Developing Carbon Credit Markets for Traditional Row Crops
Carbon Credits are gaining interest in the agriculture marketplace, but not without significant confusion. It’s time to set the record straight. Let’s discuss what carbon credits are and how they apply to the agriculture supply chains.
What Exactly is a Carbon Credit?
Carbon credits sometimes referred to as “Carbon Offsets” are permits that allow the owner to emit a certain amount of CO2. One credit allows the emission of one tonne of Carbon Dioxide (CO2) or the equivalent in other greenhouse gases.
They are quickly becoming very valuable commodities. This type of credit has been around for about 25 years, and it is used in conjunction with Cap and Trade programs to help curb pollution. This is accomplished by regulating the release of CO2.
Companies that emit greenhouse gases earn credits that allow them to continue to emit up to a certain limit, which is reduced periodically. Meanwhile, if the company emits less GHGs than its prescribed limit, the company may sell any unused credits to another company that needs them to offset its emissions.
In the future, private companies will be doubly incentivized to reduce their greenhouse emissions. The first issue is that they need to spend money on extra credits if their emissions exceed the cap. The second issue is that they can make money by reducing emissions and selling excess allowances in the form of carbon credits.
Carbon offsets are generated from verified projects that pull Carbon Dioxide (CO2) out of the atmosphere. One carbon credit is created when one tonne of CO2 is avoided, sequestered, or destroyed. The credit is a tradable permit that provides the holder the right to emit one tonne of CO2. Carbon credits are one-half of cap-and-trade programs, where companies are required to purchase credits if they exceed the regulated cap for CO2. They are also purchased to support a company’s voluntary reduction Commitments.
Carbon Credits in the U.S. – Do They Exist?
The short answer is “Yes”, however, the U.S. is slower to adopt the Cap and Trade model that is prevalent in Europe and Asia. So far, 12 states adopted market-based approaches to the reduction of greenhouse gases, according to the Center for Climate and Energy Solutions. Of these, 11 are Northeast states that banded together to jointly attack the problem through a program known as the Regional Greenhouse Gas Initiative (RGGI).
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort by the Northeastern and Mid-Atlantic States to reduce greenhouse gas emissions. The regional initiative includes 11 States in the Northeast and Mid-Atlantic United States: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Virginia, and Vermont. The program includes power plants in these states that are either already subject to strict regulations or will be in the near future.
The other state with a Cap and Trade program is, not surprisingly, California. According to the California Air Resources Board (CARB), their Cap-and-Trade Regulation establishes a declining limit on major sources of GHG emissions throughout California, and it creates an economic incentive for significant investment in cleaner, more efficient technologies. The Program applies to emissions that cover approximately 80 percent of the State’s GHG emissions.
Are there Carbon Credits Outside of Energy and Transportation?
What we hear most when discussing carbon credits relates to energy production (or more specifically, more efficient energy production) or transportation in the form of reducing the fuel-burning vehicles on our roads. That makes sense because when carbon credits emerged from the Kyoto Protocol in 1997, there weren’t a lot of options for reducing carbon emissions dramatically with the exception of energy production and transportation (which together account for over 50% of all GHG emissions).
However, today there’s more focus on agriculture (as it is also a big contributor) and even more recently material science in the area of biomaterials. Regenerative agriculture is not new, in fact, it’s very old, however, our technical advances in the 20th century outpaced the planet’s ability to keep up with herbicides, pesticides, and other destructive farming practices. Regenerative agriculture takes us back to methods that produce fewer emissions, use fewer chemicals and improve the quality of our soil. To read about this in detail, see our Regenerative Agriculture guide.
Materials science has also seen quite a spike in activity over the last decade. Today, there is a renewed focus on manufacturing products with materials that don’t harm or deplete the planet. The USDA has a BioPreferred program that provides incentives for manufacturers using natural materials. For example, plastics that contain at least 22.5% biomaterials qualify for the program, and as you’ll read, industrial hemp is leading the bio-based additive charge.
Both regenerative agriculture and the use of bio-based materials can now qualify as carbon credit programs.
Does Agriculture Qualify for Carbon Offsets?
The answer is yes if you do it right.
As we begin discussing how carbon credits impact the agriculture value chain, there are a few important topics to keep in mind:
- Where in the value chain, do we create valid carbon credits?
- The increasing importance of co-benefits.
- How do we execute?
Hemp is scientifically proven to absorb more CO2 per acre than any forest or commercial crop and Hemp is the fastest CO2-to-Biomass conversion tool available. An acre of Hemp has the potential to sequester upwards of 10-30 tonnes of CO2, depending on the number of harvest cycles and overall farming performance.
It Starts with the Soil
Sustainable farming practices converge with the benefits of rotational crops.
Accretive to the credibility of hemp carbon credits is its co-benefits. Many Credit issuers focus on the co-benefits of a project and hemp crushes it! From regenerative farming practices that improve biodiversity to local economic boon to removing toxic CO2-intensive materials from end products.
More Revenue Throughout the Supply Chain
It is important to see the full picture of the impact agriculture materials can have on your product because all of this information can translate into extra cash flow for your business. Carbon credits need to be counted, verified, and tracked and their chain of ownership must be solid. At Heartland, we are embarking on many research projects to streamline the life cycle analyses (LCAs) for carbon.
This will allow proper credit for regenerative practices and for carbon sequestered in the soil as well as the hemp biomass produced. The biomass processed for plastics additives will create a revenue stream for the owners of the materials, no matter where in the supply chain they take ownership.
I Qualify for Carbon Credits, Now What?
The last part is to understand how to file for and acquire carbon credits. Anyone can file for these benefits, but this process is designed to be time-consuming and meticulous. You must validate your claims with the information we gathered above and confirm it with a validated third-party entity. This makes it difficult for the everyday farmer to apply for carbon credits and see value from these resources.
Most agriculture companies will not take the time to understand these numbers. Even less will create the structure required to ensure farmers qualify to receive revenue from carbon credits.
The Heartland team believes that access to this revenue stream is an important part of our value chain. We have centralized the complex procedures necessary to begin quantifying our entire supply chain so Heartland farmers and clients can reap the benefits of carbon credits.
Heartland’s network of farmers will have an additional revenue stream on top of their fiber and grain harvests because we spent the time to get the job done right.
Heartland’s clients and partners will have access to carbon credits that no other raw material suppliers could provide.
Carbon credits are another tool that our partners and customers will use to increase revenue, decrease their carbon footprints and take an active role in the sustainability revolution.