{"id":2866,"date":"2023-04-05T14:47:29","date_gmt":"2023-04-05T19:47:29","guid":{"rendered":"https:\/\/agrilife.org\/agecon\/?p=2866"},"modified":"2023-04-05T14:50:50","modified_gmt":"2023-04-05T19:50:50","slug":"high-plains-ag-week-4-5-2023-an-introduction-to-carbon-credits-and-carbon-markets","status":"publish","type":"post","link":"https:\/\/agrilife.org\/agecon\/high-plains-ag-week-4-5-2023-an-introduction-to-carbon-credits-and-carbon-markets\/","title":{"rendered":"High Plains Ag Week \u2013 4\/5\/2023 \u2013 An Introduction to Carbon Credits and Carbon Markets"},"content":{"rendered":"

\"\"Carbon markets have been a trendy topic lately and present producers with a potential new revenue source for their operation.\u00a0 This post briefly describes the basics of what carbon credits are and how carbon markets\/contracts are structured.\u00a0 At the end of the post, I provide a set of links to additional articles that provide a more in-depth discussion of some of the legal and economic considerations related to carbon contracts.<\/p>\n

<\/p>\n

 <\/p>\n

Board Update 4\/3\/2023<\/strong><\/span><\/h3>\n

\"\"<\/p>\n

 <\/p>\n

Tulia, Amarillo, Dalhart Average – Cattle Prices by Category 3\/30\/2023<\/strong><\/h3>\n

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

Dates & Deadlines<\/strong><\/h3>\n

4\/6\/2023 – RWFM Stewardship Webinar Series: Water Law Overview & Update<\/a><\/p>\n

4\/14\/2023 – Owning Your Piece of Texas<\/a><\/p>\n

4\/19-21\/2023 – Prescribed Burn School<\/a><\/p>\n

4\/25-26\/2023 – Hemphill County Beef Conference<\/a>, Canadian<\/p>\n

5\/4\/ 2023 – RWFM Stewardship Webinar Series: Wild Pigs in Texas<\/a><\/p>\n

 <\/p>\n

What are Carbon Credits?<\/h3>\n

A carbon credit is essentially a \u201cpermission slip\u201d to emit one metric ton of carbon into the atmosphere.\u00a0 A business, organization, or individual can purchase these credits to offset their carbon emissions.\u00a0 For example, if a business emits 1 ton of carbon, and it purchases 1 carbon credit, its net carbon emissions is zero.<\/p>\n

Many businesses, such as Amazon and Walmart, have made pledges to achieve net zero carbon emissions, meaning they will remove one ton of carbon from the atmosphere for each ton they emit, by 2050 or earlier.\u00a0 To achieve net zero emissions, these companies look for partners that can produce carbon credits for them to purchase.<\/p>\n

A carbon credit is \u201cproduced\u201d when carbon is captured and somehow stored so that it cannot enter the atmosphere.\u00a0 This is how farms and ranches can enter the carbon market.\u00a0 If a farmer or rancher implements practices on their operation that capture carbon and store it in soil, they can enter the carbon market as a seller of carbon credits.<\/p>\n

Carbon Market Basics<\/h3>\n

Carbon markets are similar in concept to the market for any other good or service.\u00a0 The market is made up of a group of buyers that wish to purchase carbon credits and a group of sellers that wish to sell them.\u00a0 The buyers consist of those businesses and other organizations that have made a commitment to reduce their carbon emissions and are willing to pay to purchase carbon credits to meet that commitment.\u00a0 The sellers in the carbon market consist of businesses and organizations that can capture and store carbon and are willing to accept payment to do so.<\/p>\n

The purchase and sale of carbon credits in these markets is usually facilitated through contracts that, in many ways, are like the contracts used to sell physical commodities.\u00a0 The seller in the contract agrees to take specific actions to capture and store an agreed upon amount of carbon by a certain date.\u00a0 The buyer in the contract agrees to pay a certain price for each ton of carbon sequestered by the seller.<\/p>\n

Should You Sell Carbon Credits?<\/h3>\n

So, can carbon contracts be profitable for producers on the Texas High Plains?\u00a0 Like most economic questions, the answer to this one is, \u201cit depends.\u201d\u00a0 Most likely, entering into a carbon contract will require a producer to make changes to their existing operation, and the cost of making these changes, in terms of both extra expense and lost revenue, may not be worth the extra payment earned from the contract.<\/p>\n

It is also important to remember that a carbon contract is a legally binding agreement.\u00a0 If you enter into one of these contracts, you are committed to fulfilling your contract obligations, and may face legal or financial penalties for noncompliance.\u00a0 Make sure that you read any contract to produce carbon credits carefully so that you know what you are getting into and, if possible, consult a lawyer before signing the contract.<\/p>\n

Further Information about Carbon Markets<\/h3>\n

The ability to capture carbon for sale in carbon markets is a relatively new opportunity for agricultural producers, and navigating these markets can be complicated.\u00a0 If you want to learn more about these markets, the potential risks involved with carbon contracts, and the questions you should ask before entering into a carbon contract, I suggest starting with the following articles.<\/p>\n

Texas A&M AgriLife Extension Ag Law Specialist, Tiffany Lashmet, has written extensively about carbon contracts on her Texas Agriculture Law Blog<\/a>.<\/p>\n