Is Carbon the Real Deal?
A number of ranchers and farmers are exploring ways to bring in extra income by looking into the carbon markets or methods of mitigation. The big question is how to do it and who to deal with.
To me, this is just like years ago when we were looking into leasing private land for wind energy. We heard there was money to be made, and like today, this spurred interest. We had been watching wind towers go up around the state and those landowners talking about the revenue that came with them. Many may not have liked the sight of them but money is money. Remember, carbon cannot be seen, so this is good.
With carbon credits, we are being told the prices have not been set yet, but we’re hearing enough to look into it. We hear carbon credits are marketable and proper farming and grazing practices can store carbon in the soil, where it does some good. I’ve heard carbon is just fertilizer.
The next question is who do we deal with, as anything new and marketable attracts all kinds of buyers. There are two types of carbon credits: voluntary emissions reduction and certified emissions reductions.
Lately, I was reading an article by Laura Sands who understands the carbon markets. She wrote an article titled “7 Considerations Before You Sign On To A Carbon Market Agreement.”
The first one is understanding the business plan of the developer one plans to work with. This means knowing who the developer is, what they want to achieve and what an operation will have to do to work with them.
Another is determining whether the developer will require implementing a new practice that is uncommon for an operation or area. Sometimes it is harder to qualify for carbon credits if a ranch has been using the practice for some time. In some instances, these long-time practices are still supported, but there may be new practices to implement in order to qualify.
Asking how long the conservation practice will need to be implemented – its “permanence” requirement – is another recommendation. A number of current protocols ask that a practice be in place for seven to 10 years. There may be shorter-term credits down the road, but they are not currently in the market place today.
Sands also recommends considering how measurement and verification will be determined and evaluating the costs involved. Make sure to fully understand the costs involved and who will be responsible for them.
She says landowners should also know what to expect from the agreement in the event of a reversal. If weather or other reasons keep a ranch from completing the practice, is there a penalty or not?
Make sure you are aware of the data requirements and know whether or not the operation will be required to share the data and who with.
Review the basic contract terms in detail. As with any contract, know what is being signed and understand what is required to complete the contract.
A number of these considerations are just good business practices. As I understand it, there is currently not a national carbon policy out there so far, so be careful. And with any long-term contract, look for good legal advice.