USDA Releases Assessment on Agriculture and Forestry in Carbon Markets

Agriculture (USDA)Carbon Capture/Storage/Use Federal Agency/Executive Branch Federal Regulation Funding/Financing/Investing Government Resources Infrastructure Marketing/Market Forces and Sales Opinions Policy Resources Sustainability

October 24, 2023

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(U.S. Department of Agriculture) A key deliverable under the Growing Climate Solutions Act, the report identifies opportunities and needed solutions to improve farmers’ access to carbon markets -- U.S Department of Agriculture (USDA) released A General Assessment of the Role of Agriculture and Forestry in the U.S. Carbon Markets (PDF, 1.3 MB), a comprehensive look at current market activity, barriers to participation, and opportunities to improve access to carbon markets for farmers and forest landowners. The report is the first of USDA’s deliverables under the Growing Climate Solutions Act (GCSA), which was signed into law on December 29, 2022, as part of the Consolidated Appropriations Act of 2023.

“The Biden-Harris Administration is working aggressively to ensure farmers, ranchers, forest landowners, and tribal communities have opportunities to be part of the solution to climate change, all while cultivating new revenue streams and fostering investment in rural communities,” said Agriculture Secretary Tom Vilsack. “This landmark report demonstrates both the potential and the challenges that carbon markets present for agriculture and forestry.”

As part of a broader effort to combat climate change, carbon markets offer a promising tool to achieve net-zero emissions. Farmers, ranchers, and forest landowners can generate carbon credits by adopting practices to reduce emissions or sequester carbon on their land, and carbon markets may provide them new income opportunities through carbon credit sales. Purchasing these carbon credits may also help companies achieve voluntary greenhouse gas reduction goals.

Today’s report identifies a variety of barriers that have hindered the participation of agriculture in these markets. Among other things, farmers face limited returns on investment due to high transaction costs in carbon markets, including the costs of greenhouse gas quantification, verification, and reporting. However, a clear assessment of these barriers gives federal agencies, scientists, farmers and other partners valuable insight into what kinds of solutions can facilitate increased and more beneficial participation by farmers.

USDA is taking a hard look at how to foster additional confidence and landowner participation in carbon markets. Ensuring the climate benefits represented in these transactions are credible and supported by sound science is essential to making carbon markets work. Earlier this year, USDA also announced the investment of $300 million through President Biden’s Investing in America agenda to improve measurement, monitoring, reporting and verification of greenhouse gas emissions and carbon sequestration in climate-smart agriculture and forestry. This work is critical for enhancing the implementation of climate-smart conservation activities as well as strengthening carbon market opportunities.

Following release of the assessment, the next step in implementing the GCSA is for USDA to make a determination regarding whether to establish the Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Program, which would facilitate better technical assistance to producers interested in participating in carbon markets, as well as a process to register market verifiers.

This report builds on and complements other components of the Biden-Harris Administration’s work to help farmers mitigate climate change and enhance resilience of their operations, while also capitalizing on demand for climate-smart agricultural products.

USDA also recently reported on swift implementation of President Biden’s Inflation Reduction Act, which is the nation’s largest-ever investment to combat climate change. The Inflation Reduction Act made nearly $20 billion available over five years for some of USDA’s most popular conservation programs, and USDA has received three times the demand for the Fiscal Year 2023 funding. As a result of the historic climate investments made by the Inflation Reduction Act, USDA also announced funding for a new program to help underserved and small acreage forest landowners connect to emerging voluntary carbon markets in August 2023.

USDA touches the lives of all Americans each day in so many positive ways. Under the Biden-Harris Administration, USDA is transforming America’s food system with a greater focus on more resilient local and regional food production, fairer markets for all producers, ensuring access to safe, healthy and nutritious food in all communities, building new markets and streams of income for farmers and producers using climate-smart food and forestry practices, making historic investments in infrastructure and clean energy capabilities in rural America, and committing to equity across the Department by removing systemic barriers and building a workforce more representative of America. To learn more, visit www.usda.gov. READ MORE

Related articles

Report to Congress: A General Assessment of the Role of Agriculture and Forestry in U.S. Carbon Markets Written in support of the Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Program (U.S. Department of Agriculture)
USDA report weighs agency's role on carbon markets (Agri-Pulse)
USDA Carbon Market Report Addresses Biochar, Livestock Manure Digestion (Biomass Magazine)
Watch: Controversies in the voluntary carbon market (S&P Global; includes VIDEO)
3 Questions to Consider About Carbon Programs (AgWebO

Excerpt from U.S. Department of Agriculture: TABLE OF CONTENTS

Executive Summary ................................................................................................................... 1 1

Introduction ......................................................................................................................... 5 2

Agriculture and Forestry Credits in Carbon Markets ............................................................ 9 2.1

Overview and Key Terms............................................................................................. 9 2.2

Carbon Registries .......................................................................................................10 2.3

Voluntary and Compliance Carbon Markets................................................................11 2.3.1

Compliance Carbon Markets ...................................................................................11 2.3.2

Voluntary Carbon Markets.......................................................................................12 2.3.3

Insetting Programs ..................................................................................................14 2.4

Role of Project Developers and Third-Party Verifiers ..................................................14 2.4.1

Project Developers ..................................................................................................14 2.4.2

Third-Party Verification Bodies ................................................................................15 2.5

Carbon Credit Quality Initiatives..................................................................................15 3

Supply and Demand of Agricultural and Forestry Credits in the United States....................17 3.1

Supply of Agricultural and Forestry Carbon Credits.....................................................17 3.2

Types of Agricultural and Forestry Credits in the United States...................................18 3.2.1

Forestry Project Scope............................................................................................19 3.2.2

Agriculture Project Scope ........................................................................................22 3.2.3

Land Use Project Scope..........................................................................................26 3.2.4

Inactive Protocols ....................................................................................................28 3.3

Carbon Credits Sold....................................................................................................28 3.4

Future Agricultural and Forestry Carbon Credit Supply ...............................................29 3.4.1

Protocols Under Development.................................................................................30 3.5

Future Demand for Carbon Credits .............................................................................30 4

Accounting systems for Agricultural and Forestry Carbon Credit Projects ..........................32 4.1 Overview.....................................................................................................................32 4.2

Quantifying Carbon Credits.........................................................................................32 4.2.1 Complications..........................................................................................................33 4.3

Protocol Design ..........................................................................................................34 4.3.1

Protocol Design Mechanisms to Address Accounting Issues...................................34 4.4

Third-Party verification’s Role in Project Accounting ...................................................37 5

GHG Quantification Systems..............................................................................................39 5.1

State of Greenhouse Gas Quantification Systems ......................................................39 5.2

Monitoring and Measurement Technologies ...............................................................39 5.2.1

Croplands: Process-Based Models..........................................................................40 5.2.2

Croplands: Soil Sampling ........................................................................................41 5.2.3

Livestock: Quantification Methods ...........................................................................41 5.2.4

Forestry: Quantification Methods...............................................................................42 5.2.5

Empirical Models and Emissions Factors ..................................................................43 6

Barriers to Entry .................................................................................................................44 6.1

Barriers to Landowner Participation in Carbon Markets ..............................................44 6.1.1

Return on Investment ..............................................................................................44 6.1.2

Upfront Costs to Implement Projects .......................................................................45 6.1.3

Record Keeping and Data Collection.......................................................................45 6.1.4

Early Adopters.........................................................................................................45 6.1.5

Permanence Requirements.....................................................................................45 6.1.6

Scale .......................................................................................................................46 6.1.7

Market Confusion ....................................................................................................46 6.2

Reducing Barriers to Landowner Carbon Market Participation ....................................47 6.2.1

Reducing Transaction Costs....................................................................................47 6.2.2

Upfront Financing and Forward Crediting ................................................................48 6.2.3

Reducing Record Keeping and Data Collection Burdens.........................................48 6.2.4

Addressing Early Adopter Concerns........................................................................48 6.2.5

Addressing Permanence .........................................................................................49 6.2.6

Addressing Scale Through Project Aggregation ......................................................49 6.2.7

Carbon Market Resources and Standards...............................................................50 6.3

Role of USDA in Reducing Market Barriers.................................................................50 6.3.1

Technical Assistance, Outreach and Education.......................................................50 6.3.2

Conservation Programs...........................................................................................51 6.3.3

Innovative Grants and Partnerships.........................................................................51 6.3.4

Supporting Infrastructure.........................................................................................52 6.3.5

Investments in MMRV .............................................................................................52 6.3.6

Potential Role of Greenhouse Gas Technical Assistance Provider and Third-Party Verification Program...........................................................................................................54 7

Beyond Greenhouse Gases: Other market Opportunities for Ecosystem Services.............55 7.1 Introduction.................................................................................................................55 7.1.1

Payments for Ecosystem Services ..........................................................................56 7.1.2

Mitigation and Conservation Banks .........................................................................56 7.1.3

Habitat Exchanges ..................................................................................................57 7.1.4

Water Rights Trading and Instream Buybacks in the Western United States...........57 7.1.5

Water Quality Trading Programs .............................................................................57 7.1.6

Other Types of Market-Based Mechanisms.............................................................58 7.1.7

Ecosystem Service Markets in the United States.....................................................58 7.1.8

Federal and State-level Fuel Markets ......................................................................59

Appendix tables ........................................................................................................................62

Bibliography ..............................................................................................................................72

READ MORE

Excerpt from AgWeb: When it comes to carbon programs, most U.S. farmers are sitting on the sidelines.

Recent data shows farmer enrollment in the programs is less than 5%. Many are skeptical about climate change or don’t understand how carbon programs work. Others wonder if there’s really any value in them, and some are concerned that carbon programs will become government-mandated, although the U.S. market today is voluntary.

Yet, having worked in agriculture for my entire career and specializing in carbon the past few years, I know farmer awareness and curiosity about these initiatives is expanding dramatically.

Carbon programs pay farmers for carbon credits, which are then sold in the market to someone looking to offset their carbon footprint. In a carbon program, a farmer is required to implement specific practices, and the program should follow a protocol established with a carbon registry, such as the Climate Action Reserve.

If you’re considering enrolling in a carbon program, keep these points in mind:

1. Does it seem too good to be true?
Carbon programs are not a get-rich-quick scheme. If a program is promising you the world and you have to do nothing in return, you should probably ask more questions or consider other options.

2. Is the organization requiring you to purchase something in order to participate or paying you in a credit to purchase something?
Just because it’s a trusted brand from which you’ve purchased crop inputs or services in the past doesn’t mean it’s qualified to deliver on a legitimate carbon project. Most claims that applying specific products will improve carbon sequestration are not backed by legitimate or peer-reviewed research that verify creditable improvements.

3. Do you have enough information?
Ask some technical questions, even if you aren’t an expert. The salesperson’s responses should alert you right away if the program is legitimate and if they are truly knowledgeable in the carbon arena.
Here are a few to consider:

Are the credits issued through a registry?
How are the credits verified?
Who’s doing the verification?
How are the credits issued, sold and accounted for?
Who’s buying the credits? At what price?
How much does this company keep versus how much you, the farmer, receive? READ MORE