvania, no-till practices may have the ability to sequester more carbon when compared to tillage systems.
Planting Cover Crops
Establishing a cover crop between cash crop enables farmlands to capture additional sunlight and convert atmospheric carbon dioxide into above and below ground biomass, and this additionality of biomass and carbon sequestration can be counted in most carbon programs. The amount of biomass produced by cover crops will depend on the species grown, planting rate, local soil and climatic conditions and the duration the cover crop is grown before termination. This can make it difficult to make broad predictions on the amount of carbon sequestered per year. One meta-analysis of soils across the word identified gains from near-zero to over one ton per acre of sequestered carbon per acre, with an average of less than 0.25 tons (5). A narrower focused meta-analysis of cover crops grown in temperate climates found an average of 0.5 tons per acre (6).
Improving Nitrogen Usage
While emitted in lower quantities than carbon dioxide (CO2), Nitrous oxide (NO2) is about 300 times more potent than CO2 as a greenhouse gas, making it a potential point of reducing global warming potential of agricultural soils. Nitrous oxide is emitted from soils when bacteria convert nitrate nitrogen (NO3) to N2O in an anaerobic (low oxygen) environment, such as when soils are saturated. Therefore, scenarios where soils are maintained under an aerated state will reduce nitrous oxide emissions.
As with soil carbon, no-till practices can have positive, neutral, or negative effects. No-till often improves soil infiltration by improving soil structure and allowing pore networks from earthworms and crop roots to form. Conversely, the degradation of soil structure and formation of a plow pan through tillage can reduce infiltration and keep soils saturated longer. However, the placement of nitrogen and leaving of residue on the surface found in no-till systems can result in higher N2O emissions from no-till systems (3, 4). Cover crops will generally have positive effects on soil aeration as growing, transpiring, plants will remove water (and allow air to enter) the soil profile. Transpiration will slow with cooler temperatures; however, the activity of soil bacteria greatly is greatly reduced below 50oF, therefore N2O emissions slow as plant growth slows. Additionally, cover crops capture excess soil nitrogen and convert it to more stable forms in plant matter, preventing atmospheric emissions.
A final way to reduce soil N2O emissions is with nitrification inhibitors. These products, which have been available for years, inhibit the activity of nitrifying bacteria, stopping the conversion of ammonium to nitrate, which is the precursor to N2O. There is also a small amount of N2O generated directly from the conversion of ammonium to nitrate, even in aerobic soil environments, which can be prevented by nitrification inhibitors. At this point in time, there has been less focus on offering credits for reducing soil N2O emissions than sequestering carbon, but as programs continue to evolve there may be more incentives to utilize the practices mentioned above.
What will a change in practice cost?
A change in farming practice may come at an economical cost; it is vital to consider all factors:
- Land – How much farmable land can be devoted to the practice change? Not all land may be eligible.
- Operation - How does the change affect operations? Does the credit offset any lost revenue for that change? Is there a difference in yield? Are new equipment or labor modifications required?
- Contract – Does the contract include penalties? An overlong period of obligation?
- Timing – How and when are payments disbursed? Some contracts pay only a portion over time.
- Practice-based vs sequestered carbon-based payments. Programs that pay on a given practice will provide a greater amount of certainty, as long the practice is correctly implemented. Programs that pay based on predicted or measured sequestered carbon may be more variable in payments, positively or negatively, depending on the conditions specific to a field and growing season.
- Taxes – Carbon credit payments are most likely taxed as ordinary income and do not currently appear on Schedule F as a commodity.
- Data –Who keeps track of data, what is the reporting burden, how many hours a year will be devoted to paperwork, and who owns the data? Is historical data needed? Are samples taken, by whom, and when
Takeaways
If approached by a company with the opportunity for a carbon credit, it is critical to evaluate all economic impacts. Given the current offerings for carbon, this may provide a small additional revenue stream, however not a substantial income stream.
A cash payment for a carbon credit may help to offset some of the direct costs of implementing the practices and may offer a bit of insurance if any issues arise.
Forest Carbon Sequestration
Carbon sequestration for Forest Landowners is different than for agricultural producers. For those seeking information about forest carbon sequestration, an excellent place to start is with Dr. Melissa Kreye's and Calvin Norman's article Carbon Markets 101 or What Does Forest Carbon Sequestration and Storage Mean?
Source : psu.edu