Crops > Costs & Returns > Carbon Market Information
Written January, 2023
File A1-78
Net Returns to Carbon Farming
The accompanying spreadsheet (AgDM Decision Tool A1-78, Net Returns to Carbon Farming in Iowa) is a decision tool to evaluate the net returns to a carbon farming contract, based on the following attributes:
a. Farm location, by county,
b. Current farming practices: tillage management, cover crop use, irrigation, compost and manure use,
c. Contract type: per outcome or per practice,
d. Contract length,
e. Additional regenerative practice, from a list of 66 practices for working croplands,
f. Frequency of additional practice implementation,
g. Contracted price: price per ton of CO2e or price per practice,
h. Expected change in contract price,
i. Farm area enrolled in carbon contract,
j. Participation in cost-share programs: area, contract length, annual payments,
k. Expected changes in cash and non-cash cost,
l. Discount rate.
The specific methodologies to measure CO2e removal vary across carbon programs (see File A1- 76, How to Grow and Sell Carbon Credits in US Agriculture and File A1- 77, How do Data and Payments Flow through Ag Carbon Programs?), but they always involve the comparison of GHG emissions from the current production system (baseline) against the emissions from a modified production system with additional regenerative practices. The decline in emissions from the baseline to the modified production system is the carbon farming output, conceptually equivalent to a "yield" in crop production.
The Decision Tool, Net Returns to Carbon Farming in Iowa is designed to evaluate only one carbon contract at a time. To evaluate multiple carbon contracts, the user is advised to save each alternative as a separate spreadsheet file. Decision Tools for additional states are listed below, and more information is also available on the Ag Decision Maker Carbon Market Information webpage.
Other States
Alejandro Plastina, extension economist, 515-294-6160, plastina@iastate.edu
