By David Bau
University of Minnesota Extension

Farmers can now sell carbon credits for storing carbon in the soil to help pay for conservation tillage methods, or plantings of perennial grass and trees.

I have received many questions on this topic and recently attended a workshop on carbon credits provided by Rural Advantage. The carbon credits are a path for landowners to help aid and abate the global climate change through carbon sequestration.

The Chicago Climate Exchange is a voluntary market created in 2003 that trades carbon credits. Currently carbon credits are trading around $4; a credit is a metric ton of carbon dioxide.

In order to trade carbon credits, you must be an aggregator or collector of the credits. Many individuals will not qualify as an aggregator because of minimum asset requirements. This is where North Dakota’s Farmers Union and Iowa’s Farm Bureau have taken the lead as aggregators for their respective organizations in 14 states. Individuals and farmers can go to www.nfu.org [1] for information about selling carbon credits with Farmers Union, or to http://www.iowafarmbureau.com/special/carbon/default.aspx [2] for the Farm Bureau site.

Land that is eligible to be enrolled in the Carbon Credit Program must be capable of being cropped, even though it currently may be in a harvested grass or forage crop. It must be designated as “cropland” on Farm Service Agency maps.

Timelines for three different establishment methods are:
— Conservation farming such as no-till or strip-till practices (disturb less than 30 percent of soil surface) on land that did not previously have them can receive a carbon credit of one-half metric ton of carbon dioxide per acre per year.
— Grass plantings planted after Jan. 1, 1999, can be enrolled and receive a credit of three-quarters of a metric ton of carbon dioxide per acre (this includes land in CRP).
— Land that’s been forested since Jan. 1, 1990, can also receive carbon credits. The amount of credit varies by the type and age of tree planted. Tree plantings in the upper midwest average around three to four metric tons of carbon dioxide per acre. Some types receive up to seven tons per acre.

The program is currently accepting land for 2006 and 2007, and the land must stay in a carbon sequester format through 2010. Payments are received the year after the carbon has been sequestered, with both groups charging a 10 percent aggregation fee. They keep 20 per cent of the payments until the end of the contract (in this case 2010) to ensure enough acres to fulfill the contracts sold on the Chicago Climate Exchange.

Another method for livestock producers to sequester carbon is a methane digester that has been put into operation any time after 1999. Producers can receive a credit for 18.25 metric tons of carbon dioxide per ton of methane produced per year.

Farmers should go to one of the two websites and get started with the paperwork to receive additional income for practices they may already be incorporating into their farming operation, or planning on in the near future.

(David Bau is an ag business management educator with University of Minnesota Extension.)