Cover crops are growing in popularity to fight climate change. They now account for twenty-two million acres of land, a 43% increase from past years.

So, what exactly is a cover crop?

A cover crop is a crop planted without harvesting.

While that may sound silly, farmers can benefit from doing this. Cover crops can restore soil and reduce erosion. Plus, they remove carbon from the atmosphere. Because of this, when farmers plant cover crops, they qualify as a carbon offset project. This means the crops can generate carbon credits and create additional revenue.

Popular cover crops include barley, oats, legume, radishes, and rye. Some crops are converted into biofuel or fed to animals. However, leaving the crops to break down in the soil is best for the environment.

Companies, including Bayer, Land O’Lakes, and Cargill, Inc., launched carbon farming programs to offset their own carbon footprint. These programs pay farmers to capture carbon through cover crops.

For example, in 2021, Truterra (a Land O’Lakes subsidiary) paid $4 million to farmers for cover crops – capturing 200,000 metric tons of carbon.

Some critics say cover crops could cause an issue with the supply of seeds. They are also worried that the use of farm chemicals will increase. However, many environmentalists believe that the benefits of cover crops outweigh any risk.

Many in congress recognize the role cover crops can play in reducing carbon.

The Build Back Better legislation put forth by the Biden Administration allocated $28 billion for land conservation programs. $5 billion is to pay farmers and landowners to plant cover crops.

Right now, no one is sure if the bill will pass.

Estimates say by 2030, between 40 and 50 million acres of land could be cover crops.

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As you might have heard already, last year was an incredible one when it comes to voluntary carbon markets.

According to the analysis group Ecosystem Marketplace, the value of the market has reached one billion dollars already.

Best part?

We’re still only at the beginning.

And with big events such as the COP26 taking place and setting rules for companies…

The demand for carbon offsets will keep on getting higher in the years to come.

The Paris Agreement means that the carbon market will need to grow a hundred times bigger by 2050…

And the big players are getting in as well, including the big banks like HSBC and Barclays.

Now, we’ve been talking about understanding what carbon credits are for some time, but there’s a few questions that we keep hearing.

Let’s tackle them in order.

1. How Do You Get Carbon Credits?

The long answer would be planting an entire forest, getting the government’s seal of approval, and then selling the obtained credits to companies.

Luckily, there are other options.

For the quick reminder, a carbon credit represents 1 ton of carbon dioxide – CO2 emissions – removed from the atmosphere.

This can be done through several methods, such as planting forests, waste management or wastewater treatment.

When it comes to getting carbon credits, a lot depends on location.

And on top of that, carbon credits were controversial for years.

In the US, cap-and-trade programs are emerging, such as the Regional Greenhouse Gas Initiative, or the Western Climate Initiative, which is a joint program with Quebec.

And while national programs did exist in some countries such as Canada or Australia, private markets grew alongside them.

So another option for getting carbon credits is to buy them individually.

You can do this through third-party websites such as Nori, GoldStandard or Southpole.

In Europe – which is home to the largest carbon market – the EU ETS framework is used, and works on cap-and-trade as well.

Which brings us to our second question.

2. Can I Sell Carbon Credits?

If the country you reside in allows you to, you can sell your carbon credits to the government.

This is the case in the UK, Australia or Canada.

In the US, it is not possible yet.

But that doesn’t mean you can’t sell carbon credits. It means that the markets are organized by public and private companies.

And it does not mean less money, at all.

After all, selling carbon credits is part of the way Tesla got so far ahead, for one.

Since the carmaker receives them for free – in the form of credits for vehicles that emit fewer amounts of CO2 – they are able to sell them for a full profit.

Who do they sell to…?

The competition, basically. Large carmakers are the buyers, such as Stellantis, who bought more than $2 billion worth of European and U.S. credits from Tesla in the last two years.

And as regulation tightens around carbon emissions, you can be sure that you will see more and more companies basing their profit around carbon credits.

And while it may be easier to buy them for a company, an individual can do so too.

We just touched on the subject briefly, so here’s the last one.

3. Are Carbon Credits Worth Anything?

We answered part of this question by mentioning the growing demand as well as Tesla’s example, but that’s not all there is.

You probably already know that the carbon markets are growing at an incredible pace, but you may wonder where that leaves the credits themselves.

Because buying carbon credits can seem complex, and the prices vary based on market dynamics, it can be hard to estimate what they are worth exactly.

According to Ecosystem Marketplace, the average weighted price for one carbon credit – one metric ton of CO2 removed – is around $4.73 in 2021.

That’s only one estimate, of course, and others price it higher.

Considering the demand for carbon offsets is expected to rise as we get closer to net zero, the prices will grow accordingly.

How much?

Well, according to a study named Future Demand, Supply and Prices for Voluntary Carbon Credits – Keeping the Balance this growth in demand should mean that carbon credits should rise to between $20 if we take their lowest estimate …

To $50 per metric ton by 2030.

Which would mean a more than tenfold increase.

That would also mean a $100-180 billion market by 2030, according to this study as well as Bloomberg Green.

What’s more is that offset prices are likely to continue growing for the foreseeable future.

In conclusion, while the carbon market is still a relatively new one, – and to some still a “wild west” – it is a growing one.

While the future may hold surprises and maybe the reliance on offsets will lessen as we develop new ways around the issue, one thing is clear.

Carbon credits are here to stay.

If you want to learn how to invest money in carbon credits, you can read our in-depth article about it.

The post How You Can Benefit From the Booming Carbon Credits Market appeared first on Carbon Credits.

A few decades into the growth of the carbon market, and most carbon offsets are still nature-based.

Yes, there’s growing interest in removal techniques like CCS (carbon capture and storage) and DAC (direct air capture). But for the foreseeable future, the world of carbon offsets will continue to be dominated by nature-based solutions.

And until very recently, nature-based offsets have meant primarily one thing: trees.

Forestry-based credits – the original carbon offsets

Forest-based credits have been around for decades in one form or another. They began, formally, under the Kyoto Protocol.

The Kyoto framework turned out to be not entirely kind to forestry-based credits themselves, but the idea of using forests to combat greenhouse gas emissions quickly took root.

As with most nature-based carbon credits, forestry credits take two primary forms:

Preventing Deforestation
Afforestation/Reforestation

Prevent a chunk of the Amazon rainforest from being cut down, and you’ve saved all the carbon dioxide currently trapped in the trunks of those trees.

That’s basic prevention; but in cases where forests existed historically, credits take the form of reforestation. If you’re planting trees where there never really was a forest, that’s afforestation – planting a whole new potential carbon sink.

It’s partly that last idea – afforestation – that has led to increasing scrutiny of the entire idea of forest-based credits.

For years, the logic went something like this:

One tree can absorb anywhere from 400 pounds to 1 ton of atmospheric carbon emissions over the course of its life. Most of that absorption occurs after about 40 years, once the tree reaches maturity.

Extrapolate that out a bit, and you’ve got the potential for hundreds of tonnes of CO2 emissions trapped in every hectare of mature forest. And as an added bonus, the CO2 sequestered in the trunks of the trees remains there in the form of lumber, only gradually being released as trunks and boards decay. 

Given those numbers, an obvious way to fight climate change was to plant empty land to forests. Even other kinds of natural environments – including grasslands – didn’t have the potential biomass and CO2 absorption of forests.

But these days, scientists and market analysts alike are starting to take a closer look at the numbers. After all, trees don’t grow everywhere; does that mean that the only way to fight climate change is to plant every bit of public and private land to trees?

Missing the (climate) forest for the trees

If the only weapon in the offsets arsenal is forests, then we’re in trouble. It would require planting 40 billion trees per year to offset human-caused CO2 emissions at current rates.

That many trees would quickly exhaust available land, and the full effect of those carbon sinks wouldn’t be seen for the better part of four decades.

In addition, a few decades of large-scale tree planting efforts have demonstrated a number of potential drawbacks with forest-based credits. 

Monoculture and improper forest choice

Forests are good, but not all forests are equally good everywhere. Carbon projects that rely on rapid afforestation efforts can fall into the trap of prioritizing tree monocultures – one type of tree, typically rapid-growing, planted in vast plantations.

Planting the wrong kind of tree can further complicate matters, resulting in forests with depleted biodiversity or ones that are poorly suited to a particular climate.

Potential for rapid degradation

Those factors, in turn, add to the risk of rapid degradation. Forests established as carbon sinks can quickly see all their gains reversed due to disease or wildfires, risks that are increased when compounded by monoculture forestry practices.

One ill-timed forest fire can see all the greenhouse gas reductions of a forestry-based offset literally go up in smoke. 

Displacement

The human factor comes into play as well; to plant new forests, you need land that is currently un-forested. But not all un-forested land is just sitting vacant and empty.

It may be used for agriculture, pastorage, living space, or some mix of all three. Aggressive forestation projects can sometimes lead to the displacement of current populations and the loss of native grasslands.

Criticisms of the over-reliance on forest-based offsets are nothing new. Some of those criticisms have been answered by better and more rigorous offsetting frameworks, from REDD+ to the recent Glasgow Agreement.

But others have begun to look beyond forest-based credits at other widespread ecosystems, and wonder if the old calculations on biomass and potential carbon storage still hold true.

Expanding nature-based offsets: grassland and forestry-based carbon sinks

Current estimates indicate that at the conclusion of the last ice age, the earth’s surface was a little over half forests. That percentage has steadily declined, and the percentage of other common ecosystems has more-or-less increased.

Grasslands, in particular, have always been a major landform. When combined with shrubland and marginal lands, they cover the vast majority of the non-forested surface of the earth.

At first glance, grasslands may not seem like an ideal carbon sink. Trees make sense – tall, towering behemoths with immense amounts of C02 locked away in their trunks. Even the tallest grasses can’t come close, making grassland-based offsets something of an odd choice.

But in recent years, two major factors have begun to transform how offset programs on the voluntary carbon market (VCM) view grasslands.

The secret source of grassland biomass

First, the biomass question. Yes, trees are the more obvious warehouses for CO2, locked away in their towering trunks. Grasses, on the other hand, tend to be short, often without wooden stems that would appear to be a natural repository for CO2. 

A closer look at grasslands reveals that there’s far more going on beneath the surface. Grasses, unlike trees, keep the vast majority of their collective biomass underground in extensive root systems. Add in the tendency for grass to grow in dense concentrations, and the apparent difference in available biomass starts to diminish.

The fact that grasslands lock most of the CO2 they absorb away in underground root systems, rather than visible trunks, gives grassland-based offsets one more key advantage over forest-based offsets; resiliency.

Grasslands: a more resilient offset

Perversely, ongoing climate change increases the demand for forestry-based offsets in both the voluntary and regulatory markets, while also increasing the pressures on those very forests.

Warming forests are more susceptible to disease and insect infestation, degrading the quality of existing forests. And the warming climate, among other factors, has led to the recent significant rise of forest fires.

Fires carry a double punch; by destroying entire forests, they not only remove a carbon sink for future emissions, but they also release tonnes of carbon into the air at once.

Grassland projects, on the other hand, can largely avoid the fire problem. When a grassland burns, the root systems are left largely intact. Grass regrows quickly in most cases, meaning that a burned-off field recovers in a matter of weeks or months, rather than the years and decades it can take a mature forest to re-grow.

Forests may get most of the press, but grasslands are proving to be resilient carbon sinks. A California study examined four scenarios in a warming climate that compared forest resilience to grasslands; in three of the four, grasslands proved to be more resilient in the face of ongoing climate change.

Origins of grassland-based carbon offsets: from protection to restoration

The progression of grassland-based carbon credits on the voluntary markets has followed the same path as forestry-based ones. The first grassland offsets focused on protection and preservation.

A carbon sink saved is one that doesn’t have to be created again in the future. With grasslands, the primary threat is agriculture. 

Agriculture isn’t as bad as paving a field over to make a parking lot, but in terms of CO2 emissions, tilling for crops disturbs the root systems that trap carbon underground. The loss of soil carbon is compounded by the use of carbon-emitting machinery burning fossil fuels. 

To preserve grasslands as-is, offset projects tend to focus first on preventing the conversion of grasslands to tilled fields. Projects take existing grasslands – typically well-established ones – that are under some threat of being converted to a different use, and award credits for landowners who keep them in their current state. 

As a second step, grassland carbon credits might be rewarded for agricultural techniques, such as no-till farming, that preserve underground biomass. These techniques are nothing new, although the technology required to accurately monitor underground carbon sequestration is still under development.

The final stage in the development of grassland-based offsets seeks to expand and restore historic grasslands. Typically, this involves converting existing cropland to grassland, or (in some cases) to pastorage or crops such as hay that require less direct planting and tilling.

Advantages of grassland offsets

It’s that last idea – integrating carbon sequestration potential with existing human use – that makes grassland-based offsets so appealing. Forestry-based offsets are often used the same way, with monoculture tree plantations functioning as carbon sinks and then harvested en masse.

Grasslands offer the same cycles of growth and harvest, but with the added benefit that cutting hay in a field does little to disturb the carbon locked away in the soil.

Grassland-based offsets offer the potential to work alongside current human usage in a way most forestry-based offsets cannot. This has given grassland sequestration initiatives key advantages over forestry counterparts.

There’s no need to lock up a chunk of land in a Sitka pine forest for 30 years; instead, farmers and ranchers have the chance to continue using land for pastorage or no-till farming while also selling offset credits on the VCM. 

In short, these credits aren’t necessarily primarily focused on virgin prairie grassland preservation, though some of those efforts might be included. More often, grassland protocols include provisions for livestock grazing or hay-cutting, attempting to create reliable carbon sinks without completely transforming current land use.

This gives most grassland sequestration efforts a community appeal that may not be possible with forestry-based efforts. Well-designed grassland programs openly acknowledge that the co-benefits of such projects include maintaining the key aspects of current communities, such as ranching and farming, rather than asking them to uproot or change lifestyles entirely.

Adjusting rangeland practices to encourage soil health and improve rates of carbon sequestration, while also providing financial incentives, turns out to be an easier pill for many rural communities to swallow.

It’s no coincidence that many of the key drivers behind grassland-based offsets are rural ranching and farming communities, as well as the government agencies tasked with supporting them.

Pilot projects have included partnerships between organizations as varied as Ducks Unlimited and the Climate Action Reserve. One such early program, initiated in 2011, was conducted under the auspices of the USDA. In Canada, key programs have been set up by the Canadian government’s own Agriculture and Agri-food Canada department. 

That level of direct community and government involvement is harder to achieve with forestry-based credits, where tensions between forest preservation and agricultural lifestyles are more direct and harder to resolve.

Benefits of grassland offsets

On the broader VCM, grassland-based offsets provide a number of benefits, including:

Adaptability – Grasslands are variegated, including everything from dense prairies to pastoral cropland, and occur across a variety of climates.

Resilience – Most grasslands have proven to be less susceptible to extreme weather, including prolonged drought and wildfires, which have at times devastated forestry-based credits.

Integration – Many grassland offset projects can be integrated with current farming techniques, including no-till farming and livestock grazing.

Expanding the role of nature-based offsets

Grassland sequestration projects form part of a growing world of nature-based offsets. The image of a pristine forest as the best – or even the only – kind of nature-based offset is rapidly changing.

Forests will continue to play a vital role in the VCM, but nature-based offsets are beginning to grow beyond forestry alone. In addition to grasslands, there’s renewed interest in the peat bogs found around the globe and more traditional wetlands. Frequently, the search for new kinds of natural carbon sinks is spurred on by weaknesses in a forestry-first approach.

In the meantime, grassland conservation provides a uniquely applicable real-world carbon sink, one that many ranchers and farmers in North America and beyond can adapt to comparatively quickly. And the timescale for many of these projects is much faster – years to restore vibrant grasslands, compared to the decades necessary to regrow a forest.

Grassland-based offsets form part of an emerging frontier for carbon sequestration, blending positive climate activism with real-world adaptability. Call it a realpolitik for the VCM, with grasslands at the heart of it all. 

The post Grasslands: An emerging frontier for nature-based carbon Credits appeared first on Carbon Credits.

Section 45Q of the US Internal Revenue Code offers a tax credit for each metric ton of carbon captured and sequestered.

It ranges from ~$12 up to ~$50 for every ton of carbon captured and stored underground. These credits can be claimed even if the carbon is used to push oil out underground.

California lawmaker Ro Khanna would like to change that.

His new bill is called the “End Polluter Welfare for Enhanced Oil Recovery Act.” If passed, carbon capture used for oil production would no longer receive a tax credit.

Over 95% of carbon capture and storage in the US is used for enhanced oil recovery. So, if Khanna’s bill were to pass, it would affect many companies.

Khanna told Reuters, “We shouldn’t be subsidizing enhanced oil recovery (EOR) if this is going to be increasing carbon.”

Environmentalists agree. In fact, twenty environmental groups have expressed their support for this bill.

They feel this practice defeats the purpose of carbon capture by increasing the use of fossil fuels. In the past, critics had felt this way about carbon offsets too. However, increased regulation and improved verification methods have changed that.

The bill’s co-sponsors include Rail Grijalva of Arizona and Mike Quigley of Illinois. Like Khanna, both are democrats. Grijalva is also chair of the House Natural Resources Committee.

There are deep divisions within the US House and Senate concerning environmental initiatives.

Some senators have discussed eliminating part of 45Q that requires facilities to capture at least 75% of their emissions to qualify for the tax credit. Senator Joe Manchin of West Virginia is said to be part of these discussions.

Khanna believes his senate colleagues are going about this the wrong way and hopes his bill will be adopted into the Senate’s version of the Build Back Better Act (BBBA).

Since Khanna’s bill varies significantly from the 45Q expansion discussed by the house, its chance of being signed into law is slim.

The post US Bill Could Eliminate Tax Credits for Oil Recovery appeared first on Carbon Credits.