Understanding How Ecosystem Markets Pay for Carbon Capture

There is a lot of excitement these days around how farmers can be paid for their stewardship practices. But it can be hard to tell what is real, what is noise, and what actions farmers can take. I sat down with Lauren Brown, our Sustainability Manager, to get her thoughts on what farmers should know today.

Can you share a brief summary of what an Ecosystem Services Market is?

Ecosystem services markets are virtual exchanges where farmers can sell credits, most commonly for carbon sequestration, to buyers. Farmers gain these credits by adopting practices that meet specific criteria or create quantifiable results toward increasing organic matter, improving water quality, and other environmental benefits. Credits are then sold in a marketplace to compensate farmers for the sustainable changes made on their farm. 

And who are some of the main players in the space?

There are many players in the space, from new organizations like Nori and CIBO, to more established companies like Nutrien and Land O’Lakes. ESMC and the Soil and Water Outcomes Fund are looking beyond carbon credits at the potential of integrating water quality credits as well. 

What are some of the practices that farmers are rewarded for?

Some of the most common practices that are recognized in these markets are introducing a no-till or reduced till practice, integrating cover crops, and reducing fertilizer inputs.

SOURCE has the ability to provide 25 lbs of N Reduction — can it be used for carbon credits? 

Reducing synthetic nitrogen fertilizer application has the potential to earn credits for reducing carbon emissions. Excess nitrogen fertilizer can be lost to the atmosphere as nitrous oxide gas, a greenhouse gas that’s 300x more potent than CO2. Some companies are developing water quality credits for municipalities or companies interested in reducing nitrate levels in waterways for improved drinking water quality and to combat challenges like harmful algal blooms. These initial programs are designed to stack water quality credits with carbon credits to offer the most value to a grower for management changes. 

What is SOURCE doing to help farmers capture this value?

This year, we are collecting more in-field data on nitrate runoff and greenhouse gas emissions to provide a clearer picture of the impact SOURCE can make by reducing applied nitrogen fertilizer. 

Why are farmers interested in these markets?

There are several reasons why farmers are interested in the development of these markets. Most simply, being able to generate and sell credits represent a valuable additional revenue stream. However, other benefits beyond credits can come from adopting these practices. First, reducing fertilizer leads to fewer input costs, which can enhance farm profitability. Next, healthier soils that result from these practices can lead to more resilient crops and improved yields. Finally, it allows farmers to stay ahead of future regulatory actions by preparing their operation for potential changes. 

Do you have any advice for farmers looking to engage in the space?

Those who are ready to jump in now can get started with one of the many programs that are open for application. Being eligible requires a farmer to implement certain sustainability practices. Some programs will also give credit for changes made in the last 5 – 10 years. Most require contracts, but vary on who owns the credit, sets the price, etc., so it’s important to understand the contract terms. All will require data for validation, which may include physical tests like soil samples for baseline carbon measurements, management practices, or the use of satellite images to verify cover crop adoption. For those waiting for the ​“dust to settle”, we recommend taking the following steps:

• Record: Get in the habit of recording practices, fertilizer rates, crops, and other important aspects of your operation so that you can demonstrate how you are implementing conservation practices and soil quality.
• Research: It’s important to understand what it would take to alter your practices to qualify for credits and what other benefits they might bring to your farm. Your local extension or agronomist is a good first step in identifying resources to understand how to implement such practices and their impacts.
• Test: Getting a soil test is always a good idea because it allows you to take a more science-based approach to fertility needs. Many products, including SOURCE, perform differently as soil conditions change. In fact, we recently put our Performance Optimizer tool in the hands of farmers, which allows them to see which fields will gain the biggest impact from SOURCE based on pH, OM, and CEC.
• Take small steps: The easiest way to begin in this space is to start small and try things that can help you learn without requiring large changes. Using SOURCE as a way to reduce nitrogen inputs and improve soil health is a simple step that fits in with current practices.

We’re excited about the potential of ecosystem services markets to help farmers and the environment. In this rapidly evolving space, we are forming partnerships to make SOURCE an easy part of your profitability and sustainability journey. If you’d like to learn more about SOURCE, please contact us at source@sound.ag.