Although the Bush administration has refused to commit the United States to participation in the Kyoto Protocol to limit greenhouse gas emissions, at least tentative steps in the private sector could pave the way for a source of additional long-term income for some farmers via carbon sequestration credits.
How it works: Companies that emit large quantities of carbon dioxide and other greenhouse gases sign agreements with farmers to grow trees or no-till crops that would offset emissions from power-generating and other industrial plants. Depending on usage, many tons of carbon per acre could be held in the soil, generating “credits” for companies burning fossil fuels.
It's all so new, no hard and fast figures exist for payments, but a World Bank study estimated that one carbon credit could generate from $500 to $2,500 per acre over a four-year period, with potential for higher payments as the worldwide clampdown on emissions tightens.
The U.S. administration's intransigence on the Kyoto Protocol, which has been ratified by 100 or so countries, opened the door for Great Britain and Europe to take the lead in emissions trading. The world's first organized trading system was launched in Great Britain in 2001 and the European Union plans full-scale trading by 2005. Canadian companies have also been active in carbon credits agreements, including some in the United States, mostly in the Midwest.
Rather than wait for Washington to act, a number of major companies, along with several cities and states, have moved on their own to institute measures to limit emissions. Continuous electronic trading of greenhouse gas emission allowances and offsets is scheduled to get under way Oct. 10 by the new Chicago Climate Exchange (CCX), providing a marketplace for companies to buy and sell credits in order to find the most cost-effective way of achieving reductions.
In 2002, the huge Southern energy company, Entergy, based in New Orleans, entered into a 10-year lease of carbon dioxide credits generated through the direct seeding of cropland in the Pacific Northwest. Each participating acre is expected to sequester 55 tons of carbon per year. Another company, American Electric Power, purchased 2 million acres of trees in Bolivia for carbon sinks; it also has projects in Brazil and Louisiana.
“What is mostly going on with this issue now is talk and speculation,” says John Anderson, assistant Extension professor of agricultural economics at Mississippi State University. “A fair number of people do seem to be interested in the concept of paying for carbon sequestration, but right now there doesn't seem to be a lot of incentive for companies, or anyone else, to do so. When the United States opted out of the Kyoto Protocol, with its fairly binding restrictions on emissions, that removed much of the motivation for pursuing the issue.”
But, Anderson says, placing limits on emissions will continue to be an issue of interest and although there don't seem to be any immediate opportunities for Mid-South farmers, “It's something to keep an eye on.”