Net Returns to Carbon Farming Tool Allows Producers to Evaluate Contracts

By Alejandro Plastina

Producers looking to calculate financial returns from carbon farming contracts can use a newly updated resource from Iowa State University Extension and Outreach.

The Carbon Farming Decision Tool allows farmers across various Midwest states to input data surrounding various farm attributes in order to calculate net returns on carbon credits generated. The decision-making tool uses Microsoft Excel software and is free to download and use.

Carbon credits are typically purchased from voluntary carbon programs working with agricultural producers by large corporations or other entities looking to offset their own carbon emissions. Voluntary carbon programs allow for producers to be compensated for implementing farming practices that help to sequester carbon, decreasing carbon emissions.

“This tool is intended to help agricultural producers and extension educators approach a complex decision with a solid economic methodology and carbon removal estimates from a USDA-funded carbon model, COMET-Planner,” said Alejandro Plastina, associate professor in economics and extension economist at Iowa State University. “A total of 66 agricultural conservation practices per county can be evaluated with this tool.”

This tool is available for 10 states so far, including Iowa, Idaho, Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. Each spreadsheet calculates the net present value of a carbon contract based on various costs associated with carbon farming contracts and payments from carbon contracts. While the tool is intended to be used with individual carbon contracts, producers may evaluate multiple contracts by downloading and completing multiple copies of the decision-making tool.

In order to educate producers, the decision-making tool evaluates carbon contracts based on county, current carbon farming practices (including tillage, cover crop use, irrigation use, compost use and manure use), cost-share payments from federal or state programs, and contract details such as length of contract, type of contract and payment per ton of CO2e, among other factors.