Opinion: Trading carbon credits may carry downsides for farmers

Carbon farming, or the sequestration of carbon in agricultural soils and the subsequent sale of “carbon credits”, has hit the headlines with the recent high-profile sale of A$500,000 (£280,000) of credits by the Wilmot Cattle Company of New South Wales, Australia, to US software giant Microsoft.

The deal was brokered by Regen Network and Impact Ag partners, two players in what is becoming a potentially significant global environmental credit market.

It is a market that, in principle, enables large-scale carbon emitters to effectively buy their way out of their emissions reduction obligations by purchasing offsets from others with a potential surplus of carbon sinks… basically anyone who owns land.

See also: Carbon credits – a long-term income option for farmers?

Proponents of the process claim it is a win-win for all parties involved.

Not only does sequestration in soils mitigate the current upward trend in atmospheric concentration of carbon dioxide – the accepted major driver of climate change – but by adopting the regenerative practices necessary to increase soil carbon and create saleable credits, sellers enhance the productivity, sustainability and climate resilience of their soils.

This virtuous circle of environmental bounty and essentially “free money” seems almost too good to be true; something that has certainly not been lost on the financial markets, with companies such as Indigo Ag in the US springing up like mushrooms.

Indigo has raised more than $850m to date to develop the nascent carbon credit market, so there must be a sniff of a return in there somewhere.

However, while this may be an attractive and viable pathway for some, most landowners need to temper any burgeoning enthusiasm they may have for cashing in on this carbon goldrush.

Anything that seems too good to be true almost always is, and in this case, while the upside might seem quite attractive, the potential downside risks should not be underestimated.

Credits for sequestered soil carbon can be sold only once, yet the responsibility, and therefore the liability, of ensuring that carbon stays locked up indefinitely remains long after any cash has been trousered.

Furthermore, as soil organic carbon levels rise, admittedly imparting the agronomic and environmental benefits outlined earlier, so does its volatility, by which I mean its susceptibility to disappear back into the atmosphere at any point in the future, should that soil be disturbed.

Whether intentional or not, this could effectively constitute a breach of the original credit contract with the responsibility for restitution likely to rest 100% with the seller.

Additionally, the soil’s ability to assimilate and hold on to extra carbon will start to diminish over time as it approaches its effective holding capacity.

So, while the longer-term liabilities continue to ramp up, the potential to generate ongoing carbon credit revenue tails off quite rapidly.

The landowner could be left holding a potentially troublesome “carbon foster child” long after the one-off “maintenance” payment has been spent.

This potentially open-ended liability could have profoundly negative long-term implications for both land use and land values.

Increasing soil carbon has many potential benefits, both for farmers and wider society, and as such should be actively encouraged and pursued.

Monetising any increase simply to allow others to keep polluting, however, seems rather short-sighted and could end up literally costing the earth. Caveat vendor… let the seller beware.