HEATHER SMITH THOMAS

Carbon Initiatives and Carbon Credits— Understanding the Potential Carbon Market

BY HEATHER SMITH THOMAS

Carbon is one of the most abundant elements on earth, forming millions of compounds. Some of the combinations we are most familiar with are carbon dioxide, carbon monoxide, etc. When combined with oxygen and hydrogen, carbon can form many groups of important biological compounds including sugars, lignins, chitins, alcohols, fats, etc. Carbon occurs in all forms of organic life.

The amount of carbon on earth is constant. Processes that use carbon obtain it from somewhere and discard it somewhere else. Paths of carbon in the environment form what is called the carbon cycle. Plants draw carbon dioxide from the air and through photosynthesis combine it with other elements and build biomass. Some of this biomass is eaten by animals (including humans) as food. Dead plant/animal matter may eventually become petroleum or coal, which releases carbon when burned.

Dr. Mark Liebig, Research Soil Scientist, USDA Agricultural Research Service in Mandan, ND explains that carbon is an element that links land management with the chemical composition of the atmosphere. On land, carbon is a major part of biomass and soil. In the atmosphere carbon dioxide is the most prevalent of the “greenhouse gases” which also include methane, nitrous oxide and water vapor.

Agricultural practices play an important role in taking up carbon dioxide from the atmosphere. “If farmers and ranchers have healthy, productive pastures and rangeland, those plants can take up carbon dioxide through photosynthesis and translocate it into the soil, where it can become part of the stabilized pool of organic matter,” says Liebig. Developing Carbon Markets

In the past two decades, a number of programs have emerged to encourage farmers and ranchers to add more carbon to their soils. A new marketplace has developed around CO2 mitigation that enables companies and industries that emit CO2 to purchase carbon credits from businesses engaged in offsetting activities, such as production of renewable energy through wind farms or biomass energy, energyefficiency projects, destruction of industrial pollutants, etc.

The money that the company pays for these credits is utilized to support projects and businesses that help sequester carbon. In general, a carbon credit allows the purchaser to claim reductions of one metric ton of CO2. There is a voluntary carbon offset market, but some larger companies are required by law to purchase carbon credits to offset their carbon-producing activities in a “compliance market”.

Kirsten McKnight, Manager of Development, Native Energy (a carbon credit provider based in Burlington, Vermont) says that one of the big misunderstandings about the carbon market is the idea that companies who purchase credits have the “right to emit” CO2. She explains that companies don’t buy credits so they can keep emitting. “They buy carbon credits when they set carbon reduction goals, and when there are certain emission sources they aren’t able to reduce on their own,” she says. “Carbon offsets is the only tool to verifiably and effectively offset those emissions.” “Soil organic matter is about 58% carbon,” says Liebig. “If we can take up carbon dioxide and build organic matter, we concurrently remove a greenhouse gas from the atmosphere and improve soil health, making the land more resilient to external stresses like drought. This can make the land more productive and help protect it,” he says. Increased organic matter in the soil, coupled with plant cover as “soil armor” can serve to capture and retain more moisture when it rains, rather than having the water run off and create erosion. “Whether you are a livestock producer or a crop farmer, the principle is the same: you want to take up carbon dioxide from the air with plants and transfer it to soil organic matter, and if the carbon accruals are greater than the losses, over time you will see improvements in the health of your soil. It does take time, however, especially in dry climates. The amount of production each year, relative to the total pool of soil organic matter in soil profiles, is very small. You need to take a long-term view—looking at this in terms of decades or even generations, as a stewardship commitment,” explains Liebig. There are several carbon initiative programs to give farmers/ranchers more incentive to sequester carbon into their soils. “Contracts are designed to specify the adoption of a specific management practice. For some producers, these management commitments are something they have already been doing, but this Alex and Abbey Blake are excited about the opportunities the WSE carbon program offers them. is additional encouragement for them to stay the course,” he says. “One practice that almost always has a positive impact on carbon storage is keeping the ground covered with perennial plants such as deeprooted grasses. This practice works well in most situations. Studies have documented increases in soil carbon under perennial grass,” says Liebig. Beneficial grazing management methods that favor increased growth of above-ground biomass (and limit the amount of bare ground) can put more carbon into the soil. However, there is often some skepticism when enrolling in one of these programs because the fine print may be hard to understand. “Many of these initiatives read like a legal document so it is important to review them carefully. I had some experience with a previous carbon initiative in the mid-2000’s with the National Farmers’ Union and the Chicago Climate Exchange. The skeptical perceptions from crop and livestock producers provided opportunities for dialogue between initiative managers, scientists and producers. An improved understanding of agriculture’s effect on the carbon cycle, along with the long-term benefits of carbon sequestration on soil health, was a lasting impact of the initiative. The intent was to find

Determining Value

Gabe Brown is one of the pioneers of the current soil health movement and regenerative agriculture which focuses on regeneration of resources. He and his wife Shelly and son Paul have a diversified 5,000-acre farm/ ranch near Bismarck, North Dakota--several thousand acres of native perennial rangeland along with perennial pasture and some cropland.

Brown says there are actually very few working programs that are paying farmers for carbon right now. “Some are willing to pay farmers for the carbon but don’t really have a market developed yet. Carbon initiatives are looked upon as a new thing but this was actually being done years ago in North Dakota—a program in which the Farmer’s Union paid farmers for carbon. The problem with that program was that they paid everyone the same. If you did no-till, you got so much per acre. If you rotationally grazed livestock, you got so much per acre. There can be a huge difference, however, in the individual situations. What we are finding is that people who are using regenerative practices are sequestering much more carbon. You can do no-till and still have carbon loss if you are overusing synthetic fertilizers and don’t grow cover crops or have a poor crop rotation. You won’t be adding carbon to the system,” he explains.

“There are some groups working on this problem, however. We are doing some studies on my land, for instance, looking at the amount of carbon. We’ve found that we have 92 tons per acre of carbon in the top four feet of soil profile on our ranch now. We are getting the data now on other farms in the area to find out how much they differ, but fully expect it to be 4 to 10 tons per acre more carbon here than on the typical farming operations in the area.”

It is important that people use all of the principles of regenerative ag says Brown. “These include the least amount of disturbance possible, armor on the soil at all times, plant diversity, living root in the soil at all times, and the integration of animals. These are all very important for putting carbon back in the soil,” says Brown. “The companies that need to buy carbon credits are going to try to buy them as cheaply as possible. Then the question is, how are the clearinghouses that are buying them from farmers and ranchers going to measure the amount of carbon? This is very expensive to do if you are going to do it right. You can easily pull a soil sample to check the organic matter, which is 58% carbon, but this is not looking at the full depth of the soil profile. On my ranch we took 300 samples four feet deep. This was a very comprehensive test, but it would be prohibitive for people who are buying the credits to do this,” he says.

“Since this would be too difficult and costly, they are just going to go by trends. They’ll say that if you no-till you will get this amount, if you

plant cover crops you will get this amount, etc. but this shortchanges the farmers and ranchers who are truly farming regeneratively and adding carbon in greater amounts,” says Brown. “My big worry is that carbon credits are going to be sold—like the earlier versions were, to the farmers—saying they can get these producers an extra $5 or $10 or $20 per acre. In my mind that is a small pittance of what it is really worth if you are doing it right. I realize that $20 per acre might seem like a lot, but it’s not much for what the regenerative farms are actually doing.” Will It Work? Dr. Jason Rountree at Michigan State University is part of a group that is doing a wide-scale project on carbon sequestration and the amount of carbon that regenerative farms and ranches are actually putting into the soil. He says there are probably more questions than actual facts about these programs. Like Gabe Brown he references the cost of monitoring as an issue. “The cost of measuring/ monitoring must continue to come down and the technologies need to be better,” he says. “We are very close to having less expensive technologies to measure soil carbon and there is some excellent work being done at Yale University in terms of having realtime carbon monitoring. The Yale program is called Quick Carbon. There is another group that is just starting, called Openteam, to try to more aptly get these technologies adapted faster. “There is also new funding through FFAR (Foundation for Food and Agriculture Research) and other groups to help launch this. It’s not only an opportunity to obtain more technology but also to try to fastforward technologies to more rapidly assess soil carbon. “California has a climate-smart ag program that is more a function Loren Poncia has sold a conservation easement to the Marin Agricultural Land Trust as well as being involved in the California Healthy Soils Program. of taking tax dollars and trying to work with farmers to implement more regenerative agriculture principles such as no-till, cover cropping, planned grazing, etc. This is actually working. Another group that is starting to work on this is the Noble Foundation in Ardmore, OK. They are working on various scenarios in Oklahoma to look at ecosystem service markets (ESM). There are some larger-scale entities interested and involved. “McDonalds, Tyson, General Mills, JBS and others have made pledges to lower their CO2 emissions by 30% in the next 30 years. These opportunities at the ground level are probably some of the largest, and least expensive to implement, in thinking about how to offset the overall emissions of the food production system. General Mills is investing millions of dollars to develop more regenerative oat supplies for their cereals. They are the number one oat buyer in the world. The big industries are not naïve to the problem of impaired natural resources. CONTINUED ON PAGE 14

They are investing in opportunities to develop more regenerative supply chains. This will continue to be important, especially from a water footprint aspect as well. I look at all of this with hope, but also with a certain level of cautious ‘wait and see’ because first we need to be sure we are measuring carbon accurately.

“There is also some discussion regarding the question of permanence. I’ve learned that some of the industries are considering a window of 25 years of permanence but it probably varies.

“Another big challenge today is economics. I recently read that the average farmer is $1.3 million in debt right now. 2019 was a horrible year in some places in terms of weather and flooding last spring, and another challenge is volatile markets. Probably for many farmers the last thing on their mind is sequestering carbon. They are just trying to survive and feed their family. Maybe, however, some of these regenerative practices could be an avenue that could help propel farmers into potentially more profitable scenarios and give their land more resilience. There are some folks out there who are doing this, and more and more data that supports it.” New Players in the Market

Abe Collins owns a company in Vermont called Landstream that is quantifying ecosystem services. He was a dairyman who became interested in carbon and studying carbon sequestration. He feels that the market on down the road will be much bigger.

His company and other parties that belong to the Soil Carbon Coalition are focusing on advancing the practice of regenerative ag, and spreading awareness of the opportunity of turning atmospheric carbon into living landscapes and soil carbon. The principal project of the Coalition is the Soil Carbon Challenge, an international competition to see how fast land managers can turn atmospheric carbon into water-holding, fertilityenhancing soil carbon.

LandStream is developing on-farm environmental monitoring systems and Collins says farmers should be hired to rebuild deep topsoil watersheds. He says we can double farmers’ incomes, reduce externality costs, and grow the natural infrastructure needed for healthier land.

“I believe that hiring farmers and ranchers to regrow the measured natural capital of topsoil and biodiversity, and the wide range of ecosystem services that come from natural capital can and must become the largest energy and infrastructure project in history. Pilot projects are obviously in order. There are a lot of enabling conditions that will be required to evolve this. One of them is rigorous, accurate, operational quantification of landscape-function, which serves multiple purposes, from realtime feedback to land managers to measurement of value-creation by

land-managers,” says Collins. LandStream has been building a landmeasurement program to enable people to take accurate assessments. Another group that is pioneering carbon sequestration programs is the Marin Agricultural Land Trust (MALT), with its Marin Carbon Project. MALT purchases development rights from landowners and the land remains in the farmer’s or rancher’s ownership; the legal agreement with MALT guarantees the land’s ongoing agricultural use. Once a conservation easement is in place, MALT’s staff supports landowners with conservation planning and helps them address land management challenges. One of these partners is Stemple Creek Ranch and holistic producer Loren Angelo Poncia. He is the fourth generation on this family ranch in the coastal hills of Northern California near the town of Tomales. Loren notes, “Our goal is to work in harmony with Nature to promote optimal biodiversity that ensures the long term health and productivity of this ranch. We raise grass-fed beef, lamb and a small amount of pork and sell all the meat direct to consumers all over the country. Our business is growing and we can’t keep up with the demand.” Stemple Creek Loren notes that his paradigm has shifted from being a livestock farmer to a grass Ranch’s 1,000 acres is farmer and now a carbon farmer. protected through the Marin Agricultural Land Trust (MALT) to insure that it will remain a productive part of the Marin County agricultural landscape forever. Stemple Creek Ranch is involved with the Marin Carbon Project, Carbon Cycle Institute, and several other groups that are focused on improving the soil and sequestering more carbon. “What got me into this project is that I’ve always been interested in learning about the soil,” says Loren. “This project was an incentive for farmers/ranchers to get some compost on their property for free, if they would be part of this study. I was chosen out of 35 people to be one of the Marin Carbon Projects demo sites. I didn’t really know what I was getting into at the time, but it opened my mind and made me think a lot more about soil health and how important it is—how it directly relates to forage health, animal health and my own health. “I now consider myself more of a soil farmer than a grass farmer. This is where it all begins, building soil through our grazing practices. Some people call it rotational grazing but I call it pulse grazing. We try to leave lots of cover and promote biodiversity in our pastures. “I want to be a part of anything that can help me achieve my goals of producing the highest quality meat available and something consumers want. My biggest resource that I need more of is grass, so anything I can do to make more grass is of interest to me, especially higher-quality grass. This is what got me started in this carbon program. “Now, however, we market our practices as a carbon farm plan and use it as a measuring tool. I have a contract that basically states we are going to do our best to sequester as much carbon as possible and graze our pastures correctly. We’ve signed these types of agreements but it’s not like a legal contract. The main thing is that our soils will be so much better when we are done with this project that it will be a win-win for everyone involved.”

Carefully managed grazing of livestock can qualify for the voluntary carbon credit market, according to Chris Mehus, ranching program director at WSE (Western Sustainability Exchange). WSE’s Montana Grasslands Carbon Initiative investigates and promotes ways gardeners, farmers, and ranchers can create healthy soil by increasing carbon content through regenerative agricultural practices. A growing number of companies now voluntarily purchase carbon credits to offset their own carbon emissions caused primarily by fossil fuels used in their business operations.

WSE is partnering with carbon project developer and credit provider, Native Energy, to create a program that will pay ranchers and other land stewards for sequestering carbon on grasslands through regenerative grazing practices. Kristen McKnight (Native Energy’s Manager of Development) notes:

“Native Energy provides upfront funding to improve their grazing practices. This funding is for fencing and water developments that are necessary to increase the rest and rotation on pastures. Contracts include 20 years of payments for carbon sequestered.”

Mehus says that Native Energy approached WSE four years ago to discuss creating financial incentives to encourage more ranchers to adopt rotational grazing and make a 30-year commitment to practices that sequester carbon. “For many years we’ve been helping producers set up monitoring programs and to understand why management-intensive grazing is a better way to do business than seasonlong grazing.

“We’ve entered a pilot project with Native Energy. They have participated in the renewable energy and reduced carbon emissions arena for many years. They are well established in this field with their energy products/methane projects and alternative cropping. They are looking at ways to reduce energy consumption and help companies address their carbon footprint issues and sustainability issues.

“The current project involves sequestering more carbon through healthier plant communities, healthier root systems and healthier soils. The carbon sequestration model we’re using was developed by a professor at Syracuse University, Mark Ritchie. His company, a soil science organization, is called Soils for the Future. We had some interns out here this past summer and they took soil samples on 170 sites across the eastern 2/3 of Montana. This model has already been developed but is now being validated with data collection by this study, through all these sites, to apply directly to our specific environment, growing conditions, soil types and other environmental factors.”

All the data will be used, as well as site-specific factors like moisture, soil type and vegetation type, to compare the amount of carbon in the soil (and relative soil health) with the past grazing management. Once that model has been validated, it will be used to estimate the amount of carbon that the rancher could sequester on his ranch by changing grazing practices. This is how the amount of carbon credits that can be sold is calculated and verified.

“We are currently in the trial phase but we had eight companies out here in June, interested in possibly purchasing these credits,” says Mehus. “They came to meet the ranchers who are currently doing different grazing practices, to understand how it’s changing their operations—and witness firsthand the wildlife species and diversity of animals and plants. “We had about 20 ranchers attending, and the eight companies, and other interested people from the local area. We had soil experts and folks from local and federal government. It was a great opportunity for people to meet and talk seriously about how this project might take shape. “At this point, Native Energy has signed contracts with four ranches, totaling about 35,000 acres. These are 30-year contracts. These are a business arrangement--not any kind of an easement. They do not cloud the land title in any way. It is a legal contract, however, and states that the rancher intends to improve grazing management on his/her property and keep records of grazing management and submit those records to Native Energy each year. It also gives permission for them to come test the soil periodically. In exchange, the rancher will be paid for the carbon actually sequestered in the soil as a result of the improved grazing practices.” To help with the pasture management and recordkeeping, WSE enlisted the help of two ag-tech companies, PastureMap and Maia Grazing, that both provide a comprehensive software platform for rotational grazing. “We’re taking baseline samples this year on the four ranches that signed contracts. The carbon levels at those sites will be checked again periodically. After the first five years there will be another set of samples taken. We’ll probably continue taking samples every three to five years after that, though actual timing has not been determined yet,” Mehus says. “Currently Mark Ritchie and Soils for the Future are responsible for doing it. This is basically a carbon test that can be run (through his laboratory) on core samples taken from the ground and then the results are reported back.” Using Soils for the Future’s computer modeling system, the amount of carbon sequestered is then certified through the Verified Carbon Standard--the

Soil sampling is a key component for developing soil world’s leading program for certification carbon models that are necessary for large scale growth of of greenhouse gas reduction. a carbon market. “Native Energy (the project developer) has an agreement with the landowner to sell the credits on their behalf to companies that purchase carbon credits. Their responsibility is to work with the companies and contract with us to recruit and work with the landowners on all the documentation that needs to be provided to make these contracts valid and verify the carbon reductions to the carbon standards,” Mehus explains. Xanterra signed on as the first carbon credit purchaser for the program. Xanterra Parks and Resorts is the largest national park concessionaire in the U.S. and the primary concessioner for Yellowstone and Glacier National Parks. WSE works closely with each rancher through the enrollment process to create a grazing plan that fits the producer’s own land and management goals. If there are additional infrastructure needs such as fencing, range riding, or water systems, these are included in the plan, as well as education about regenerative grazing. Producers can choose one of two 30-year contracts: one offers immediate funding to help cover infrastructure costs for a grazing plan, CONTINUED ON PAGE 16

and the second provides a regular payment structure for ranchers who don’t need the upfront financial investment; they simply receive payment for carbon sequestration. The 30-year commitment may cause some ranchers to hesitate, but the lengthy timeframe is necessary for the carbon credit purchaser to know that the carbon sequestration is permanent. WSE hopes to enroll 100,000 acres by July 2020.

McKnight says ranchers are permitted to leave the project if they can no longer ranch, or if it becomes commercially unreasonable for them to continue ranching in ways that protect the soil carbon they have accrued. “But the opportunity to make more profit by cropping isn’t sufficient grounds to leave,” she says.

Carbon Market as Income Stream

Alex Blake, a rancher near Big Timber, Montana is one of four ranchers in his area who signed up for one of these carbon programs. “My parents bought this ranch in 1973 so my family has been here raising cattle for 46 years. We also have a retail tree nursery. I spent some time elsewhere with school, work and the military, then moved back to the ranch fulltime in 2009,” says Blake.

“My parents are still involved in the business; my mom and younger brother are focused on the tree nursery and my dad and I manage the ranch. We are a conventional cow-calf operation but have a small grass-fed beef program and custom-graze yearlings some years.

“We are fairly progressive in our grazing management. My dad went through some HMI courses in the mid-1980’s when Roland Kroos started some classes. We began making some changes at that point. The whole family went through the Ranching for Profit schools about 10 years ago and did the Executive Link program with that for a while. This helped reinforce what we were doing, and some of the things we wanted to do but didn’t have the time nor the resources to accomplish quickly. This carbon initiative program has now given us the financial boost to get us a bit farther along and get more projects done.”

Necessary projects included more cross-fencing and water development, and they would not have been able to accomplish these at the pace that this program will enable them to accomplish. The initiatives program provides financial assistance and gives them five years to get the whole ranch cross-fenced and the necessary water developed. “Without this carbon program, it would have taken us 10 years or more,” he says.

“There are a number of reasons why the carbon initiative programs got us excited. My parents have been great examples with their strong environmental ethic. They have been committed to conservation and good stewardship since our family’s early days on this ranch. They fenced off our major riparian areas in the late 1970s and early 1980s, adopted planned grazing and started on the general HRM (Holistic Resource Management) path about that same time. We all believe in the threat of

climate change, so the potential for carbon sequestration through our grazing management and practices gets us excited about playing a small role in slowing/reversing long-term climate trends. “We were the first ranch Kristen met with, about five years ago, when this was a very early idea for Native Energy. At that point, most ranchers around here were still pretty gun-shy about carbon programs because we’d done quite a bit of work to get signed up for one about 10 years ago. That’s when the Chicago Climate Exchange market collapsed so a lot of folks were skeptical about what these carbon programs should look like. I really have to applaud Native Energy--and the WSE staff who’ve worked on this--for their perseverance. “It has also helped us to know the other ranchers and their families. This gives us a support network, being able to talk with them and ask questions and discuss these things amongst ourselves when there were things we didn’t understand and things that Native Energy was still trying to figure out, too. Our community here is a good one to work with, because there are many people who are involved in regenerative agriculture. “This carbon program is a 30-year commitment, which is a bit scary, but for me and my wife and a brand new baby, it’s exciting to think about the future and the next generation. This program will be good for this ranch, whether for our kids or somebody else; we know that this property will be on that track for the long haul.” “We assume there will be some changes but I feel Dr. Mark Ritchie from Syracuse University is currently working on carbon confident that we are working sequestration models as part of the effort to effectively monitor carbon with good partners and sequestration at a large scale. can work through whatever challenges we face or whatever changes need to happen. Our ranch is about 5,000 acres and our nursery has been a big part of helping us diversify our operation. The carbon program is just another tool for us to bring in some additional income and keep our place going.” Opportunities & Challenges Roger and Betsy Indreland are ranching north of Big Timber, Montana, about 12 miles east of the Crazy Mountains, and also participating in this pilot program with WSE and Native Energy. Last year they signed a 30year contract to sequester carbon on their ranch. “My parents moved here in 1967 and I grew up here and went to school in Big Timber and to college at Bozeman,” says Roger. In the late 1990s Roger and Betsy bought the ranch and started ranching full-tim and developed a seedstock progam. In 2012 they attended a Ranching for Profit School in Billings, Montana. “We were already starting to do some different grazing practices,” says Betsy. “Then through one of the summer conferences we met Nicole Masters, with Integrity Soils, an ag ecologist from New Zealand. This changed our focus more toward soil health. “Then through our involvement with Western Sustainability Exchange and their affiliation with Native Energy in Vermont we became aware of their project that would compensate us for grazing practices that CONTINUED ON PAGE 18