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Clearing the air about carbon trading
Jonathan Findlay, a Caro organic farmer, gave daughter Madison her first taste of Michigan Farm Bureau's Annual Meeting as he and wife Carrie absorb information during policy debate. Findlay, a Young Farmer Achievement Award finalist, was one of 472 delegates who determined Michigan Farm Bureau policy for the coming year. Read about some of the events at this year's meeting throughout this edition of Michigan Farm News. Look for more information in the Jan 15 edition.
So far, government has not ridden farmers' backs about air pollution, but most astute farmers can hear Congress's footsteps behind them.
Farmers have shown a healthy skepticism toward what, on the surface, looks like money for nothing, because they know Washington has never offered a free lunch, and likely never will.
So it seems logical that farmers tend to toe the dirt and mutter something about how they've done nothing to deserve a check for keeping carbon on the farm, even when they can earn - at present market prices - about $2 or more an acre, depending on the methods used, for seeding grasses, using no-till or planting trees.
Sound too good to be true? Could be, if Congress gets involved and decides the present voluntary free-market system isn't reducing air pollution. But until then, farmers can take advantage of a program - in which the government has no active stake - that rewards them for farming methods that offset industrial air pollution.
Large-scale farm participation may take a change in self-image, said Scott Piggott, manager of Michigan Farm Bureau's Agricultural Ecology Department, because farmers have taken such a verbal beating in the last few years from watchdog groups who bark incessantly about what horrible polluters farmers have become.
"The fact is, farmers have always provided the service of tying up carbon, but now they can be recognized for that beneficial environmental service," Piggott said. "It's biology 101. People, through industry or just by breathing, use oxygen and release carbon dioxide into the air. Plants take carbon dioxide out of the air and release oxygen. Who has more plants than farmers?"
Farmers shouldn't sell themselves short for the good things they do for the environment, in other words. And if a business by its very nature provides a service for which someone is willing to pay, why not participate in the market?
New policy
Policy makers at Michigan Farm Bureau's recent Annual Meeting thought their peers should be paid for environmental stewardship, and passed a new resolution that directs the state staff to conduct research into carbon trading.
The research, according to the policy, "should include, but not be limited to becoming an aggregator for carbon credits in the state of Michigan or facilitating member access to other aggregators." Basically, that means Michigan Farm Bureau may become an aggregator, or it may simply help its members find and work with other aggregators.
Delegates directed staff to have the research done by next fall, but it might be done earlier, said Carrie Vollmer-Sanders, Michigan Farm Bureau's ag ecology specialist who will conduct the research.
Spring or fall is not the crucial issue, she said, because payments for 2006 and 2007 credits won't be issued until July of 2008.
Still, farmers considering a little extra cash and want to be in on the first payment schedule should begin thinking about their choices, beginning with whether those payments are worth the hassle of filling out a four-page document for soil credits; or a 15-page document for forestry credits.
The decision is not entirely up to the farmer, however, Vollmer-Sanders said.
"If you farm north of a line that runs through Bay County to Oceana County," she said, "you cannot trade in soil credits. The Chicago Climate Exchange (CCX) has determined that counties above that line may only qualify for forestry credits, and below that line, soil credits or forestry credits are allowed."
Presently, forestry credits are worth more than soil credits, but the price could change as frequently as stock prices, although it seems unlikely that the carbon credit price will go down in the near future.
"I don't think the price will reach European levels (at last check carbon credits were trading at around $30 per ton, or $15 per acre) until the government gets involved," Vollmer-Sanders said. "But I think government involvement will create more questions in the carbon trading market."
The free market advantage
Most farmers and industry leaders believe the free market system should be given a chance, said Dave Miller, director of research and commodity services with the Iowa Farm Bureau, the first and one of the largest "aggregators" - or carbon credit brokers - in the nation with contracts in 12 states, including 1,000 acres in Michigan. Information about the Michigan farmer involved was not available.
Iowa Farm Bureau began looking at a way to trade in carbon credits in 1995, Miller said, and became an aggregator when the CCX was founded in 2003.
Basically, the exchange permits companies that want to reduce their carbon emissions (by reducing any of six different greenhouse gases, including carbon dioxide) to buy credits earned by businesses or communities which surpass emission-reduction goals. Without government intervention, Vollmer-Sanders said, those goals remain vague, with a general feeling that pollution needs to be reduced, and can be reduced by farmers who simply no-till to save soil, plant grasses or trees or do other things that cause carbon to be fixed in the soil.
"Basically, farmers can be paid for doing things that are good for the air, water and soil," she said. "A good number of groups are excited about it, including conservationists."
For polluting companies, the advantages of carbon trading are many. Not only is purchase of carbon credits cheaper than industrial smokestack scrubbers, but the company can then promote its commitment to being green.
The ultimate advantage of the free-market system, however, is to keep the government from stepping in to issue expensive and excessive regulations that will hurt business and create further bureaucracy.
Although there's no guarantee government will remain uninvolved for long, farmers should take advantage of the free market while they can, Miller said.
"What is a carbon credit going to be worth five years from now?" he asked. "It started in 2003 at $1 per ton, and now it's $4. And since this started, as energy prices have gone up, carbon values went up with them."
Payments are icing on the cake for farmers. But the overall, altruistic goal is to reduce carbon emissions that some scientists say cause global warming.
That was the primary issue of debate for Farm Bureau policy makers, who said they feared that working to trade carbon credits would give the impression that Michigan Farm Bureau agreed with the "theory of global warming."
But worrying about political terms isn't the best way to confront the issue, Miller said.
"I know there is some dispute on how warming would affect climate change," he said, "but there is no dispute that there is increasing carbon dioxide in the atmosphere. Taking that atmospheric CO2 and putting it into the soil is a good thing, so to me, the bigger debate is that if we do nothing, the government may impose carbon taxes. By trading in carbon, we have a proactive way to let the markets determine carbon levels in the air. The Exchange is self-regulated, and the federal government is not involved. Carbon levels are reportable, but not mandatory yet. Some people think the EPA will impose some things, and maybe put some caps on emissions, and that's more likely with a Democrat Congress than with a Republican one. But for now, let's let the markets work."
The beauty of the free market, Vollmer-Sanders said, is that farmers can take advantage of carbon credits and don't have to worry much about price volatility. Also, if corporations that buy credits can advertise their commitment to the environment, why can't farmers brag a little and solidify their image as the world's best environmental stewards?
Overall, Piggott said, trading a farm's carbon credits appears to be a good opportunity for producers. Farmers can get paid for what they're already doing, or they can switch to no-till to gain cash and environmental advantages. And if they simply plant trees or perennial grasses, they'll gain much-deserved notoriety for providing the greatest solution to industrial pollution since the combustion engine came on the scene.
And if farmers can clear the air about their environmental stewardship, keep the government regulators at bay and collect some cash, why not?
How Carbon Credits Work
1. Farmers sign a five-year contract with the Chicago Climate Exchange (CCX) or the Delta Institute in which they promise to use no-till farming methods on annual crops; or commit to keeping grasses or woodlands that were planted after 1999 unplowed until the contract expires. Currently, the Iowa Farm Bureau Federation and the Delta Institute (Illinois) are aggregating (brokering) agricultural offset credits. Delta Institute has a Lansing satellite office. Call Todd Parker at 517 482-8810.
2. Farmers can pick and choose which parts of their farms go under the CCX contract. The CCX will send someone to the farm to verify the practices before the contract is finalized.
3. The check's in the mail. Be patient.
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