What Are Carbon Credits—and How Can They Help Farmers Make Ends Meet?

Like many farmers in the upper Midwest, A-Frame Farm's Luke Peterson makes the bulk of his living growing grains on the 1,000 acres he manages in Madison, Minnesota. In addition to corn and wheat, Peterson has branched out into less common crops like buckwheat, flaxseed and Kernza, a perennial grain touted for its environmental benefits. His farm has been certified organic since 2014, but lately he's gone even further, adopting regenerative practices like eliminating fall tilling, grazing cattle on his fields, and planting cover crops and perennials (like that Kernza). The point of those practices? They all improve soil health, allowing it to hold moisture better and require less fertilizer come springtime.

They also help sequester more carbon underground, an emerging tool in the fight against climate change. That's because healthy soil is better able to trap the CO2 that plants draw out of the atmosphere and funnel down into the earth through their roots. According to influential Ohio State researcher Rattan Lal, Ph.D., soil stores more than three times the carbon locked in all the plants and animals living on land. Yet deforestation and conventional agriculture have depleted soil carbon on cultivated land by 50 to 75%. Scientists are studying how regenerative agricultural practices like the ones Peterson is using can restore those soils and sequester carbon—1 to 3 billion metric tons per year, Lal estimates—in the process.

What Is Carbon Farming?

The business sector, too, sees the potential of "carbon farming." Over the past three years, private companies including Indigo Ag, Nori, and a Land O'Lakes subdivision named Truterra have set up carbon markets to channel payments to farmers who capture carbon in their soil. Here's how it works: Say you're a corporation whose operation produces greenhouse gases—like an airline or large food company. You can't completely eliminate your emissions, but you can choose to offset them by buying carbon credits from farms that sequester greenhouse gases, making your emissions "net-zero." (They can also be bought through renewable energy, forestry and other projects.) A third-party firm estimates the amount of carbon you've sequestered and converts it into sellable credits—each of which represents 1 metric ton of CO2 or its equivalent.

Microsoft purchased Truterra's first "crop" of 100,000 tons in 2021. In its first year, Indigo Ag enrolled 2 million acres, paying farmers at least $15 per metric ton of CO2 added to their lands, and estimates that a Minnesota farm the size of A-Frame could earn more than $11,000 a year (vested over a period of five years to ensure they maintain their carbon-capturing practices).

It's a thrilling possibility: Farmers gain a source of extra income, and polluters, not taxpayers, fund a massive shift to sustainable farming.

The Problem with Carbon Farming

Few scientists contest the idea that soils are massive carbon sinks. However, issues arise over private companies trying to quantify the amount of carbon these farming practices sequester and turning it into a cash payment. "We know how to count trees pretty well, both in person as well as with remote sensing technologies. That is fundamentally much harder to do with soils, because their carbon content can change," says Danny Cullenward, policy director at Carbon Plan, a nonprofit research agency that ensures the integrity and transparency of climate solutions. "Walk 10 meters in one direction, and you could be in a completely different soil ecosystem."

Businesses like Truterra and Indigo Ag aren't testing every acre on every farm they pay. Instead, they rely on complex formulas to figure out how much carbon specific farming practices could sequester. After conducting a thorough review of these formulas, Carbon Plan has strong concerns: Are they based on current science? Do they measure deep enough in the soil? "I'm not seeing a lot of signs that these companies are trying to account for this stuff," Cullenward says.

Buying credits for soil carbon is also, in effect, investing in risky and volatile penny stocks. Pay a farmer to practice no-till agriculture for 10 years, and if she decides on year 11 she's going to till up her field, the carbon will be released again. There go the gains—and she still keeps the money. Catastrophic weather events such as flooding or wildfires can also erase gains farmers make.

Another concern is whether markets even pay farmers enough per ton of CO2. Adopting carbon-capturing practices can require a hefty investment from farmers. For example, planting cover crops costs $15 to $78 per acre every year, according to a 2019 report from the Sustainable Agriculture Research and Education program. Numerous studies suggest that cover cropping and no-tillage pay off financially in the long run in the form of lower pesticide and irrigation costs. But in those crucial first few years, carbon offsets wouldn't cover the cost—they're more of a financial pat on the back.

Who Can Farm Carbon?

An even larger problem that sustainable-agriculture advocates raise is that most of the farms applying for carbon credits are conventional farmers growing commodity crops like corn, soybeans, wheat, rice and cotton. According to the USDA, more than 50% of all U.S. cropland—163.5 million acres—is devoted to corn and soybeans alone. That massive scale is a selling point for private carbon markets, who argue that they provide the incentive America's industrial farmers need to change the way they farm giant tracts of land.

Sarah Mock, author of Farm (and Other F Words), considers that an empty promise. "The farmers being paid credits are the last people we would want to pay: the biggest farms, the richest farms, who have used the worst farming practices the longest. It's leaving out farmers who have already been doing carbon-sequestering practices and Indigenous people who manage land well." Carbon markets, after all, don't address the holistic impact of chemical fertilizers, pesticides or other industrial farming practices on the environment—or reform the agricultural system so it allows small family farms to thrive.

Some experts say that expanding the $2 billion that the USDA and state governments pay growers for farming sustainably would be a better incentive that could inspire more holistic, longterm changes. Or, Mock proposes, "Why don't we tie some of the billions we give in farm subsidies every year to conservation practices and cover cropping?"

At A-Frame Farms, Peterson says he's all-in when it comes to regenerative farming—but he doesn't want to participate in commercial carbon markets. "It's this game that farmers get involved in where they have to chase the dollar," he says. Measuring, reporting, giving all his agronomic data to a third party, and all for a relatively mediocre paycheck? He'd rather charge a fair price for his organic, regenerative grains—one that incorporates all the ecosystem benefits he already provides. In short, sequestering carbon shouldn't be the product. It's just part of the process of doing right by the Earth.