Frequently Asked Questions:
1. Who needs to be involved in the decision to develop carbon credits?
Anyone with an ownership stake in the land will need to be involved in the process. Ownership of carbon credits can depend on the leasing agreement. For rented land, farmers may need to provide an attestation of their right to market carbon on the property to the company. Because of the long-term nature of the contracts, it is important to understand what implications there are if the farmer stops renting the land in the contract.
2. What practices are companies paying for?
Companies are currently only paying for certain practices. Some typical practices companies are paying for include increasing grazing rotation and diversifying forage. Many companies require farms to commit to new practices to be eligible.
3. Will I need to invest in new technologies or platforms?
Some protocols may involve investment in new infrastructure like fencing to allow for increased rotational grazing. Additionally, some protocols may require a technology investment from the farmer, such as requireing the farmer pay for a subscription to the company's online platform.
4. Is my farm too small to profitably sell carbon credits?
While your farm may not be large enough to attract carbon sequestration project developers, developers may be interested in including your farm in a larger project involving multiple farms. Project developers often aggregate small farms into units for purposes of development, soil testing, and marketing credits.
Carbon project developers often aggregate farms into units, develop carbon sequestration projects on each of them at once, and sell their credits on registries at once, rather than develop projects and sell their credits individually. This allows smaller farmers to participate in the markets – while it may not be cost-effective for a project developer to travel to a small farm, measure its soil carbon, and monitor its progress as it complies with a protocol, it is more efficient when developers can group farms together.
When they aggregate farms, project developers tend to prioritize two things: the geographic proximity of the farms to each other, and the overall size of the project. Traveling between farms as they monitor compliance and measure carbon levels presents a major cost to developers, and they may try to aggregate farms that are within a few hours’ drive of each other for purposes of individual credit offerings. Talk to a developer to find out what parameters they are looking for.
5. How much will I be paid?
The price of a soil carbon credit ranges from $10 to $20 per metric ton, although the price is increasing (as of spring 2022). Some high estimates for soil carbon credits are $40 per metric ton of acre.
Farmers are estimated to generate 0.2-1 credit per acre in the first year of starting a soil carbon project (or regenerative grazing project?), and up to 2 credits in subsequent years. This amount depends on the carbon that the soil sequesters.
Given a mid-range price of $15 per carbon ton, the amount you would receive in the first-year could range from $3 per acre to $15 per acre, again depending on the amount of carbon sequestered in the soil. In the subsequent years you would receive roughly $15 - $30 per acre per year. In this scenario, we are estimating that $15 per carbon credit is the price that farmers would get after project developers have taken a cut for their efforts. Be sure to ask what is the final price per ton of carbon that you sequester and how payments work (see “Questions Farmers Should Ask” section).
6. How long will it take to get paid?
This depends on the project developer. A portion of the money may be paid upfront for the carbon that will be sequestered or the money may be paid at a future date, after the project developer has measured the carbon sequestration in the soil.
Grassroots Carbon: This company pays farmers based on a conservative estimate upfront and then continues to pay yearly installments based on the amount of carbon actually sequestered.
Blue Source: This program pays farmers a certain amount upfront and then will continue to pay farmers for the rest of the money after the carbon credits have been sold, not after the soil carbon sequestration is measured.
There may be a payment program to give the farmer a certain percentage of credits or payment gradually over a specified period. This is an important question to ask a project developer before signing on to a project.
7. What are the costs to getting involved?
The cost will depend on the practices and project developer, so researching methodologies and potential partners is essential.
The cost of entering into a carbon sequestration protocol depends on the farmer's current practices, environmental and soil conditions at their farm, and outside economic factors like protocol costs and current price of carbon credits.
Changes in practices may require costs like investing in additional fencing or more diverse forage (see the Financial Benefits section for examples of how these costs may be offset by financial benefits). Farmers may have to pay a fee for soil sampling or third-party verification, although some project developers may cover these costs. There may be additional administrative, registration, insurance, and/or transaction fees depending on the contract. Some project developers may withhold a percentage of carbon credits to cover carbon loss, buffer pools, or administrative fees.
The type of activity that the farmer engages in may impact how much carbon a farmer can sequester, changing the "breakeven price." The breakeven price is when a farmer is no longer losing money on their carbon sequestration practices. The breakeven price is determined by the amount of additional carbon a farmer will sequester given variables like their technique (i.e. no-till) and the technique costs. Farmers may not sequester enough carbon per acre for operations to be cost-effective.
The protocols discussed on this site (and those practiced by project developers) are intended to create economic benefits for the farmers involved. Since farmers risk potentially decreasing their crop outputs while adjusting their practices to comply with protocols, some project developers have developed programs to pay farmers in advance for complying with the protocol and maintaining carbon reserves. This method limits farmers' risk if they do not sequester as much carbon as planned. While different project developers have different protocols, it is common for soil carbon levels to be estimated with formulas rather than measured every year, which helps the farmer know what to expect in terms of income generation.
8. How are the carbon credits tracked and sold?
Carbon credits are held by the project developers, who can then sell them on carbon registries to companies. See the Soil Carbon Market Process infographic for more information.
9. I adopted carbon sequestering practices on my farm in the past. Can I still be paid for the carbon I am sequestering?
Most protocols require additionality, which means that you must adopt new practices in order to be paid for your carbon sequestration (click here for more about additionality). Even if you have already employed regenerative practices on your farm, there may be other changes you can make to sequester additional carbon. We recommend speaking with a developer to get a sense of the options for your situation.
10. How often does the data need to be reported?
Farmer will have to report their data and provide soil samples about once a year or every few years. A third-party verifier may have to visit the farm at a specified period as well.
While different protocols require different specific sets of data to be collected, protocols generally require that project developers measure and report data pertaining to carbon emissions at the farm, soil carbon sequestration, overall soil health, and compliance with regenerative practices. Carbon emissions at the farm are often estimated using some combination of measurements of fertilizer application, livestock numbers and grazing, fuel and electricity consumption, and any area lost to fire. Soil carbon sequestration is often estimated by measuring soil organic carbon at various sampling sites, soil bulk density, area of trees and shrubs, soil depth, and the proportion of the soil that is composed of rocks, dead roots, and other nonliving objects. Overall soil health is usually measured by the annual area of nitrogen-fixing species planted, the mass of nitrogen-fixing species dry matter returned to the soil annually, soil pH, soil macronutrients and micronutrients, soil conductivity, and other environmental metrics. Compliance with regenerative practices is usually confirmed by submitting logs of all grazing activity to the entity responsible for verifying credits - grazing logs often include the number and type of livestock, the number of days each parcel of land under management was grazed, and the average grazing hours per day of each livestock type on each parcel of land under management.
11. Is there a limit to the number of credits per acre?
Some protocols limit the number of carbon credits farmers can receive per acre. For example, if the protocol limits the farmer to two carbon credits per acre, and the farmer adopts a practice that sequesters more than two metric tons of carbon per acre, the farmer might not receive the full payment from the carbon they are sequestering. On the other hand, some companies intentionally underestimate the number of carbon credits per acre upfront, and then adjust the estimates and payments upward to match actual conditions after soil carbon levels have been monitored over time.
12. How many years does the contract last?
Contracts could be 10 to 20 years or more, depending on the protocol.
Contracts with project developers will often require you to implement regenerative practices for at least some minimum time period required by the specific protocol. These contracts will describe how the project developer is to pay you, what portion of the proceeds from selling your carbon credits they keep, and other key items governing your relationship with the project developer. Contracts may also require you to modify your agricultural practices in specific ways, or require you to maintain ownership or control of the land (or only transfer it to buyers who will continue to sequester carbon).
13. Would the contract need to be transferred along with the land?
This depends, and different project developers may implement different requirements. If the land is transferred to another party before the end of the minimum time period specified by the protocol (often ten years), and the contract is not transferred to the new landowner, then the project will likely be deemed canceled and neither the buyer nor the seller will receive additional payments from the sale of carbon credits.
Your contract may impose penalties on you if you sell or rent the land to an entity that will not perform the contract. To successfully remove carbon from the atmosphere and sequester it in the soil, contracts come with the expectation that the carbon will stay there for at least a specific time period (known as permanence). A penalty may result from violation of permanence. If you anticipate transferring your land during the time period of the project, make sure to ask your project developer in advance so that you understand the consequences of contract violation.
14. What happens if my land doesn't sequester enough carbon?
It varies tremendously by the project developer/registry.
This is a very important question to ask your project developer/registry in the planning stages of a carbon project so that you are prepared in the unlikely event that this happens.
When establishing a soil carbon project, the farmer and project developer make estimates of how much carbon they expect to be sequestered through the project. These estimates are often conservative so that they can be easily achieved. However, it is still possible that these estimates are not met due to a project issue or unforeseen event.
A commonly asked question by farmers looking into selling carbon credits is, “What happens if I don’t sequester enough carbon?” The answer can vary, making this an important question to ask your project developer (or whomever you are working with to sell your credits). In this situation, many registries will still pay farmers some portion of what was agreed upon, so long as the farmer followed the original agreement (for example, not tilling the soil).
Here are two different examples of how project developers/registries could handle this situation:
The project developer/registry makes a conservative estimate of how much carbon could be sequestered by a project and pays out 50% of that estimate at the beginning of the project. In the event that less than 50% of the conservative carbon estimate is sequestered, the farmer still gets to keep that money. (Grassroots Carbon)
The farmer still gets paid as if they sequestered the agreed upon carbon amounts. The project developer would have to pull from their buffer pool (or unsold carbon credits) to cover the loss. (Blue Source)
15. Why is there a market for soil carbon credits?
Companies choosing to diversify their climate mitigation/carbon credit portfolios.
Companies choosing to support farmers and agriculture.
Farmers are not responsible for securing buyers for their carbon credits that their farms produce. Finding carbon credit buyers is the responsibility of the project developer and/or the carbon credit registry. However, it can still be helpful for farmers to know what might motivate some of the potential buyers of carbon credits and how the market for carbon credits might be changing. Some of this information is outlined in the section below.
Businesses are increasingly being held to higher environmental standards by their boards, investors, customers, and employees. This positive pressure often leads businesses to search for a variety of ways to lessen their environmental impact. Strengthening their sustainability plans can provide tangible benefits to businesses. Sustainability improvements that businesses make often involve cutting waste, reducing emissions, and looking closely at materials used. But what if a business wants to make more of a positive impact? Or what if a business is unable to reduce their greenhouse gas emissions further, but they still want to decrease their negative impact on the planet’s climate? This is where carbon credits can come in.
Purchasing carbon credits is an attractive way for businesses to neutralize their environmental impact. Businesses have been increasingly interested in purchasing these credits, which has translated into higher purchasing prices for each credit. Each credit purchased equates to removing one metric ton of carbon dioxide from the atmosphere. Purchased carbon credits fund projects that remove greenhouse gases directly, prevent the release of additional greenhouse gases, or both. Example projects could include reforestation, building clean energy infrastructure, and using regenerative farming practices.
Businesses might specifically wish to purchase soil carbon credits for a variety of reasons. One reason is that a business might want to purchase multiple types of carbon credits in order to diversify their portfolios. Another is that the business might want to show that they are specifically supporting farmers and agriculture.
16. How can I benefit even if I don't sequester enough carbon to participate in a carbon market? What other sources exist to support regenerative practices?
In case your farm is not suitable for carbon sequestration projects, there are other funding streams that may allow you to earn money for environmental protection on your farm. These programs may be best suited to areas on your farm that are not currently in use.
One possible source of income is wetland banking. The North Carolina Department of Environmental Quality works with a number of developers and trading agencies to protect wetlands located on private land.
Endangered species credits allow landowners to earn money by protecting habitats integral to the protection of endangered species. The Fish and Wildlife Service and National Marine Fisheries Service both have the authority to approve projects in which landowners protect habitat for endangered species, are given credits by FWS or NMFS in return, and then can sell those credits to developers who are required to counterbalance any loss in endangered species habitat due to their projects with a gain of endangered species habitat. While endangered species credits currently only protect a small subset of listed endangered species, projects to conserve habitat command a premium – credits issued to protect select endangered species often fetch thousands of dollars per acre. Unfortunately, the endangered species credit market is currently concentrated on the West Coast, with very little development in North Carolina.
Below are some possible funding sources farmers can pursue to help make regenerative practices profitable: