The US Farm Sector is Gearing Up to Cash In on Climate Action

Carbon market and Soil Sequestration-mania is set to funnel big financial gains from carbon-emitting industries to farmland owners. But what does it really mean farmers?

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As my friend Rhishi over at so aptly wrote recently, “Everyone and their brother has a carbon market.”

Among the group frantically hoping to set up private markets are the venture capital darling Indigo Ag, Nutrien, the EcoSystem Market Consortium, Bayer’s Carbon Initiative, and the COMET-Planner, just to name a few. Even new advisors on Biden’s agriculture transition team want the US Department of Agriculture in on the action.

The basic idea behind carbon markets is simple; carbon-emitting companies and industries will pay farmers to sequester carbon in their soil to offset emissions, and this will create a market for carbon sequestration credits. Sounds great, right? Big companies like Amazon and Exxon can go on, business as usual, and offset their enormous impact on the environment by funneling money to farmers to suck their sins right out the air and bury them in the soil.

But the thing is, no part of this solution is as this simplified description would make it seem; not the existing context, not the science, not the potential structure of the market or the incentives. Not the outcomes, the impacts, or the players.

This idea didn’t fall from the sky recently, for one. For years, the agricultural industry has been fighting this very thing, commonly referred in to in the past as “Cap and Trade,” tooth and nail.

The New Cap and Trade?

Why the sudden about face? Because currently, there is no cap (and there seems to be no real policy effort coming to create one), so no actual forced limits on the amount of carbon being emitted, which helps farmers, because the average US farmer emits a lot of carbon. Without the cap, and with carbon markets being nebulous and privately-run, there’s a good chance farmers can be cashing in on minimal “carbon neutral” or “carbon negative” activities, like no-till or cover cropping (the latter being an activity the USDA will pay for farmers to do anyway, so they could end up getting paid twice).

You may be thinking, “Good! Farmers deserve to get paid for good conservation practices.” But they already do. In fact, the 2018 Farm Bill provided around $5 billion in direct payments and cost shares for farmers under the heading of “conservation.” What does that look like for an individual farmer? This cattle and turkey farmer in Virginia makes $17,000 a year from conservation programs alone.

[Sidebar: And the fascinating thing about Farm Bill conservation programs is that, it’s well known that they’re farm income-supporting programs first, and good for the planet second. You can tell because they’re shoehorned into the Farm Production and Conservation mission area, the same one that provides price support and crop insurance. In other words, subsidies.]

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All the Money, None of the Regulation

So if farmers are already getting paid to do conservation activities, why the sudden interest in carbon markets? Because privately set-up markets, with less public oversight and transparency on their workings, offer a huge opportunity to funnel wealth from big companies to farmland owners, under the guise of “saving the planet,” while in reality changing little about farming’s real and significant impact. (You could make a good argument that farmers should be required to offset their own pollution/impact before they can start selling credits beyond the farm.)

One good indicator that the new obsession with carbon markets is more a money-making scheme than good conservation is that one of the most reported on points of contention is not whether the science works, how outcomes will be measured, or how standards will be enforced, but how much farmers will have to be paid to cajole them to take better care of our soil, water, air, and public spaces.

Plus, there’s a lot of skepticism in the scientific community about the science that’s underpinning these efforts. For one, the technologies to measure the stock of carbon in the soil at a given time (let alone consistently over time), which would be a vital part of any market, barely exist. A few publications have covered the lack of depth in the science of soil carbon sequestration, but few have been willing to admit the obvious, Farms Can’t Save the Planet. Consider in particular the difference between soil carbon, which is continuously shifting into plants and animals, and being release and re-absorbed into the atmosphere, and fossil carbon, which was previously trapped and relatively stable/isolated beneath the Earth’s surface. Soil as a storage vehicle is not similar to deep Earth wells, where much of our current atmospheric carbon came from. This is obvious, but rarely part of the discussion.

*Clutches Pearls* But we’ll starve!

I’ll pull another instructive point from ;

Now we’re getting to the (forgive the pun) meat of it. Because there’s something glaring being left out of the above statement “conversion of other lands to production to maintain food production” is unnecessary, especially in the United States, because US agriculture has been experiencing sector-wide over-supply of commodities grains for years (to dig into this complex statement, check out Escaping 1980, an ag history and economics podcast that will break this allll the way down). Barring a weather catastrophe year to year, this is why you’re always hearing farmers talk about prices being too low. Prices are low because there’s simply too much of the corn, soybeans, and other grains in the market, and there has been for decades.

The creation of the Renewable Fuel Standard and perpetuation of ethanol is an instructive piece of evidence. The RFS created the market for ethanol, and is a prized farm policy (and a part of every Iowa caucus) because it raised corn prices for a while, by increasing demand. Prices were up, that is, until farms across the country expanded to take advantage of those higher prices, in many cases bringing new acres into production or even converting acres from food production to commodity corn. The RFS was created to eat our surplus commodity crops, and in doing so, it encouraged farmers to till up marginal lands, push for higher yields with more fertilizer and other chemicals, and focus on the high-soil impact crop, corn, over everything.

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Today, farmers have filled most, if not all, of the expanded demand from ethanol, and the thing is, I can pay a premium at my local gas station to buy gasoline *without* ethanol. It’s a product, in an artificial market created by federal policy, that consumers will pay *not* to use. If we got rid of the RFS today, the economic carnage in the US ag industry would be considerable. But the thing is, we might want to do it anyway. Doing so would free up a lot of acres for food production, wildlands, or anything else. And the thing is, over the past three years, farmers have received more than $60 billion in direct federal payments (that’s checks in the mail). Arguably, we’ve already provided a lot of support to help farmers through this kind of inevitably painful transition.

So the suggestion that inefficient soil sequestration would threaten food supplies, at least in the US, doesn’t make much sense. The US has around 90 million acres (about the size of Montana) in commodity corn production at the moment. Converting any significant amount of those to human food production, grasslands, forest, or wetlands would not only improve environmental outcomes and create additional economic benefits for the farmer/landowner, it would actually contribute to raising commodity prices for other farmers, by reducing supply.

So, yeah, don’t let anyone tell you pursuing environmental outcomes in US farming will lead to food shortages.

The best way to overcome the industry’s current inertia and achieve all the above sited good outcomes would be environmental regulation, which we know works. But the ag industry has a strong lobbying arm in Washington (that’s how you know farmers aren’t poor — how many poor groups do you know have strong lobbying outfits?) who’s insisting on voluntary programs only. So what’s the alternative?

In Soviet Russia, You Work for Farmers

The companies to whom farmers sell their crops and products could demand that they pursue better environmental outcomes. We know the power the purchase order has, and we know that using it as a tool to negotiate better practices works. This is the, “if the government won’t step up (with regulation), we’ll do it ourselves!” option. But consider this chart for a moment;

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State of Sustainability Report, Trust in Food. By way of Software is Feeding the World

On first blush, it probably makes sense. If farmers are going to change their practices, they should be compensated for it. But let’s consider this in a different context. If your boss told you that you need to work smarter and more responsibly, and that if you failed to do so, you would need to find work elsewhere, would your first instinct be to say, “I’ll only do better if you pay me, otherwise, eff off?” Or would you carefully consider whether you can possibly work better (an option that was, indeed, on the survey) without making too many sacrifices, and take time to look within yourself and possibly determine if it might even be in *your* best interest to work smarter and more responsibly, and only as a last resort approach your boss to talk about a potential pay increase to accommodate the added work load?

Sure, you can say that “a farmer’s customer is not their boss.” I’d argue that’s wrong. Our culture tells us that “the customer is always right,” we are a service-oriented people, and we expect even the CEOs of multinational companies to care about their products and their customers wants and needs (because that’s generally how they stay successful, right? And more importantly, we value people who value people). All of this to say, more than 50% of farmers in this survey are, essentially, saying they’d rather lose a high value customer than consider investing in their own good practices (in many cases, to improve the quality of a privately held land asset *they own*).

This is a mindset we should be worried about in farm entrepreneurs.

Conserving Our Resources, or Yours?

Another way to think about this point. In the above sited State of Sustainability Report, “74% respondents believe farmers should receive monetary incentives to utilize certain production practices that benefit the public good.” Again, another idea that doesn’t sound too controversial. But let’s consider, for example, methods like cover crops that keep harmful nitrate in the soil and prevent soil runoff. First of all, USDA has a cover crop program already that provides funds to farmers to pay for the practice.

Second, though *not* poisoning your neighbors ground water with nitrate is, I suppose, a public good, it’s not exactly something we want to be actively rewarding people for. Rewarding people for not doing others harm is a literal protection racket (“nice water system you’ve got there, rural community, would be a shame if anything happened to it”). We don’t get paid for *not* drunk driving or *not* spitting in people’s food at restaurants. We get punished when we do. We are regulated, and we generally all agree that that’s for the best, paying people to be virtuous is not a good substitute. So no, the argument that farmers should be paid to not harm others is not a good one.

Third, keeping topsoil on the farm is actually something the farmer/landowner is doing for themselves, not for “the public good.” Farmland is a capital asset, valued by its quality and productive capacity. Maintaining its quality builds the farmer’s bottom line wealth in the long term, and does not accumulate value to the public. Paying farmers to protect their own topsoil is like paying people to mow their own lawns, paint their own houses, or (literally) maintain their own business. That’s not for our good, it’s for theirs, and if a business can’t afford its own maintenance, we should be asking the hard question of whether it should survive.

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Carbon Markets are about Paying Farmers. Period.

Rishi’s key takeaway in is that “carbon market exuberance is good for the long term, as it has the potential to address multiple issues like farmer profitability, soil health, and climate change and food production systems have a role to play.” I think it’s clear that, as the science and industry currently stand, the only “issue” that’s being addressed is “farmer profitability.” The thing is though, 2020 is shaping up to be the best farm income year since 2013, and the past three years have all likely been in the top 10 since USDA started keeping records. Couple that with the fact that, the average net worth of US farmers was above $1 million, and farm household income has been higher than US household incomes in general for more than 20 years.

If farmers are out here planning to reject lucrative contracts because their customers won’t pay for their business’ expenses, while receiving taxpayer dollars to do conservation, in addition to billions in direct payments, it doesn’t sound like their biggest need right now is more money.

The farm sector has more carrots than it can fit in its mouth at the moment, and participation in lucrative but nebulous carbon markets is just one more carrot.

What we need to encourage better conservation practices, is a stick.

Author of Farm (and Other F Words), pre-order now: https://bit.ly/2JTY90i. Rural issues and agriculture writer/researcher. Not a cheerleader, not the enemy.

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