Farmers cashing in on carbon credits - The Milwaukee Journal Sentinel

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Farmers cashing in on carbon credits: Contracts with firms aim to reduce emissions
Feb 5, 2008
The Milwaukee Journal Sentinel
Amy Rinard

Feb. 5, 2008 (McClatchy-Tribune Regional News delivered by Newstex) --

Wisconsin farmers are used to hard work and hard times, but now some are making a little easy money off their land by cashing in on growing environmental awareness and selling carbon credits to big corporations.

"It's been about an extra dollar or two an acre for the farming operation," said Jaran Rundahl, whose large Coon Valley family farm was among the first in Wisconsin to sell carbon credits, putting 2,739 acres under contract in 2006.

"It hasn't been real lucrative, but it's been well worth the effort. And if it can benefit some industry to say that we're helping them to clean up some of their carbon dioxide emissions, it's fine with us."

Increasing concern over global warming has made carbon credits, or offsets, a hot commodity.

Companies, universities and even local governments are trying to reduce their carbon dioxide emissions because they are a cause of global warming. One way to reduce carbon emissions is to offset them by entering into a contract with someone who is doing something to reduce those emissions.

Essentially, if a large company wants to be a good citizen and help reduce global warming, it pledges to voluntarily reduce its carbon dioxide emissions by a certain amount annually. If, after doing all it can to cut emissions from its manufacturing processes and other business operations, the company still comes up short of its goal, it can pay farmers to take steps to reduce their carbon emissions -- and earn credit for the reduction from what the farmer would normally have produced.

Voluntary, but legally binding, contracts for these so-called carbon credits are traded on the Chicago Climate Exchange, and the agreements are subject to audits and verification.

The exchange's current list of 400 members that buy the contracts range from giant corporations to local governments. On the list are DuPont (NYSE:DD PRB) (NYSE:DD PRA) (NYSE:DD) , Rolls-Royce, Ford Motor Co. (NYSE:F PRS) (NYSE:F PRA) (NYSE:F) , Honeywell International Inc. (NYSE:HON) , Bayer Corp. (NYSE:BAY) , Safeway Inc. (NYSE:SWY) , IBM (NYSE:IBM) , Sony (NYSE:SNE) Electronics, Bank of America Corp. (NYSE:BAC) , Monsanto (NYSE:MON) Corp., Amtrak, Michigan State University, the states of Illinois and New Mexico and the cities of Berkeley, Calif., and Melbourne, Australia.

Chad Martin, a soil aggregation specialist with AgraGate, an Iowa-based firm that pools carbon credits offered by landowners into larger contracts for sale on the Climate Exchange, said the number of companies and governments buying carbon credits will only keep growing.

"They see the regulations coming and when they do come, they want to be able to say they're already playing an active role in reducing global warming," he said.

"They want to get as many feel-good points as they can."

The Wisconsin Farm Bureau Federation wants as many Wisconsin farmers as possible to start cashing in on the growing demand.

The Farm Bureau, the state's largest organization of farmers with more than 40,000 members, has started holding informational meetings around the state for landowners interested in selling carbon credits.

The response by farmers, so far, has been overwhelming, said Deb Raemisch, the Farm Bureau's carbon credit contract facilitator.

"My phone does not stop ringing," she said. "It's a supply and demand thing; our landowners and farmers have the supply, and the demand is coming from big corporations."

For cropland to qualify for carbon credits, it must be farmed with no-till or conservation tillage practices. Not tilling up the land each season means the carbon dioxide in the soil is not released into the atmosphere, Raemisch said.

A farmer has to adhere to certain specific land management practices, she said. But many farmers in Wisconsin already are doing this and have been for some time, she said.

"If they're already practicing no-till or conservation tillage, it's a way for them to get paid for just doing what they're already doing," Raemisch said. "So why not?"

Rundahl, who with his two sons raises beans and corn and some feed cattle on their sprawling farm operation near La Crosse, said the family has been farming entirely with no-till and conservation tillage practices for the last 12 years and is pleased with the results.

He said entering into a carbon credit contract required the family to change nothing about the way it farms. Rundahl said the hardest part of the process was completing the contract application, which requires verification of soil types and number of acres.

"But all the time we spent on it was worth it," he said.

Credits for cropland are calculated based on soil quality and number of acres. Credits for forest land placed under contract are based on the age and species of trees. Grassland also may be placed under a carbon credit contract.

Contracts run for five years, but the credit prices are not locked in at the start. Landowners get paid twice a year under the contract at the current price of the credits on the Climate Exchange.

Just like the stock market, the prices paid for carbon credits can fluctuate hourly and have ranged from 80 cents to $5 per credit since they started to be traded on the Climate Exchange in 2003, Martin said.

He said as the market grows, he would not be surprised to see a carbon credit trading for $15 by 2012.

Newstex ID: KRTB-0130-22776371

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