What a Carbon Bank Could Mean for US Farmers

The Biden administration has made it clear that environmental protection/sustainability is a primary focus for the next four years. Farmers are expected to play a key role in these efforts by planting cover crops, establishing native vegetation, reducing carbon/nitrogen pollution, and helping sequester carbon.  

The question is, who is going to pay for it? 

Though environmental friendliness can provide numerous benefits in the long term, it often comes with a notable upfront cost. For farmers, new equipment and materials need to be purchased to reduce tillage, water waste, and the use of nitrogen fertilizers. Meanwhile, crop yields may initially decrease as sustainable measures are implemented.  

A carbon bank could help offset these expenses, allowing farmers to update their methods without financial penalties.  

A carbon bank works by providing financing and funding for green initiatives and climate-friendly practicesA number of smaller carbon bank and carbon pricing systems exist in the US. However, they’re generally limited in scope and consistency. 

A national carbon bank, however, could help farmers across the country by providing funding, setting market prices, and piloting green initiatives without needing congressional approval for each of their actions. 

What a US Carbon Bank Might Look Like 

Currently, there are a number of proposals for how the US could establish a carbon bank under the USDA. One of the leading proposals involves using the Commodity Credit Corporation (CCC) to create a carbon bank. The CCC is essentially the USDA’s personal financial institute, allowing them to spend $30 billion before needing replenishment from congress. 

This idea is supported by the Climate 21 Project, which recently created a memo detailing how the Biden administration could set this into motion. The Climate 21 Project is a group composed of more than 150 industry experts with high-level government experience, including nine former cabinet appointees.  

They believe a carbon bank could be used to pay farmers a guaranteed price for sequestered carbon, as well as greenhouse gas reductions. For example, by allocating $1 billion from the CCC, a carbon bank could pay guaranteed carbon credits to farmers for every ton of greenhouse emission they reduce.  

Alternatively, a carbon bank could be used to set a floor price for carbon. From there, farmers could monetize carbon sequestering on a private market. Many organizations that operate in the ag space are currently developing their own carbon markets and emission cutting initiatives. Land O’Lakes and Microsoft recently joined forces in a program called TruCarbon that pays farmers $20 per ton of carbon reduction 

Will Carbon Pricing Work? 

Critics of carbon markets question their effectiveness in actually reducing carbon levels, as they could potentially excuse larger companies from having to cut their own emissions. Instead, they can simply purchase credits to make up the difference. However, with the right rules in place, these sort of loopholes could be closed. 

For farmers, however, the benefits of a guaranteed carbon market are fairly clear. By taking actions to reduce emissions and capture carbon, they can receive financial compensation. Additionally, these actions are better for their land. No-till or reduced till farming is better for soil health and structure. Capturing carbon in soil increases the presence of organic matter. Reducing the use of synthetic fertilizers strengthens soil in the long run. 

Depending on your location, you may not be able to engage in a carbon market yet, but there are other ways to receive financial compensation for environmentally-friendly actions. One of the leading ways to do this is through the Conservation Reserve Program. CRP offers market-based rental payments in exchange for taking marginal farmland out of active production and establishing native vegetation. It also covers a portion of the conversion cost. 

If you’re interested in joining CRP, FDCE can help. We provide full-service CRP solutions that take care of the entire establishment process. This includes documentation and report submission to FSA. Thanks to CRP’s cost-share element, our services practically pay for themselves. Whether you’re establishing pollinator habitat or grasses and forbs, native vegetation can help restore health to your damaged soil while benefiting the environment as a whole. 

Contact us today to get started.

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