Carbon in soils and trees: What should farmers and society worry about?
Carbon in soils and trees: What should farmers and society worry about?
Brent Sohngen, Professor of Environmental and Natural Resource Economics, Ohio State University
As the US re-enters the Paris Agreement and companies all over the world work to become carbon neutral, the idea that farmers can help out by storing carbon in their soils through conservation tillage, cover crops, conservation reserve practices like grass waterways and riparian zones, and in their corner woodlot has suddenly become a thing. Several companies have popped up to manage the process of quantifying and selling the carbon, and real money is being exchanged. This naturally raises lots of questions for landowners. Here are some of the questions I’ve heard, and some answers. This list is by no means complete, and as more questions arise, I’ll work to update it. If you do have a question, please feel free to email me at Sohngen.email@example.com.
What is carbon neutrality? The term carbon neutral refers to the concept that any carbon dioxide emitted into the atmosphere by burning fossil fuels (driving cars, running tractors, heating homes, using the lights, etc.) can be offset with practices that remove exactly that amount of carbon dioxide from the atmosphere. Right now, the most efficient process for removing carbon dioxide from the atmosphere is photosynthesis, or growing plants. Although engineers are coming up with ways to remove carbon dioxide from the atmosphere, right now, it’s easiest and cheapest to use the age-old process of using sunlight and CO2 to grow plants.
As an example, consider that I drive about 10,000 miles a year in a car that gets 30 miles per gallon. This means I emit about 3 tons of carbon dioxide each year due to my driving. If I want to make my driving “carbon neutral”, I would need to plant about 1 acre of trees in Ohio and grow it. Each year, that stand would offset about 3 tons as it grows, so the growing stand of trees would remove, or offset, the emissions from my driving. Alternatively, if a farmer switches from conventional tillage to conservation tillage, they will sequester about 1 ton CO2 per year. Thus, I could pay a farmer for 3 acres of their conservation tillage practice to offset the tons I emit by driving.
Right now, forests and agricultural lands in the US offset about 12% of our gross carbon emissions (773 million tons of CO2 per year), so as a country, we could say that we are about 12% carbon neutral.
Who wants to buy the carbon stored in soils or trees? Right now, lots of people and companies want to become carbon neutral. Because most of the energy businesses consume emits carbon dioxide, and renewable energy is still expensive to deploy at a scale that would displace this fossil energy rapidly, many companies are looking at ways to increase carbon storage on the landscape – in agricultural soils and trees – in order to offset their emissions. Today, if a company wants to reduce their net carbon emission by 1 ton, it’s cheaper for them in most cases to pay a farmer to store carbon in soils or a forester to store carbon in trees than it is to deploy or buy new renewable energy. As a result, many of the world’s largest companies are trying to contract landowners for the carbon they can generate now.
One of the best places to find information about these carbon markets is Forest Trends “State of the Voluntary Carbon Market Report”: https://www.forest-trends.org/publications/state-of-the-voluntary-carbon-markets-2020-2/
How much is the carbon worth? Right now, since there are no regulations in place in most of the US (California, of course, is an exception to this rule) that require companies to reduce their carbon emissions, or farmers to increase their carbon storage. As a result, the price of carbon determined almost entirely by voluntary trades by people who want to solve climate change for the good of the earth. The price thus is relatively modest, around $10 per ton CO2, which translates into $10 per acre for conversion to no till, or $30 per acre for conversion to trees. This price will probably increase in the next couple years as the US and other countries increase their commitments under the Paris Agreement.
Although it is possible that there will be new regulations imposed on power plants, appliance manufacturers, and automobile companies, and we may see higher fuel prices, it is not likely that there will be new regulations imposed on farmers or foresters to increase carbon storage in their trees or soils.
What does “additionality” mean? If you’ve read about carbon markets, you probably have read about the term “additionality”. It’s a fairly specific term for these types of contracts which means that people who contract with you for your carbon want only “additional” carbon. That is, they want only new and additional carbon that you sequester in your trees or soils as a result of the contract you sign. They do not want carbon that you would have sequestered anyways without the contract.
This means that if you are already practicing no-till, and have been for a while, companies are unlikely to be wiling to pay you to continue that practice. They figure you are already sequestering carbon without a payment, so why pay you for something you are going to do anyways. Obviously, this sounds really unfair – after all, you are doing something really beneficial for society by using no till. But because this is a private market, and private companies get to decide what they buy and don’t buy, just like farmers get to decide whether to do no till or not, it’s their choice to buy only “additional” carbon.
However, if government gets into the act of regulating carbon emissions from factories and cars, or regulating carbon in soils and trees, government doesn’t have to worry as much about additionality. They can choose to pay off farmers who have already done no tillage, or forest owners who have been storing carbon in trees for years, in order to compensate them for these past good actions. That’s probably what government will do since one alternative is that they can choose to tax anyone who hasn’t yet adopted no tillage to encourage people to switch to the practice, or they can tax foresters when they cut their trees.
The key point is that there are lots of ways to handle this additionality question in ways that efficiently and equitably manage carbon in soils and trees without worrying endlessly about whether you can figure out who would have and would not have adopted no tillage without a carbon price.
Isn’t it likely that the carbon stored in soils or trees will be emitted to the atmosphere someday? Sure. If someone practicing no tillage decides to do some light tillage, lots of the stored carbon is emitted and that will eliminate most of the benefits of storing it. And if someone who has some forests harvests them, some carbon is emitted, although lots of carbon is stored for long periods of time in wood products (furniture, houses, landfills, etc.). But even storing carbon for 5, 10, or 50 years in soils or trees is helpful, and valuable, so there is a good reason for you to do it even if you don’t plan on doing it forever. And, since we are all used to renting all kinds of things (farmland, cars, homes, apartments, machinery, etc.), we may as well think of carbon the same way – as something that can be rented out to whoever will buy it.
Thus, if you switch over to no till and never look back, you should be paid $10-$15 per ton CO2 right now. If you are someone who does not till every other year when you are planting beans, then you should get paid $5-$7 per ton. There is a fairly straightforward way to value different actions based on the carbon benefits they provide over time, and jJust like we have figured out how to value different qualities of grain, we can value different qualities of carbon stored in soils differently.
If I sell my carbon storage, don’t I just let someone else out of something they should be doing? Well, yes, but that’s basically the point. I mean, if you are inclined to switch over to no-till and not receive a $10 per ton (current price) payment from somebody else, then by all means do it! Yes, you are reducing carbon in the atmosphere, and that’s a good thing. However, you are offsetting someone’s carbon emissions, whether it’s yours or someone else’s. My view is that you may as well get paid for it as long as you are doing it. And if you weren’t going to do the practices, but the carbon payments induce you to do them, that’s even better. It really doesn’t matter who’s carbon you are offsetting, if you are a no-tiller, or a landowner with some forests, you are offsetting someone else’s carbon, whether they know it or not. Wouldn’t you rather find somebody who actually wants to reduce their carbon emissions, let them buy your carbon sequestration, and then both of you can feel better about your contribution to fighting global warming? Thankfully, carbon markets have evolved to allow those kinds of transactions to happen, and they make all of us better off, not worse off.
Shouldn’t I just worry about offsetting my own emissions? It’s not a bad idea for individuals to choose to become carbon neutral on their own, but economically, it would be extremely costly to hold everyone to a standard that says we all have to be carbon neutral as individuals. It’s much better, and cheaper, to accomplish carbon neutrality through markets. Carbon neutrality for the earth will come faster and cheaper that way.
If you are a typical corn and bean farmer in Ohio with no animals, you emit about 0.25 tons of CO2 equivalent per acre per year. If you switch to no till entirely, you sequester about 1 ton CO2 per acre per year. For a 420 acre farm, that’s 105 tons up in the air, and 420 tons back in the ground, for a net of 315.
Now consider me and 140 of my neighbors, who all are emitting 3 tons a year from driving around. That’s 420 tons of CO2 emissions per year. If we want to become carbon neutral we have three choices:
(A) buy electric cars now, and use only solar and wind power;
(B) buy our own farmland and plant some trees or learn how to be farmers and do no tillage;
(C) buy the carbon you sequestered in your soils from you through a contract.
Look, I know all of us should buy electric cars and only wind and solar, but there aren’t enough electric cars nowadays, and they are a bit more expensive, and there is definitely not enough solar and wind to go around. In any event, sometimes I like to go on long road trips occasionally, and I don’t really want separate cars for driving around the city and driving from city to city. And should I really turn my entire lawn into a garden, and spend all my time and my kids time figuring out how to grow stuff that we can eat just so I can sequester a ton of carbon in my backyard by practicing whatever equivalent there is to no tillage?
The economic concept of comparative advantage is really important here. Let people who have a cost-advantage to produce carbon emission reductions do it cheaply for us. It would be really crazy, and costly, for all of us to try to become carbon neutral on our own.
So back to the example, what if my 140 neighbors and I paid the farmer $10 per acre to sequester our carbon emissions? Then we get peace of mind, the farmer gets $10 per acre, and we all get 420 tons of reduced emissions. If you do the math, considering the emissions and sequestration by this group of 1 farmer and 140 suburbanites like me, the net emission to the atmosphere is the same 105 net tons whether the farmer claims it and bears a cost of $5 per acre, or whether my neighbors and I buy the 420 tons for $10 per acre. The only real difference is that everyone is better off if the transaction between farms and suburbanites happens and everyone is worse off if it doesn’t.
Look, lots of people these days are obsessed with trying to become sustainable, zero carbon dynamos just within the four walls of their homes. I think it’s great when people do that. But it would be exceptionally costly to hold all of us to the same standard. While most of us really want climate change solved, we want someone else to solve it for us because we know that they actually are better at it than us. Carbon markets that allow you to buy someone else’s efforts to mitigate climate change are just the tool to accomplish that. With carbon markets that allow farmers to sequester carbon and you to buy it, you can specialize in taking care of your aging parents, raising your kids, doing your job, running the school PTO, or just watching football on TV, while someone else produces the carbon reductions.
Will this slow down climate change? Yes. Any tons removed from the atmosphere will help slow down climate change. It’s as simple as that.
This Q & A hopefully answers some questions, but definitely leaves many questions unanswered. If you have a question, please email me at Sohngen.firstname.lastname@example.org.