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Carbon sequestration can be new paycheck for farmers

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By Jennifer M. Latzke

It's rare that farmers can get paid extra for their choices in production methods. But, for producers in select regions of the High Plains, the benefits of conservation tillage methods may soon mean more to their profit margins than their production yields.

At a packed house Feb. 12 at the Knights of Columbus in Great Bend, nearly 125 farmers gathered for a presentation on carbon sequestration and carbon credit trading.

Carbon sequestration primer

Charles Rice, soil microbiologist in the K-State Department of Agronomy, first explained carbon sequestration and its importance to the environment and to industry.

Methane, carbon dioxide and nitrous oxide are three greenhouse gasses that concern scientists, he told producers. These gasses, in the atmosphere absorb sunlight and heat energy and in normal doses this affect provides a moderate climate. "But, there is such a thing as too much of a good thing," Rice said. These gasses have been on the rise in the last 150 years, since the prairie was first plowed, and co-incide with the deforestation of the rain forest and the increasing use of carbon-based fossil fuels.

"Five to eight degrees Fahrenheit may not seem like much, but we can see that the Arctic sea ice boundary, since 1979, is shrinking," Rice said. This is just one sign of global warming, he said.

Scientists have identified several ways to reduce atmospheric levels of greenhouse gasses. They include: Reducing fossil fuel consumption; increasing the efficiency of fuels; increasing the use of renewable fuels; and using sequestration. For all practical purposes, Rice said, sequestration is the most feasible route as of now.

The simplest explanation of carbon sequestration, Rice said, is that plants take in carbon dioxide from the air to make oxygen and grow. The plant grows and its biomass--the residue and roots of the plant--capture the carbon dioxide in its cells. As long as the residue is not disturbed greatly, the carbon dioxide stays in this form and is taken out of the atmosphere where it can do damage. The carbon dioxide, though, can be released by burning the plant mass or by tilling the soil and disturbing the organic matter.

"Since we first broke the soil to plant a crop on the Plains, we've lost on average about 50 percent of the organic matter, carbon, stored in the soil," Rice said. "Now, with new technologies and the use of reduced tillage, no-till, and crop varieties we can increase the carbon that we store in the soil." Carbon dioxide can be stored in the soil through no-till planting, restoring wetlands, converting cropland to permanent grass or trees, planting conservation buffers and using cover crops. Research has shown that no-till corn fields can store one-half ton per acre of carbon dioxide annually, for example. By establishing a new grass stand on previous cropped land, a producer can sequester at least three-quarters of a ton more carbon dioxide per acre.

"Globally, there is a potential to offset about 30 percent of the annual carbon dioxide emissions," Rice said. "And, in the U.S., we could offset about 15 percent of our annual carbon dioxide emissions."

This poses a great opportunity for industries that must reduce their carbon emissions. If they can reduce their own emissions by 10 percent, they are eligible to enroll in the Chicago Climate Exchange, and purchase offsets to account for the carbon they release into the atmosphere.

The economic potential for carbon sequestration is generated when one group sells its ability to store carbon to an industry that emits carbon, Rice explained. And, it's this stored carbon that creates the offset, or credit, that can be sold on the Chicago Climate Exchange, according to the Iowa Farm Bureau.

The Chicago Climate Exchange

The Chicago Climate Exchange (CCX) launched trading in December 2003 in a four-year pilot program to allow large industrial companies to purchase carbon credits to offset their greenhouse gas emissions, according to the Iowa Farm Bureau Carbon Credit Program. The CCX is a private entity, with no government funding, so it can set its own rules.

As an aggregator for the pilot program, the Iowa Farm Bureau Carbon Credit Program has enrolled 335,000 acres in eligible counties in Kansas, Nebraska and Iowa. The only way farmers can earn money for carbon sequestration is by enrolling their eligible land in a registered and verified offset project with the Exchange. The Iowa Farm Bureau is one such program. Another is being conducted by Farmers Union.

Chad Martin, with the Iowa Farm Bureau Federation, discussed his organization's program that is pooling ag-based carbon credits for certification. According to the program literature, the Iowa Farm Bureau manages and administers these carbon credit pools, registering the individual farm projects, maintaining the database of ag-based credits, interfacing with the CCX, managing the sales of the credits in the pools and distributing the sales proceeds to participants.

"To become an aggregator, we must have $1 million net worth, with $10 million in assets," Martin said. "We're like the county elevator of carbon credits."

"In 2003, we enrolled 80,000 acres in our first pool of credits," Martin said. "In 2004 we opened up the pools to Kansas and Nebraska growers and enrolled an additional 250,000 acres. Now, all total, we have about 900,000 acres in the pools."

There are only certain regions that are eligible for enrollment in this first carbon credit pilot program through the CCX. Some regions can enroll both cropland and grassland, such as the Great Bend area. Other regions, such as in the Dodge City area, may only enroll permanent seeded grasslands. For a more detailed listing of eligible counties, farmers should look online at www.iowafarmbureau.com, or www.nfu.org. Both the Farmers Union Carbon Credit Program and the Iowa Farm Bureau Carbon Credit Program abide by the same rules, according to Martin and Kansas Farmers Union President Donn Teske, who also presented at the meeting.

In order to participate, land enrolled in the exchange soil offset (XSO) certification program must be able to be cropped--either in row crop or small grain production. Land in the program must be farmed in compliant manner, using only approved conservation tillage methods (such as no-till/strip-till and ridge-till) and equipment .

As for Conservation Reserve Program land, as long as it was put into CRP after Jan. 1, 1999, it may be enrolled for carbon sequestration credits. And, cropland harvested for hay as part of a crop rotation is eligible, as is permanent grass cover plantings, as long as they were planted after Jan. 1, 1999.

The date of Jan. 1, 1999, was set as the baseline for the pilot program so that it would account for those farmers who have long practiced conservation tillage as well as those who are new to the practice. One audience member asked why her land, that has been in conservation tillage for a decade or more and has more carbon stored, shouldn't earn more than land just enrolled in conservation tillage and has less carbon stockpiled. Rice explained that current research hasn't discovered a way to account fairly for the long-stored carbon. "The technical advisory committee sets the values based on scientific research," Rice said. "The organic content of soils can reach a saturation point and it varies between soils in sandy, versus clay, in western Kansas versus eastern Kansas.

The enrollment process

Enrollment in either the Iowa Farm Bureau or the Farmers Union programs is simple enough. The applications require a legal description of the land to be enrolled, such as a FSA map, and a few other easy to obtain documents from the Farm Service Administration office in their area.

Tenents have first enrollment rights in the pilot project, according to Teske and Martin. A renter can enroll his leased ground to earn carbon credits as long as he expects that the acres will continue to be under his control through 2010, or the end of the contract. If the leasee loses the enrolled land, however, before the contract is completed, he voids all of his carbon credits on the land and must pay back the money he received on those acres, Martin explained.

"As a buffer, we keep 20 percent of the sale of carbon credits in an escrow account just in case so that we can cover this cost," Martin said. "Farmers Union must do the same. If the farmer doesn't need these funds at the end of his contract, we of course give them over to him." Martin explained one way to avoid this situation is to communicate with landowners and have them co-sign the contract for carbon credits so that if the leasee loses the land, there is some protection against losing his credits.

"Of course, if the next tenant continues to enroll in the carbon sequestration credit program, then the credits don't need to be paid back," Martin said. Contracts are transferable, he said.

Once land is enrolled, the CCX sends verification specialists to the acreage to verify that the land conforms to the contract requirements for carbon sequestration. For example, they'll check to see if wheat stubble was burned, which is against the rules, as well as if the land is in continuous cropping, which is required to store as much carbon as possible.

The transfer price of XSOs pooled by the Iowa Farm Bureau or the Farmers Union will be the net sales prices (less exchange fees) as determined by sale through the Chicago Climate Exchange, minus a 10 percent service fee. Prices are paid per metric ton of carbon dioxide stored per acre. Historically, farmers have earned $1 to $2 per metric ton, with an average historic daily volume on the CCX of about 7,000 metric tons. Total volume to date on the CCX is 2.7 million metric tons.

While it may sound like enrolling one's land in a pilot project and following a bunch of new guidelines is more hassle than it's really worth, Teske said in the end it can benefit both farmers and the public in general.

"If global warming isn't real, then you have an entity who's willing to pay you to do what you're already doing," Teske said, regarding soil conservation efforts. "But, if global warming is real, then you have the added bonus of helping to make the world a better place."

Jennifer M. Latzke can be reached by phone at 620-227-1807, or by e-mail at jlatzke@hpj.com.

Date: 2/14/07


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