By Chastain Spiller
Everybody is talking carbon credits. Are they right for your operation?
Clouds of dry dust billow into the hazy blue sky as what used to be a productive hay field in a creek bottom is leveled out to build a housing development. Just over a five-strand barbed wire fence graze a herd of cattle under the care of a rancher who has just added his new neighbors to his already long list of potential problems. Across the country, farmers and ranchers are scraping by, holding their breath and hoping that they can make it to the next year without their land becoming another finger of that urban sprawl.
Land, water, labor, and capital are resources that continue to become scarcer in an industry where some years just breaking even is a blessing. However, with the urging of the public, environmental organizations and national governments across the globe are increasing the pressure for companies to reduce their carbon footprint. This shifting policy may be a new opportunity for ranchers to supplement their income—or it may be a burden too heavy to bear.
What is a Carbon Credit?
illustration by Reace Killebrew
The term ‘carbon credit’ has been tossed around more and more over the past few years, but usually without a clear definition, so let’s break it down. Put simply, one carbon credit represents one metric ton (1,000 kg) of CO2—or CO2 equivalents that are removed from the atmosphere.
David DeLaney provides a great illustration in the King Ranch Institute’s virtual lecture on this subject by describing carbon credits in terms of accounting. Think of the atmosphere itself as an account, he says. CO2 that is released into the atmosphere can then be considered a ‘debit’ and CO2 removed from it, a ‘credit.’ Companies all over the world are looking to purchase these ‘credits’ to offset the ‘debits’ they emit in the course of producing whatever product they make in order to reach ‘net zero’ emissions.
How do Carbon Credits Work?
The biggest advantage that ranchers have in this new market is that they already live and work on the most efficient CO2 collection device that exists: the range itself. Grass, just like any other plant, needs CO2 to undergo photosynthesis. This process of taking in CO2 traps carbon in the form of carbohydrate molecules that migrate into the soil and become ‘soil carbon.’
Once a baseline soil carbon measurement is determined, the amount of soil carbon that has been added is how carbon credits are distributed. Keep in mind that the measure of soil carbon and CO2 are not equivalent (one ton of soil carbon equals 3.67 tons of CO2) and carbon credits are expressed in units of CO2.
There are two terms in carbon credit contracts that are essential to understanding how carbon accumulation qualifies to be registered as a carbon credit: additionality and permanence. Additionality can essentially have one of two definitions; it either means the only CO2 that can be credited is what is accumulated past a baseline estimation, or it could simply reference the accumulation of soil carbon above current measurements.
Permanence, or how long that accumulated soil carbon is held by the soil, is the other major factor in the standards that are set for carbon credits. These two words in a carbon credit contract can not only change the amount of carbon that ranchers can get paid on, but they may also make certain practices or uses of the land under contract prohibited depending on how they would change the permanence of the soil carbon.
How Can Ranchers Figure This Out?
The primary factor that ranchers should consider is the actual physical capacity of their land to accumulate soil carbon above what it already holds. Wetter, deeper, and more dense soil such as clay will typically have a higher accumulation and carbon-retaining capacity than loose, dry, sandy soils. Inherently, land that can sustain more carbon credits becomes more valuable. However, environmental factors such as drought, soil disturbance, and previous soil management can drastically change the potential for carbon credit production.
Secondly, ranchers need to determine if entering into a carbon credit program is practically feasible for them with their current management style. Usually, the responsibility of the rancher under these contracts boils down to paying for soil samples to be measured and ensuring that the agreed-upon management practices are being followed. This, however, is where many find an issue with the carbon trade. These contracts can severely limit what can be done with the land under a carbon credit contract and may even hurt the rancher more than help. Because changes in soil carbon levels can be very difficult to measure, that can result in more costly samples to be taken, more management practices to be changed (and paid for by the rancher), resulting in more money invested in a contract that may not pay out in the long run. In the case that carbon levels decrease, some contracts may hold the rancher financially liable for the loss of carbon in the soil.
The emerging market that emission-reduction programs have created presents an opportunity for ranchers to supplement their income in a similar way to wind turbines, solar panels or even minerals. However, the investments that must be made to meet the criteria for each contract could positively or negatively impact the rancher in terms of the overall value of a contract depending on the land type and size, current management, and the length of the contract. Not to mention variances in weather. As they say, there’s no such thing as a free lunch.
As with any new market, ranchers must be careful, seek qualified counsel, read the fine print and evaluate the level of risk and investment they are willing to take for the possibility of a profit from this new potential income stream. ★
This article appears in the Fall 2022 issue of the Ranch Record. Would you like to read more stories about NRHC and ranching life? When you become a member of the Ranching Heritage Association, you’ll receive the award-winning Ranch Record magazine and more while supporting the legacy and preservation of our ranching heritage. Become a member today.
