An Emerging Market Worth Watching:
Carbon Credit Trading
by: Stewart Truelsen, a regular contributor to the American Farm Bureau’s Focus on Agriculture series.


It has taken many years for the ethanol market to gather the momentum it has today.  While it may seem like a fledgling fuel to the general public, farmers know better.  Now farmers, principally in the Midwest, are eyeing another emerging market—carbon.
           
Granted, carbon credit trading is a more elusive market than biofuels or other farm commodities.  Carbon isn’t physically delivered from the farm to a market; it is stored in the soil or removed from the air by trees.   In effect, what farmers are selling is environmental services to offset carbon dioxide emissions into the atmosphere.     
 
The Iowa Farm Bureau Federation has been the pacesetter for agriculture in recognizing the carbon market and organizing pools of farmland from which to sell carbon credits.  The first pool totaled around 80,000 acres, the second 255,000.  A third pool now forming will have enrollment from eight or nine states.   
 
The market itself is the Chicago Climate Exchange, an electronic trading platform similar to the NASDAQ stock market.  Aggregators and single providers offer carbon credits for sale on the exchange.  Exchange members who need credits to offset their greenhouse gas emissions are the bidders. 
 
Climate Exchange members include Ford Motor Company, IBM, American Electric Power and other large corporations and utilities.  Several cities and universities also participate.    
 
Most of the credits sold by IFBF resulted from no-till planting which holds more carbon in the soil than conventional tillage.  A no-till corn or soybean field stores roughly half a ton of carbon per acre, per year.   
 
“On a 500-acre farm on average it’s going to end up at about 270 credits per year. Those credits are going to be worth about $4 a ton so that would be a little over $1,000 a year at current market prices,” said Dave Miller, director of research and commodities for the IFBF.
 
If a mandatory cap-and-trade emissions program is implemented here as it has been in Europe, Miller believes the potential for the market would be in the range of 30 to 40 million acres of offsets provided by agriculture.  Carbon credits in Europe are trading at $15 to $25 a ton. 
 
Miller does not view carbon credit trading as an endorsement of the Kyoto Protocol on climate change that Farm Bureau opposed and the United States refused to sign.  But Farm Bureau does support a voluntary carbon credit trading system.
 
“We think what we are doing with the Climate Exchange is very much in harmony with that policy. The fact is that the market is developing and as part of agriculture we need to be on the inside of that market to help shape it so that it works for agriculture,” said Miller.
 
What farmers are doing to sequester carbon on their land is good for the soil as well as the atmosphere, and that’s another good reason for them to pay attention to this emerging market.   More information is available at the Iowa Farm Bureau Web site at http://www.iowafarmbureau.com/carbon/.

6/26/06