Center for Regenerative Agriculture and Resilient Systems

Carbon Markets

In 1997, 180 countries signed the Kyoto Protocol that established the first international carbon market system. The idea behind that system was to set a limit on how much greenhouse gas emissions an entity (a business or an entire country) can emit without penalty as well as a way for entities to be paid for reaching their goals more quickly. Each ton of greenhouse gas prevented from being emitted or removed from the atmosphere equals one carbon credit, and the countries and companies that agreed to participate in mandatory emission reductions use those credits to represent their compliance. However, carbon credits are also given a monetary value (variable depending on how they are determined) so that entities who more quickly meet their goals can sell their extra credits to those who do not or cannot do so. There is also a voluntary carbon market that individuals and businesses who are not under mandatory compliance can use to support climate-beneficial practices and to voluntarily offset their unavoidable emissions. This is known as "cap and trade" and when such systems are well-designed they have been shown to be effective both monetarily and for the environment.

This is not to say that most programs are well-designed or that there are no problems. Well-designed systems have accurate emissions monitoring and significant violation penalties which lead to high compliance. They also price carbon credits at a high enough rate to incentivise both innovation and compliance. At the present time, however, credits are often priced very low. Farmers, for instance, are frequently not paid well enough to cover the cost of switching to carbon sequestering practices using the carbon markets alone (currently averaging about $15/acre). Such rates don't amount to much except for farms that have large acreages, and companies do not feel the sting of having to pay for carbon credits enough to reduce their own emissions. Furthermore, emissions monitoring is not consistent or always transparent, and while some progress has been made, the United Nations(opens in new window) reports that so far efforts are falling short of what needs to be done.

On the other hand, a number of organizations are suggesting improvements to the current approach in terms of regenerative agriculture, and some companies are taking moderate steps to implement at least some of those ideas. For example, it is thought that farmers could be paid more if they were paid for their success in carbon sequestration rather than being paid per acre for implementing specific single practices. That is because multiple stacked practices tend to bring far better outcomes. Most companies prefer to pay for one or two specific practices, but some provide free technical assistance to achieve greater success and have embraced the importance of providing careful monitoring and verification of results with higher payments, over time, for results. Others expect the farmers to pay for that testing out of their carbon payments. Farmers are advised to learn as much as they can before signing any contracts.

Meanwhile, organizations such as the California Climate and Agriculture Network(opens in new window) (CalCAN) have been advocating for the U.S. government to scale up and refine farm bill conservation programs (PDF) to address the climate crisis. According to their testimony(opens in new window) at the House Agriculture Committee Hearing on “Voluntary Carbon Markets in Agriculture and Forestry" in September 2021, farmers in California are better financially supported to make the changes necessary by state initiatives such as the Healthy Soils(opens in new window) and Alternative Manure Management(opens in new window) programs. 

Learn about multiple funding sources already available(opens in new window).