As Carbon Markets Reward New Efforts, Will Regenerative Farming Pioneers Be Left in the Dirt? | Civil Eats

As Carbon Markets Reward New Efforts, Will Regenerative Farming Pioneers Be Left in the Dirt?

GC Ellis standing outside a gate on G-Bar-C Ranch with cattle in the background.

Meredith Ellis views her family’s cattle ranch in Rosston, Texas, as a giant experiment in how to store more carbon in the soil, improve water quality, and maximize biodiversity. In recent years, Ellis, who works with her father, GC Ellis, has been adding warm-season cover crops to winter wheat fields, rotating the cattle between pastures more frequently, and leaving the grass much higher to build more soil carbon and habitat for wildlife.

Ellis’s land, pieced together over a number of years, had several previous owners. One native pasture was severely overgrazed. “Another pasture is currently in the ICU being restored to native grasses,” she says. However, in May, Ellis documented 20 different plant species in one square meter of a recovered native pasture on the ranch. And she regularly shares videos featuring crystal-clear water running off her land, bees pollinating blooming plants on the pasture, and the owls and wild turkeys she has spotted on the land. But it’s the black, organic matter-filled soil that she’s especially proud of. And she joined a pilot research project that first sampled 40 locations on her fields in 2019 to measure carbon—and document grass type, soil type, the number of cattle grazing, and the weather—to model carbon sequestered. They will sample the soil again at the five-year mark (in 2024).

And yet, even if their soil has already sequestered large quantities of carbon, Ellis’s land won’t be eligible for credits from many of the carbon credit companies—because of the fact that the carbon is already in the soil.

Many hope that carbon markets are uniquely positioned to do what voluntary government incentive programs, such as the Conservation Stewardship Program or Environmental Quality Incentives Programs, have not—galvanize a widespread transition to soil-building practices at the massive scale needed to soak up significant quantities of atmospheric carbon and slow, or mitigate, global climate change. The enthusiasm stems in part from the growing number of companies making voluntary pledges to achieve “net zero,” a balance between emissions produced and removed from the atmosphere.

The National Academy of Sciences estimates that regenerative agriculture can sequester 250 million tons of carbon dioxide in the U.S. annually, or around 4 percent of the country’s emissions. And, according to an analysis published in January, global demand for voluntary carbon offsets could increase by a factor of 15 by 2030 and 100 by 2050. Since May 2020, more than 2,100 companies have promised through the United Nations’ Race to Zero initiative to reduce their net emissions to zero by 2050 through various methods, including carbon offsets.

Indigo Carbon, Nori, TruCarbon, Bayer Carbon Initiative, and Nutrien are just a few of the most high-profile existing carbon credit companies. And they have been emboldened by the Biden Administration’s Growing Climate Solutions Act, which will allocate $4 million to help support those markets to get off the ground.

Ellis’s land isn’t eligible for most of the credits those companies are offering because of a concept known as “additionality,” which means that, since she has already adopted regenerative practices, she and other pioneering farmers can’t get paid for them. And she’s not alone. Most of these markets exist to pay farmers who agree to adopt new carbon-storing practices, so although the most experienced regenerative farmers took risks and invested money in establishing the practices, it will be the newbies—and primarily the largest conventional growers—that transition to these practices in the coming years who will reap the market benefit.

“[Additionality is] one of the biggest criticisms of the offset markets,” says Ben Lilliston, director of climate change and rural strategies at the Institute for Agriculture and Trade Policy (IATP) in Minneapolis, Minnesota. “It rubs many [people] the wrong way.”

Even though Ellis understands the market dynamics, they can make her feel defeated. “[My land is] a huge carbon sink,” she says.

Farmers sign contracts ranging from 5 to 10 years to get paid—typically around $10–15 per ton of carbon dioxide removed—to start planting cover crops, diversify their crop rotations, and reduce their tillage, or to expand the number of acres on which they utilize those practices.

Experts agree that effective market-based incentives able to encourage a greater transition to regenerative practices—on a scale necessary to reduce agriculture’s greenhouse gas footprint—would have undeniable benefits. In fact, they say that regenerative management is the only endeavor able to combat climate change, restore soil health, and improve resilience to increasingly extreme events, such as June’s record-breaking heat dome in the Pacific Northwest and the recent floods in Detroit, parts of Texas, and New York City.

At the same time, carbon offset markets are coming under ever greater scrutiny for a range of reasons—most notably, because “done poorly, carbon offsets can be a giant distraction, causing even more delays to meaningful climate action,” wrote Jonathan Foley, executive director of Project Drawdown.

In fact, a proliferation of inexpensive carbon credits has so far led to more pollution in California. And there’s no guarantee the carbon will remain stored forever; a portion of the 400,000-acre Bootleg fire in southern Oregon is currently burning up trees used in a carbon offset project.

The rapidly evolving carbon credit marketplace, developed using a variety of protocols that make it difficult to compare climate impacts, has resulted in confusion over what carbon markets can and cannot accomplish. “The stakes for the climate and farmers are extraordinarily high,” said Emily Oldfield, lead author a new report on the carbon markets and agricultural soil carbon scientist at Environmental Defense Fund. As a result, many farmers are leery of all the disparate carbon credit companies. “There is tentative interest, but there’s also a lot of skepticism,” says IATP’s Lilliston.

Is it possible to create voluntary market mechanisms that could benefit veteran regenerative farmers like Ellis as well as new converts—while maintaining environmental integrity? Some companies are working to answer that question, but they’re taking decidedly different approaches.

A Revival of Carbon Offsets

Only a few years ago, carbon offset markets were fading away, says Mark Trexler, director of Climate Change Knowledge Systems at The Climatographers, a climate change advisory company in Portland, Oregon. “[They said], ‘Offsets cannot play a significant role in hitting the global targets.’ Then somebody came up with brilliant idea of ‘net zero,’ and everybody needs offsets again,” says Trexler. The only way most companies can make net zero pledges work is through offsets. “Now offsets are going to ‘save the world,’” says Trexler, noting that we haven’t solved any of the problems that bedeviled carbon markets the first time.

Markets come with a cold, hard truth, says Trexler. For offsets to meaningfully mitigate climate change, they have to differentiate between what he calls “good deeds” and legitimate, additional carbon removal. For example, because Ellis helped her land absorb carbon as part of a larger, holistic effort to improve it without a prior market incentive, her work, perversely, won’t count as an offset by most efforts.

Soils are dynamic and carbon most certainly won’t be sequestered forever. But the whole goal of the offset market is to ensure that credits translate into additional tons of carbon dioxide emissions removed from the atmosphere for as long as possible, he says. After all, companies that buy the credits are allowed to emit greenhouse gases that will stay in the atmosphere forever, says Trexler.

There is a huge financial incentive for those who have made early efforts into the offset markets—but if too many find their way in, “the environmental integrity of the market can quickly be undermined,” Trexler says, adding, “carbon offsets aren’t intended to be fair; [they] are intended to mitigate climate change.”

Debbie Reed, who helms the nonprofit Ecosystem Service Market Consortium (ESMC), agrees that additionality is an important requirement of offset markets. “Markets never pay early adopters; they don’t pay today for corn you sold yesterday,” she says. “If we don’t have an additional requirement, it does nothing to bring down atmospheric greenhouse gas concentrations. It’s business as usual.”

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Still, the growers who have been practicing regenerative agriculture continue to build carbon that has value—and they could till up the soil or sell the land to a developer tomorrow—potentially releasing much of the carbon stored in the soil. To capture that value, ESMC, which is set to launch in September 2022, is also developing inventory accounting schemes in addition to a system for calculating new carbon offsets.

Valuing Existing Carbon Storage

Rancher Meredith Ellis has been involved in one of 12 regenerative cropland and ranching pilot projects conducted by the ESMC, which is working with a number of big companies, including McDonald’s, General Mills, and Cargill, to develop protocols to account for carbon emissions reductions throughout the supply chain. Ellis volunteers her time with the consortium to not only better understand how much carbon her practices are storing in the soil, but also in the hopes it will lead to a way to reward good stewardship over time.

ESMC is also developing a way to compensate long-time regenerative ranchers, such as Ellis, who have already achieved lower emissions through regenerative practices via Scope 3 emissions reporting. Corporations can report their greenhouse gas inventories across three different categories, called scopes, using the Greenhouse Gas Protocol, developed by the World Resources Institute and its partners. Scope 1 is the organization’s directly owned or controlled emissions; Scope 2 covers indirect emissions from power generation.

Scope 3, however, includes indirect emissions from the company’s supply chain—for example, the production of wheat or the transport of sugar. Food and beverage companies often have more Scope 3 than Scope 1 emissions. In fact, 93 percent of Pepsi’s emissions are Scope 3, says Reed. ESMC has created protocols that companies can use to report the additional tons of carbon removed or reduced from the atmosphere as a result of interventions the company’s producers have put in place. As part of their pilot projects, farmers are paid $15 per ton for each additional ton of carbon dioxide removed or reduced—which is also the going rate of the carbon offset market.

“I can’t say for sure what that value [for Scope 3 assets] will be,” says Reed. “It may be nominal.” Beyond market-based approaches, ESMC hopes to see the U.S. Department of Agriculture (USDA) find a way to compensate early adopters of regenerative practices—those who have used those practices for five years or more—because they can offer technical assistance that newcomers will need, says Reed.

Gary Price, owner of the 77 Ranch in Blooming Grove, Texas, has been working with ESMC for the last three years. He’s hopeful their supplier emissions reporting approach offers a way to account for all the carbon he and fellow regenerative ranchers sequester on their land. “It doesn’t make sense to not reward good behavior,” he says.

Unlike ESMC, some companies are looking for ways to circumvent the additionality requirement altogether. Nori, for example, issues credits to producers who have made a verified practice change any time after December 31, 2009, for each ton of carbon dioxide they’ve sequestered since then.

“We just need to agree on a [transparent and predictable] performance baseline, and anyone meeting or beating that baseline gets credit regardless of whether they’ve been doing the practices for 5 minutes or 25 years,” argues Aldyen Donnelly, co-founder of the Nori Carbon Removal Marketplace. “If we are serious, we want everybody to find profit in a new way of doing things,” she says.

But without additionality, Nori’s credits are not certified by the most widely used third-party registries, such as Climate Action Reserve, Verra, and Gold Standard. Each credit or Climate Reserve Tonne (CRT) represents one metric ton of carbon dioxide equivalent (CO2e) emissions reduction or sequestration. Most offsets are listed in these registries, which track projects and set standards and protocols for carbon accounting. To date, all the existing registries have only issued around 5 billion credits since 2002. Around 50 percent of those credits haven’t been retired or used, says Donnelly, in part due to a roughly five-year lag time between when the emission reduction occurred and the credits are issued and available for purchase.

“It’s too long for a project owner to wait to recover the costs of adopting new practices,” she says. “And buyers deem them too old when they become available.”

“Everyone agrees, [many of] the carbon registries included, that the way we’ve done this in past will not allow us to scale up,” says ESMC’s Reed. She says there has been a flurry of activity to digitize and encrypt the process, while also bringing down verification costs to make it work without abandoning credibility.

The existing credits are also dwarfed by the annual emissions from the top polluters. Just 100 fossil fuel producers have emitted nearly 1 trillion metric tons of greenhouse gas emissions, which is over half of the total emissions released since the Industrial Revolution began in the 1750s.

Additionality has created confusion among farmers and tension among the competing market endeavors. But Reed points out that ESMC aims to generate other ecosystem service credits—including water quality, water conservation, and biodiversity habitat—that will also benefit long-term regenerative farmers. And as markets develop, Reed adds, “we can’t just be focusing on new carbon sequestration and new emissions reductions. Sooner rather than later, we have to also protect those existing carbon stocks because every ton of carbon lost is harder and more expensive to put back.”

In the meantime, the additionality requirement (or lack thereof) has led to competition and even ever-shifting qualifications at some companies, which has made some farmers wary of the markets overall. Many are also uneasy with companies such as Indigo Carbon, which require farmer data in exchange for contracts (neither ESMC or Nori do).

When Iowa soybean farmer Chris Gaesser first began talks with Indigo, he was told that just over 3,000 of his acres would qualify for payments. As experts criticized the company’s methodologies, the company changed the guidelines for what qualified as a “new practice,” and Gaesser’s number of eligible acres was whittled down to 1,400, then 800, then 200. At that point, he says he had little incentive to spend the time and energy to get the data necessary to secure the credits. (And, he adds, some of these companies’ services only have value because of the data farmers give to them.)

“There’s not a lot of excitement about carbon markets,” says Gaesser. “It’s such a new thing and the regulations change so quickly. Everybody and their dog outside of agriculture feels like trying to get into the carbon market to get that money,” he adds. His father and business partner, Ray Gaesser, added, “everybody up the line wants their 15–20 percent cut and there’s little left by the time it gets to the farmer.”

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Given the confusion and frustration, Gaesser expects growers will simply wait to see which carbon market best succeeds—but that will likely delay any large-scale transition to regenerative practices.

Rethinking the Market

The first voluntary carbon market in the U.S.—the Chicago Climate Exchange, which ran from 2003 to 2010—failed to gain traction because demand cratered after the U.S. refused to ratify the Kyoto Protocol. Nori’s Donnelly argues that the whole offset system to date hasn’t worked, even as she acknowledges that she is one of many who have been desperately trying to make them work for 15 years.

Donnelly has been looking to past environmental successes for inspiration. “We did get lead out of gas, we did get sulfur out of diesel fuel, and we did get ozone-depleting substances out of refrigerants,” she adds. But all those examples involved governments regulating markets and placing caps on the individual pollutants—something that the U.S. has been unwilling to do when it comes to greenhouse gas emissions.

In lieu of a cap on emissions, Donnelly advocates for regulations that mandate all suppliers of energy and chemical products—including fertilizer makers—and building products report and reduce their virgin fossil carbon content and losses in their global supply chain, at the rate required to achieve net zero by 2050. “This approach is consistent with every successful pollution reduction and energy efficiency success story in our past,” she says.

A cap is necessary for the carbon market to benefit both the environment and farmers, advocates say, because it’s the only lasting way to limit emissions. “You don’t have to worry about additionality in a capped system,” says Trexler. “Without that, you have to worry about the environmental integrity of every ton of emissions.” Further, he questions whether there has ever been a societal problem that was solved without policy and regulation. “I can’t think of any,” he says.

And farmers aren’t going to shift their practices without a significant incentive. “Without a cap, there is little likelihood that the price will ever rise to a level that shifts farmer behavior,” says Lilliston.

As Trexler sees it, a carbon tax would be more effective at cutting emissions. “Why aren’t farmers being taxed for the loss of ecosystem services if they are letting soil carbon disappear?” he asks. A carbon tax would include the environmental cost of a company’s products made by fossil fuels—and thereby encourage companies to make operations more efficient. But carbon taxes have proven unpopular—leading in some cases to mass protests—especially when it’s applied to a commonly used commodity, such as fuel.

Spurred by public pressure and increasing evidence of the climate crisis’ impact on their bottom lines, an increasing number of corporations are committed to reducing their emissions and there is a growing fervor to make carbon offset markets work. “This is the only investment we can make that mitigates climate change and creates more productive soil—there is nothing else that is mitigation and adaptation at same time,” says Donnelly.

Despite the urgency, Reed is working slowly to build the ESMC market in an effort to ensure it has integrity. Not only do companies need to avoid the risks of greenwashing claims, she fears any “producers who get burned will not come back to the table very quickly. That’s a huge liability for all of us in this space.” For that reason, carbon markets are just one of many tools that should be employed to address climate change, says Reed.

“We’ve got to identify the value of the land besides just producing food and fiber,” says rancher Price. The carbon markets offer a way to do that. “It’s a great opportunity for agriculture. I hope we don’t miss it,” he says.

Ellis agrees. She argues that if we can figure out how to ensure that markets pay for carbon sequestration or even practices that improve water quality and wildlife habitat, it will give ranchers something to be proud of and an additional way to make money besides subdividing and selling their land. “Sometimes I feel like, as usual, us little guys are going to get left behind,” she says.

And yet keeping “the little guys” on the land is key, as land prices soar, hundreds of thousands of acres of farmland is lost each year in the U.S. to development, and the lure to sell the ranch may be stronger than ever. “We can’t get this ecosystem back once it’s developed,” she says.

This story is part of a series of articles on regenerative agriculture produced with support from the Solutions Journalism Network, a nonprofit organization dedicated to rigorous and compelling reporting about responses to social problems.

Virginia Gewin is a freelance science journalist who covers how humans are profoundly altering the environment – from climate change to biodiversity loss – and undertaking extraordinary endeavors to preserve nature. Her work has appeared in Nature, Popular Science, Scientific American, The Atlantic, Bloomberg, bioGraphic, Discover, Science, Washington Post, Civil Eats, Ensia, Yale e360, Modern Farmer, Portland Monthly and many others. Read more >

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  1. Rod Sommerfield
    We have been partnering with Nature for around three decades using Regenerative Management to grow our soils. Our soils are all of hardwood forest origin not prairie grasses so the original A Horizon topsoil is 1 foot deep if not eroded from tillage and tests 5.5 to 6% som. if never farmed. By using Regenerative Management to optimize the creation of humus many of our soils are now twice as deep as they were 200 years ago before settlers came here. The Natural structure and function of our soils are now more like virgin prairie. With rain infiltration and retention if the ground is not frozen over 85%. Since we are evilly discriminated against by the Carbon credit market for having been as good as anyone in the world at restoring Carbon to the soil we consider it nothing but a SCAM! It has little value to us anyway as by partnering with Nature we are able to reduce our non-land operating costs to grow a commodity by at least half. This is usually a savings of at least $200 an acre.
    Rod Sommerfield
  2. David Cohlmeyer
    An important element that is missing in this article are the values a farmer derives from increased soil carbon. These include fewer pests, increased marketable yields, reduced erosion and fertility losses during wet years, increased production and quality during drought years, and softer soil which reduces tractor fuel use and wear on equipment. And perhaps most important of all, increased soil biological activity increases nutrient cycling that in turn reduces the need for adding fertility. Receipts of Carbon Credits are only some icing on the cake. If this this is what it takes to encourage farmers to view their soil differently, then these can be useful. But education about all the potential benefits of increasing soil organic matter (SOM) may be a less controversial method.

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