Carbon is one of the biggest topics of our day and it’s poised to increase in importance. It presents both an opportunity and a significant risk to agricultural production. Given this, it is probably a good idea for us to have at least a basic understanding of what carbon does and why is it important.
Carbon is a basic element in the chemistry of life. The entire branch of organic chemistry is really the chemistry of carbon. One way to think about carbon is that it forms the mesh that holds life together. When we have a small mesh with a few carbon atoms, we are dealing with gases like methane and carbon dioxide.
As we add carbon molecules to the chain, we move into liquids like hydrocarbons and eventually into solids like coal and diamonds. The bonds between the carbon molecules contain energy that is released when the carbon is burned. This energy heats our homes, propels our tractors and provides a myriad of other modern miracles.
The form of carbon is really important when we consider the risk/reward equation. We need some of all forms of carbon (solid, liquid, gas) but too much of the gaseous forms released into the environment create a blanket-like insulating effect on the Earth and lead to global warming. The federal government’s carbon tax is really a tax on short-chain or gaseous forms of carbon. When we talk about a carbon credit, what is being paid for is the conversion of gaseous carbon into liquid or solid forms that can be stored.
Old vs. new carbon
The carbon cycle is front and centre in this debate. This is the process by which carbon is converted from a gas to a solid. It is important for us in agriculture to understand how this happens. Moving carbon into a gaseous form is basically as simple as burning it — heat is released as the bonds are broken between longer chains of carbon, for example in a lump of coal or piece of wood.
The inverse process is a bit more complex. Carbon dioxide and water are combined in plants using solar energy to produce carbohydrates. This releases oxygen to the atmosphere and removes carbon dioxide. This carbohydrate is largely in liquid form and is pumped through the plant to provide fuel for growth. It is also pumped into the soil to feed soil microbes, which perform a variety of functions, including bringing other nutrients to the plants.
As the plants grow roots and the soil microbes grow and die back, they produce organic matter or soil carbon, a stored form of carbon that we can get paid for. An additional complexity occurs when an animal comes along and eats the plant, consuming above-ground carbon. This stimulates the plant to activate some carbon to restart growth and pull more carbon out of the air and into the soil. This is also the point of the cycle where cows burp and create methane emissions which are a gaseous form of carbon.
If carbon dioxide (CO2) is like a sheet that is warming the earth, then methane is a flannel sheet. It is a much more powerful greenhouse gas than CO2 but it also has a much shorter lifespan in the atmosphere. This is important when we consider overall impacts. Forages that are left ungrazed will also oxidize, although it may take a long time. Grazing can accelerate plant growth, sequestering and storing carbon in the ground so that it becomes an “offset.”
The real issue we need to focus on is new versus old carbon. When a cow burps, she releases new carbon that will be sequestered or cycled again in short order. Climate change is really due to old carbon. Fossil fuels represent carbon that was sequestered thousands of years ago through the same mechanisms that exist today. When we dig these ancient forms of stored carbon up and convert them to gas, we are tilting the balance of the carbon cycle. Forage growth interacting with grazing animals can store carbon, just as they have for millions of years. The problem is that current plants and animals can’t sequester as much carbon as is being added to the atmosphere by burning fossil fuels.
An emerging movement is beginning to recognize both current practices in farm management and the importance of grasslands and forages in this carbon cycle. Rangelands and forages can provide many benefits beyond carbon, such as wildlife habitat, biodiversity preservation, water filtration and other valuable ecosystem services. This is extremely important to remember when we concern ourselves with addressing the public and thinking beyond the simple carbon market approach. Many of the details of these new programs are still in development but they basically cover two basic options.
A straight acreage-based payment is simple to figure out, but the impact is much more difficult to measure. There are some new programs under development that are looking at this type of approach for grasslands and are likely to pay for “avoided conversion.” In other words, producers are being paid to leave the carbon in the ground that has been stored there over years, decades, centuries or eons. This is a huge shift in approach and long overdue, but it is not as simple as it may sound. Generally, these are long-term agreements — in some cases 100 years or more. They may require concessionizing your land, for example through a conservation easement. (To concessionize means to manage so to create a recurring cash flow from the asset.)
There is tremendous potential in this approaches for recognizing the role of forages and potentially for the recognition and conservation of our native grasslands. The challenge here is that in many ways we are paying the current owners for work that was done long before their tenure.
This is similar to acreage-based but makes payments based on approved protocols. For grain farmers, this may include minimum tillage or precision-farming fertility practices. For forages, this could include things like adaptive multi-paddock grazing (AMP). The sheer creativity of producers could be a challenge for this approach. For example, at what point does normal grazing management become AMP grazing and result in a positive carbon balance for the soil? Or does stockpiling forage for winter grazing count? There are a lot of management gradients that can create challenges in determining the volume and value of carbon that is being sequestered. While there is a reasonable expectation of some longer-term commitment to this process, it does have some advantages over straight acreage approaches in that it is generally easier to move into and out of these types of agreements and potentially adjust management significantly over time. As well, this second approach can be structured to pay for additionalities such as wildlife habitat and other environmental goods and services that are improved by management. Importantly, it also lets the farmer/rancher take advantage of increases in the price of carbon.
Where are we at?
Driven by their customers, big companies are looking to reduce their carbon footprints, and they are throwing massive amounts of investment into it. Protocol development will require this type of investment and it provides an opportunity for producers.
There are protocols developed and approved for grain-farming operations. While not required, producers generally need to sign up with an aggregator. The aggregator pools carbon credits from large acreages and then sells them to companies or others that want to offset their carbon emissions. They may also be responsible for verification of the credits. These payments have typically been small as many of the protocols only result in partial tonnes of credits on a per-acre basis. For example, if using minimum tillage results in a 0.10 tonne credit per acre and carbon is $20 per tonne, we are talking about $2 per acre. This has the potential to increase with the price of carbon.
For cattle operations, the available options are currently limited. Credits can be claimed on cropping acres, and there are some protocols for using animals with genetic markers for better feed efficiency or building a biodigester for manure, but these markets are currently not easily traded. At the time of writing, there are no protocols or options for payment of carbon credits on perennial forage or native ecosystems. There are programs such as ALUS (Alternate Land Use Services) and others that are paying for ecosystem goods and services which include a value for carbon sequestration, but stack additional benefits such as providing wildlife habitat, water filtration, pollinator habitat and biodiversity.
For both grain and cattle producers, payments may be tied to sustainability initiatives going forward. Conservation easements may be an option for some, and some of the overall value assigned to that easement may/should include the value of carbon sequestered. However, these are often technical and commit to extremely long periods and may also limit the future value of the real estate.
The take-home message
The real take-home message is to stay tuned. Many of the protocols and markets are developing and some mistakes will likely be made.
Most programs are something of a blend of protocol- and acreage-based approaches and for forages and grasslands in Canada, most of these are in their infancy. It is always important to read and understand any agreement you are entering into but given this context it is even more important than ever for these relatively new types of carbon agreements. We are told that the price of carbon is increasing to potentially north of $170 per ton by 2030 and with long-term agreements such as conservation easements, it is important to consider long-term implications. With any agreement, whether acreage- or protocol-based, it is also important to consider future implications on management as well as personal and financial considerations. In many cases, these are long-term considerations.
Carbon markets are more easily accessible for grain farms through aggregators and existing/approved protocols. However, current acreage payments tend to be quite low. They are likely poised to increase, based just on the projected price of carbon.
The revenue potential is poised to increase for carbon agreements, even fairly well-established ones such as minimum tillage. On the perennial crop side, there is evidence that well-managed grasslands can sequester in excess of one ton of carbon per acre and in some environments more than double that. At $170 per ton, that is a significant amount of money, so it is important to stay informed on what is happening in the carbon market. I would also encourage readers to ensure they look at and value factors beyond simple carbon when evaluating the path forward. This includes leveraging management practices that store more carbon but also contribute to other environmental goods and services. The issues and the real value of forages and grazing are beyond a simple plus or minus carbon balance. I expect that innovation and change will be extremely rapid as the cost of carbon continues to rise and these approaches become more mature.