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UI, OSU ECONOMISTS ISSUE REPORT "WHAT FARMERS SHOULD ASK ABOUT SELLING CARBON CREDITS?"
Source: blog by Sarah Sellars, Gary Schnitkey, Krista Swanson, and Nick Paulson, Department of Agricultural and Consumer Economics, University of Illinois and Carl Zulauf, Department of Agricultural, Environmental and Development Economics, Ohio State University

To view the complete report, click here.

Agricultural carbon markets exist through privately and publicly owned companies with aim to reduce carbon emissions through trade of carbon units sequestered at the farm level. The sale of carbon credits presents an opportunity for farmers to receive financial benefits from changing to more environmentally beneficial agricultural practices, although carbon prices may not currently be high enough to cover the cost of switching practices. Information about carbon markets can be challenging to navigate because each company typically has a different structure for payments, verification, and data ownership. This article provides a brief background about carbon markets, information about the breakeven price for carbon sequestration practices, and some questions for farmers to consider about selling carbon credits.

Background
Greenhouse gases (GHG) change the natural balance between energy received from the sun and emitted from the earth by trapping energy from the Earth in the atmosphere, altering the climate and weather. Greenhouse gases emissions are either anthropogenic or natural. Anthropogenic emissions are caused by human activities such as burning fossil fuels, and natural emissions are caused by such occurrences as volcanic eruptions, the Earth's orbit, the carbon cycle, and the sun's output. The effect of anthropogenic emissions is greater than the effect of natural emissions, with human activities suggested to be the main cause of global warming over the last 50 years. The major greenhouse gases are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and various synthetic chemicals (EPA, n.d.)

With growing concerns about climate change and greenhouse gas emissions worldwide, some countries agreed to follow voluntary climate change agreements, such as the UN Framework Convention on Climate Change (1992), Kyoto Protocol (1997), and Paris Agreement (2015). President Biden pledges the U.S. will reach net-zero emissions no later than 2050, meaning GHG removal will cancel out human-caused GHG emissions. Private companies also set emissions targets that may meet or exceed the Paris Agreement's goal. During the COVID-19 pandemic, the number of companies setting net-zero or climate-neutral targets has doubled (Forest Trends' Ecosystem Marketplace 2020).

Governments and companies can reach their emissions targets through carbon sequestration, which is the process of capturing and storing atmospheric carbon dioxide (USGS, n.d.). There are two main types of carbon sequestration: geologic and biologic. Geologic involves storing carbon dioxide in underground rock formations, and biologic consists of storing carbon in plants, trees, soils, and aquatic environments (USGS, n.d.). Carbon sinks are the reservoirs such as rocks, plants, soils, water, etc., where carbon is stored. U.S. agriculture can contribute to biologic carbon sequestration by storing carbon dioxide in soils, trees, and plants. One report suggests that U.S. agriculture and forestry can provide 10-20% of the sequestration and emission reductions needed to reach net-zero emissions by 2050 (Bonnie, Jones, and Harrell, n.d.).


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