Conservation practices: EQIP and CSP cost-share and stacking carbon payments
While carbon farming is a relatively new topic, most farmers are well aware that there are multiple carbon initiatives trying to enroll aces in conservation practices like cover crops and no-till to sequester carbon or reduce the carbon intensity of agricultural commodities.
As a group, these private, voluntary carbon initiatives offer farmers a large menu of options to contract with them and get paid based on the implemented practices, the carbon sequestered through those practices, or the carbon intensity of the commodities produced.
For example, some initiatives compensate farmers at a rate of $5 per acre to implement cover crops, while others pay $15 per metric ton of carbon dioxide sequestered in the field through cover crops. Since farms in the Corn Belt sequester, on average, about 0.3 metric tons of carbon dioxide per acre with cover crops, a payment of $15 per metric ton of carbon dioxide would be equivalent to $4.50 per acre. Another modality to incentivize carbon farming is to compensate participating farmers with price premiums for "low-carbon" commodities. For example, participating farmers might receive 2.5 cents per bushel as a price premium for "low-carbon" corn, if the corn crop was grown with cover crops or in a no-till system. A farm with an average yield of 200 bushels of corn per acre would receive a "low-carbon" premium equivalent to $5 per acre.
The goal of carbon payments is to induce farmers and ranchers to implement conservation practices that reduce and sequester greenhouse gas emissions in a way that can be verified and certified, so those efforts can be later monetized by selling carbon credits or low-carbon intensity commodities.
Farmers have multiple motivations to adopt conservation practices beyond the economic calculation, but knowing their implementation costs is a great starting point to make informed decisions.
While the USDA incentivizes the adoption of conservation practices through many programs, the Environmental Quality Incentives Program or EQIP, and the Conservation Stewardship Program or CSP are the largest programs for working lands. These programs provide technical and financial support to qualifying farms, and are intended to help farmers address local resource concerns like the degradation of the soil, water, air, plant, animal, or energy resources. Learn more about these programs in AgDM File A1-39 Financial Support for Conservation Practices: EQIP and CSP.
However, these programs do not particularly target carbon sequestration but global environmental benefits. Additionally, private carbon initiatives might or might not allow the "stacking" of carbon payments with cost-share from EQIP and CSP on the same practices. Depending on the carbon initiative, and the timing of farmers’ decisions, farmers can receive around $30 per acre per year over 10 years for implementing no-till and cover crops in Iowa. Learn more about the interaction of carbon payments with EQIP&CSP cost-share payments in AGDM File A1-40 Carbon Farming: Stacking Payments from Private Initiatives and Federal Programs.
Unfortunately, there is no fast and easy rule to identify profitable carbon farming opportunities. Net returns depend on multiple variables, such as the implementation cost for the contracted conservation practice, the payment regime (per outcome versus per practice), the soil type and weather patterns that affect how much carbon can be sequestered by different conservation practices, the actual conservation practices to be implemented, farmers’ experience with the conservation practice, and the availability of cost-share payments. Ag Decision Maker File A1-78 Net Returns to Carbon Farming can help agricultural producers organize the information and think through the agronomic and economic variables affecting the net returns to carbon farming for 66 conservation practices in each county of the United States. After checking whether carbon farming would be profitable and before signing a carbon farming contract, farmers are strongly encouraged to ask plenty of questions to clarify: what kind of information they would need to share with the carbon initiative and how frequently, the contract length and its exit clauses, the methods used to measure and verify the carbon sequestration, and any penalties in the event that the contract cannot be executed as planned.
Alejandro Plastina, extension economist, 515-294-6160, email@example.com