E. Carbon Markets

Carbon offset markets allow greenhouse gas polluters to pay another party to reduce emissions or sequester carbon instead of reducing their own emissions. Greenhouse gas emitters can purchase offsets for entirely voluntary purposes, such as to offset past emissions or otherwise reduce its carbon footprint (e.g., to sell “carbon-neutral” products) by making reductions in its supply chain.

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able to do so (e.g., airline flight emissions), may want to buy credits to offset its emissions levels (again, perhaps for marketing or recruitment purposes).

Alternatively, if allowed by a legal regime (such as certain cap-and-trade programs), a company that does have a legal obligation to reduce its emissions may wish to meet its compliance obligations by purchasing credits from agricultural producers who reduce their net emissions. These compliance offset programs raise significant concerns (in addition to measurement and verification issues discussed below)—including the creation of toxic pollutant hotspots—and are particularly problematic when fossil fuel emissions would be offset by agricultural soil carbon sequestration, which, among other challenges, is inherently impermanent.

Either voluntary or compliance offset markets stand in contrast to government or other programs that pay farmers to reduce net greenhouse gas emissions with no corresponding continuation of other emissions or statement about total emissions. These programs, such as the proposed carbon bank discussed above in Chapter V, while still facing measurement and other challenges, are entirely additional to other greenhouse gas reduction efforts. In all cases, the purchased reductions can help finance the transition to carbon farming, compensating farmers for sequestering carbon or reducing emissions.

Carbon offset markets were given a boost by the 2020 introduction²⁰ and 2021 re-introduction²¹ of the Growing Climate Solutions Act, which would allow USDA to certify third-party carbon offset certifiers. Although some environmental organizations have argued that carbon markets should play a major role in decarbonizing agriculture,²² it is unclear that carbon markets, especially at the current prices offered,²³ will be able to motivate widespread behavioral change among farmers without robust government support and regulation.²⁴ On the other hand, there appears to be significant interest among companies that have pledged to reduce their net emissions

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to zero by 2050 to buy carbon credits from agriculture and elsewhere, with the market expected to expand 100 times by 2050.²⁵

The market for agricultural compliance offsets in the United States as of 2021 is small and largely confined to rice production in California,²⁶ although agencies and others in California are also closely studying the potential for offset markets for manure management at confined animal production facilities. In addition, two private companies, Nori and Indigo Agriculture, have initiated carbon offset sales, paying farmers $15/ton (as of 2021) for carbon sequestered with differing conditions and program design.²⁷ As with public schemes to pay farmers for climate-friendly results (discussed above in Chapter V.B.3), any voluntary or compliance offset program will need to address questions of measurement, administrative feasibility, additionality, contract length, and compatibility with other programs, among other issues. As can be seen in Table 1, the few existing programs address these issues in different ways; their experience over the coming years may provide insights as to the most successful or credible approaches.

A key shortcoming of many offset programs that allow fossil emissions to be offset by increases in soil organic carbon is the false equivalency they make between permanent fossil carbon losses and shorter-term increases in soil organic carbon.

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Moreover, it is exceedingly difficult to precisely, accurately, and costeffectively measure greenhouse gas reductions from altered farm practices. While more relaxed standards might be acceptable in a program where public or philanthropic funds are being used to obtain climate benefits, a much greater degree of certainty should be demanded for offset purchasers using agricultural net greenhouse gas reductions to claim credit for balancing off other fossil fuel emissions or to lower their own greenhouse-gas-reduction efforts. Soil carbon content on a single operation can vary substantially across depths, locations and seasons, even in seemingly uniform fields,²⁹ and soil carbon measurement tools are not yet standardized sufficiently to reliably ensure emissions reductions.³⁰ Verifying changes in soil carbon storage also requires time- and labor-intensive sampling to ensure that changes are significant and real relative to sources of spatial variation outside of management.³¹ Even verified increases in carbon stocks can be misleading since they are often concomitant with increases in soil respiration (which is not included in greenhouse gas inventories) or other greenhouse gas emissions.³² Nor does measuring total carbon stocks provide adequate information on persistence, which is dependent on soil chemistry, moisture, temperature, soil microbial community, and several other factors rarely included in carbon market measurement approaches.³³ Finally, any carbon offset market must include comprehensive measurements of a full greenhouse gas budget rather than only total carbon stocks since some practices can increase soil carbon or decrease methane emissions but increase nitrous oxide emissions.

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is so important, any scheme must include full transparency related to sampling, quantification, uncertainties, and validation.

A 2021 report published by Environmental Defense Fund and the Woodwell Climate Research Center examined 12 different measurement, reporting, and verification (MRV) protocols (eight from the United States) applied to soil organic carbon credit valuation, and compared and contrasted these different approaches.³⁴ As discussed in the report, these various approaches and lack of standardization create a system where not all carbon credits are valued equally. Moreover, each approach faces challenges accounting for issues such as additionality, leakage, reversals, and permanence. Collectively, these challenges make it difficult to determine the overall climate benefits of these markets. Given these uncertainties, the report recommends continued research to better understand the true climate impact of carbon markets while limiting any carbon credit effort to voluntary value chain offsets, thus excluding offsets for emission compliance obligations. They argue that the most effective climate benefits continue to come from direct emissions reductions. “Consistent accounting and verification of direct emission reductions during agricultural production—reduced nitrous oxide emissions via improved nutrient management, reduced carbon dioxide emissions via reduced tractor use and reduced methane emissions from improved manure management—and from avoided land conversion is a less risky and permanent climate solution for supply chain and other public investment.”³⁵

Given these issues, organizers of offset systems should also explore alternative payment schemes that do not rely on having accurate or precise sequestration rates. For example, instead of paying for offsets per ton (as is generally the case), payments could be based on practices implemented per acre, with a price set by calculations of average benefits, or based on measurements of surrogate indicators.

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Many researchers and advocates have significant concerns about the use of offsets generally.³⁶ The existence of offsets can take pressure off for actual emission reductions;³⁷ they may not be truly additional or verifiable³⁸; and they may make it easier for companies to claim carbon neutrality when in fact they are not.³⁹ Moreover, offsets can change the location of the pollution, increasing or slowing reductions in the area near the purchaser.⁴⁰ And even a climate change offset program can have local impacts because greenhouse gas pollution is often accompanied by air emissions more immediately harmful to human health.⁴¹ Small-scale farmer organizations also criticize offset markets in agriculture as unreliable, detrimental to small- and medium-scale farmers, and likely to increase volatility in food prices.⁴² Private market programs should seek to expressly address all these issues, as should legislatures and agencies considering regulations to help shape or oversee these private markets. Legislatures and agencies should carefully consider all of these factors when considering any carbon market program.

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Key Recommendations

• Foundations and private donors should support the research private organizations are conducting on climate-friendly practices and help fund new organizations devoted to carbon farming. There is great need for research into publicly shared information about opportunities to reduce greenhouse gas emissions and increase carbon sequestration in soil, since now most research focuses elsewhere.

• USDA and nonprofit organizations should ensure that agricultural banks are familiar with the benefits of carbon farming, as increased resiliency exposes lending institutions to less risk.

• The private sector can play an important role in adapting and expanding agricultural easement programs to support climate-friendly practices.

• Funding is needed to develop, standardize, and distribute cost-effective monitoring, measurement, and verification techniques.

• Voluntary carbon markets can help finance the transition to carbon farming, compensating farmers for sequestering carbon or reducing emissions, but legislatures and agencies should proceed carefully given the myriad concerns about carbon markets and the inability to precisely, accurately, and cost-effectively measure greenhouse gas reductions from altered farm practices. In particular, policymakers should be very wary of offset markets that allow entities to buy agricultural carbon credits instead of implementing feasible reductions of their own greenhouse gas emissions.

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1. URS NIGGLI ET AL., RESEARCH INSTITUTE OF ORGANIC AGRICULTURE, A GLOBAL VISION AND STRATEGY FOR ORGANIC FARMING RESEARCH 55-56 (2016).

2. Id.

3. FEDERAL RESERVE BANK OF KANSAS CITY, AGRICULTURAL FINANCE DATABOOK tbl.A-1 (2019).

4. Calculated by the authors using NATIONAL AGRICULTURAL STATISTICS SERVICE, USDA, 2017 CENSUS OF AGRICULTURE, U.S. NATIONAL LEVEL DATA 9 tbl.2 (2019).

5. The majority of loans were less than $25,000. FEDERAL RESERVE BANK OF KANSAS CITY, supra note 3.

6. Calculated by the authors using NATIONAL AGRICULTURAL STATISTICS SERVICE, USDA, 2017 CENSUS OF AGRICULTURE, FARM TYPOLOGY 4 tbl.1 (2020).

7. Nathan Kauffman & Matt Clark, Farm Lending Activity Remains Robust, FED. RES. BANK KAN. CITY: AG FIN. DATABOOK, Apr. 25, 2016, https://www.kansascityfed.org/en/research/indicatorsdata/agfinancedatabook/articles/2016/04-21-2016/ag-finance-dbk-04-25-2016.

8. See, for example, the creation of the New York City Energy Efficiency Corporation (NYCEEC). NYCEEC, Home Page, https://nyceec.com/ (last visited Nov. 30, 2020). See also, e.g., Carbon Trust, Home Page, https://www.carbontrust.com/home/ (last visited Nov. 30, 2020); Solar and Energy Loan Fund (SELF), Home Page, https://solarenergyloanfund.org/ (last visited Nov. 30, 2020).

9. See AgFunder, 2021 AGFUNDER AGRIFOODTECH INVESTMENT REPORT 3 (2021) (noting that startups raised over 30% more in 2020 than in 2019, and almost five times as much as in 2014).

10. For example, conservation easements often prohibit new structures, including wind turbines and processing facilities for new agricultural products. Jessica Owley, Conservation Easements at the Climate Change Crossroads, 74 LAW & CONTEMP. PROBS. 199, 207-08 (2011).

11. Clauses that ensure open and easily available data should be included wherever possible.

12. Adena Rissman et al., Adapting Conservation Easements to Climate Change, 8 CONSERVATION LETTERS 68, 73 (2015).

13. FRED CHEEVER ET AL., PRIVATE LAND CONSERVATION IN THE FACE OF CLIMATE CHANGE (2013).

14. See AMERICAN FARMLAND TRUST, SOLAR SITING GUIDELINES FOR FARMLAND (Sept. 2020), https://s30428.pcdn.co/wp-content/uploads/2020/01/AFT-solar-siting-guidelines-Jan-2020.pdf; AMERICAN FARMLAND TRUST, WHAT IS DUAL-USE SOLAR? (Mar. 2020), https://s30428.pcdn.co/wp-content/uploads/sites/2/2020/08/Dual-use-one-pager-web.pdf; American Farmland Trust & Blue Wave Solar webinar, Sustainable Development (May 27, 2020), https://bluewavesolar.com/bw-resources/webinar-sustainable-solar-development.

15. CHRISTOPHER WOODALL ET AL., METHODS AND EQUATIONS FOR ESTIMATING ABOVEGROUND VOLUME, BIOMASS, AND CARBON FORTREES IN THE U.S. FOREST INVENTORY, USDA FOREST SERVICE NORTHERN RESEARCH STATION, Gen. Tech. Rep. NRS-88 (2010), https://doi.org/10.2737/NRS-GTR-88.

16. Stephen Prince et al., Net Primary Production of U.S. Midwest Croplands From Agricultural Harvest Yield Data, 11 ECOLOGICAL APPLICATIONS 1194–1205 (2001), https://doi.org/10.2307/3061021.

17. Salam Issa et al., A Review of Terrestrial Carbon Assessment Methods Using Geo-Spatial Technologies With Emphasis on Arid Lands, 12 REMOTE SENSING 2008 (2020), https://doi.org/10.3390/rs12122008; Robert Zomer et al., Global Tree Cover and Biomass Carbon on Agricultural Land: The Contribution of Agroforestry to Global and National Carbon Budgets, 6 SCI. REPORTS 29987 (2016), https://doi.org/10.1038/srep29987.

18. See, e.g., Robert Pallasser et al., A Novel Method for Measurement of Carbon on Whole Soil Cores, in SOIL CARBON (Alfred Hartemink & Kevin McSweeney eds., Springer 2014); S. Billings et al., Soil Organic Carbon Is Not Just for Soil Scientists: Measurement Recommendations for Diverse Practitioners, 31 ECOLOGICAL APPLICATIONS 3 (2021), https://doi.org/10.1002/eap.2290.

19. See INDIGO AGRICULTURE, About Indigo Ag, https://www.indigoag.com/about (last visited Jan. 23, 2021); NORI, About Us, https://nori.com/company/about (last visited Jan. 23, 2021); ECOSYSTEM SERVICES MARKET CONSORTIUM, About Us, https://ecosystemservicesmarket.org/about-us/ (last visited Jan. 23, 2021).

20. S. 3894, 116th Cong. (2020).

21. S. 1251, 117th Cong. (2021).

22. Robert Parkhurst, Carbon Markets in Agriculture Are the Next Big Thing, ENV’T DEF. FUND, Jan. 24, 2016, http://blogs.edf.org/growingreturns/2016/01/24/carbon-markets-in-agriculture-arethe-next-big-thing/.

23. Gosia Wozniacka, Are Carbon Markets for Farmers Worth the Hype?, CIVIL EATS, Sept. 24, 2020, https://civileats.com/2020/09/24/are-carbon-markets-for-farmers-worth-the-hype/; INSTITUTE FOR AGRICULTURE AND TRADE POLICY, WHY CARBON MARKETS DON’T WORK FOR AGRICULTURE 2 (2020).

24. Peter Alexander et al., The Economics of Soil C Sequestration and Agricultural Emissions Abatement, 1 Soil 331, 335 (2015) (noting weak demand for agricultural offsets absent government pressure).

25. Virginia Gewin, As Carbon Markets Reward New Efforts, Will Regenerative Farming Pioneers Be Left in the Dirt?, CIVIL EATS, July 27, 2021, at https://civileats.com/2021/07/27/as-carbon-marketsreward-new-efforts-will-regenerative-farming-pioneers-be-left-in-the-dirt/ (noting, in addition, the challenge of ensuring that credits are for “additional” efforts while also rewarding early adopters of climate-friendly practices). See also Lori Ioannou, This Is a $15 Trillion Opportunity for Farmers to Fight Climate Change, CNBC, June 12, 2019, at https://www.cnbc.com/2019/06/11/this-is-a-15-trillionopportunity-for-farmers-to-fight-climate-change.htm.

26. Niina H. Farah, Rice Growers on the Front Lines of U.S. Carbon Markets, E&E News, Jan. 20, 2016, https://www.eenews.net/stories/1060030839; Brian C. Murray, Why Have Carbon Markets Not Delivered Agricultural Emission Reductions in the United States?, CHOICES, 2d Quarter 2015, at 1.

27. Wozniacka, supra note 23. See also Gewin, supra note 25 (noting additional private sector agricultural carbon market platforms including TruCarbon, Bayer Carbon Initiative, B Carbon, Nutrien, and Ecosystem Service Market Consortium).

28. Letter from Food & Water Watch et al. to Members of Congress (Oct. 15, 2020), https://foodandwaterwatch.org/sites/default/files/oppose_the_growing_climate_solutions_act_final_101520.pdf; INSTITUTE FOR AGRICULTURE AND TRADE POLICY, supra note 23.

29. Keith Paustian et al., Quantifying Carbon for Agricultural Soil Management: From the Current Status Toward a Global Soil Information System, 10 CARBON MGMT. 568, 571 (2019), https://doi.org/10. 1080/17583004.2019.1633231 (accessed Jan. 22, 2020); INSTITUTE FOR AGRICULTURE AND TRADE POLICY, supra note 23.

30. Pete Smith et al., How to Measure, Report and Verify Soil Carbon Change to Realize the Potential of Soil Carbon Sequestration for Atmospheric Greenhouse Gas Removal, 26 GLOBAL CHANGE BIOLOGY 219-41 (2020); Cole D. Gross & Robert B. Harrison, Quantifying and Comparing Soil Carbon Stocks: Underestimation With the Core Sampling Method, 82 SOIL SCI. SOC’Y AM. J. 949-59 (2018); INSTITUTE FOR AGRICULTURE AND TRADE POLICY, supra note 23.

31. See Gross & Harrison, supra note 30.

32. Indeed, carbon dioxide emissions from soil respiration are “an order of magnitude greater than those from human activities, such as fossil fuel burning.” Jennifer A.J. Dungait, Organic Matter Turnover Is Governed by Accessibility Not Recalcitrance, 18 GLOBAL CHANGE BIOLOGY 1781, 1786 (2012).

33. See Michael W.I. Schmidt, Persistence of Soil Organic Matter as An Ecosystem Property, 478 NATURE 49-56 (2011).

34. EMILY OLDFIELD ET AL., ENVIRONMENTAL DEFENSE FUND, AGRICULTURAL SOIL CARBON CREDITS: MAKING SENSE OF PROTOCOLS FOR CARBON SEQUESTRATION AND NET GREENHOUSE GAS REMOVALS (2021).

35. Id. at 4. See also id. at 2:

We remain concerned that any end-use of carbon credits as an offset, without robust local pollution regulations, will perpetuate the historic and ongoing negative impacts of carbon trading on disadvantaged communities and Black, Indigenous and other communities of color. Carbon markets have enormous potential to incentivize and reward climate progress, but markets must be paired with a strong regulatory backing.

36. See, e.g., Lisa Song & James Temple, The Climate Solution Actually Adding Millions of Tons of CO₂ Into the Atmosphere, MIT TECH. REV. & PROPUBLICA (Apr. 2021) https://www.propublica.org/article/theclimate-solution-actually-adding-millions-of-tons-of-co2-into-the-atmosphere; TAMRA GILBERTSON & OSCAR REYES, CARBON TRADING: HOW IT WORKS AND WHY IT FAILS 11-12 (Dag Hammarskjold Foundation, Critical Currents No. 7, 2009); Kevin Anderson, The Inconvenient Truth of Carbon Offsets, 484 NATURE 7 (2012); Lisa Song, An Even More Inconvenient Truth, PROPUBLICA, May 22, 2019, https://features.propublica.org/brazil-carbon-offsets/inconvenient-truth-carbon-credits-dontwork-deforestation-redd-acre-cambodia/; Lisa Song & James Temple, A Nonprofit Promised to Preserve Wildlife. Then It Made Millions Claiming It Could Cut Down Trees, MIT TECH. REV. & PROPUBLICA, May 2021, https://www.propublica.org/article/a-nonprofit-promised-to-preserve-wildlife-then-itmade-millions-claiming-it-could-cut-down-trees.

37. Letter from Food & Water Watch et al., supra note 28.

38. Id.; INSTITUTE FOR AGRICULTURE AND TRADE POLICY, supra note 23.

39. INSTITUTE FOR AGRICULTURE AND TRADE POLICY, supra note 23.

40. Id.

41. Letter from Food & Water Watch et al., supra note 28.

42. INSTITUTE FOR AGRICULTURE AND TRADE POLICY, FIVE REASONS CARBON MARKETS WON’T WORK FOR AGRICULTURE (2011); INSTITUTE FOR AGRICULTURE AND TRADE POLICY, supra note 23.

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