Market is Looking Up for Carbon Credits

Feb. 21--Nobody's getting rich keeping carbon in the soil, Steve Swaffar said, but the market is apt to change for the better.

The director of natural resources with Kansas Farm Bureau told 13 people Friday how farmers, ranchers and landowners can fetch payments for not tilling their soil or by using other conservation practices.

The checks might help pay property taxes or pay for a "vacation" to Wichita right now, he said, speaking at the 4-H Building in Kenwood Park. But if the federal government makes greenhouse gas reductions mandatory, the market could climb. Currently, carbon is not regulated.

"That's why this is primarily a voluntary market," Swaffar said.

If the government mandates reducing emissions in a "cap and trade" form, there is a chance for higher payments. If a straight tax on pollution is imposed, the carbon market will dissolve, he said.

Carbon dioxide is among the greenhouse gases that contribute to global warming. One of many ways to keep it out of the atmosphere is by not tilling the land.

"You're storing it in the soil and not releasing it," Swaffar said. "It's something you can't taste, touch or smell, but it's real."

A number of companies that produce carbon dioxide -- among them Ford Motor Co., American Electric, Dupont, Motorola and the city of Chicago -- are founding members of the Chicago Climate Exchange carbon market, which started in 2003.

Those 14 founding companies signed a voluntary but legally binding agreement to reduce their carbon emissions by 6 percent by the end of 2010. More than 200 other companies have since become "emitter members," including Cargill, IBM, Monsanto and Safeway Foods.

They got in the game expecting a regulatory mandate and wanting to get ahead of it and also to use carbon sequestration as a marketing tool, Swaffar said. In other words, being able to say "our product is produced in a more greenhouse gas-friendly manner," he said.

Half of the carbon reductions must be internal, Swaffar said, and half can come from external purchases of carbon credits. That's why the companies are willing to pay farm operators, ranchers and landowners not to release carbon.

"It is one way to offset what somebody else is doing," Swaffar said.

Getting credit

Farmers who don't use tillage, for example, can gain valuable credits that compute to $2 a credit each year, Swaffar said. For no-till land in Saline County, each acre is worth 0.6 of a credit. The tanking economy, presidential election and other political issues pushed the price down.

To trade on the exchange requires a membership in the exchange, which costs in the range of $50,000, which prevents most individuals from trading directly.

Kansas Farm Bureau is in a partnership with AgraGate Climate Credits, West Des Moines, Iowa, to buy credits and trade them. Owned by the Iowa Farm Bureau, AgraGate became a for-profit company in 2007.

Last year, AgraGate paid out $4.2 million in carbon credit payments to farmers, when the average sale price was $4.63 a credit.

Land farmed with no-tillage or strip-tillage practices, new grass planting, rangeland, even forestry and trapping methane gas, has a value on the Chicago Climate Exchange.

AgraGate has 260,000 acres of no-till and strip-till land under contract in 71 Kansas counties, 1,000 or fewer in Saline County.

The program snared Ellsworth County rancher John Svaty's attention. He attended the meeting to research whether a contract would fit into his operation.

"If carbon credits go up, it could be a possibility," Svaty said. "I'm probably going to enroll now, in hopes that the rangeland credits go up."