How Farmers Could Fight Climate Change (and Make a Profit)

(Bloomberg Opinion) -- Agriculture has never been a principal focus of efforts to reduce greenhouse gases. But farm emissions — which make up about 10% of the U.S. total — are coming under increasing scrutiny as Democrats take the reins of agricultural policy and farmers themselves awaken to the threats of climate change. One strategy in particular is getting attention this year: encouraging farmers to view emissions reduction and carbon sequestration as potential sources of income.

The idea is fairly straightforward. Farmers would take steps to reduce their carbon output, such as reducing tillage to avoid releasing soil carbon, planting cover crops to hold carbon in the soil, applying manure treatments and “digesters” to limit emissions of methane, and using nitrogen fertilizer more precisely to lower nitrous-oxide emissions. In return, they could sell credits to companies looking to reduce their own climate footprint. Private markets for such credits are already springing up, and Congress took measures to encourage similar exchanges in the 2008 Farm Bill.

But much about this concept has yet to be worked out, notably the basic question of how to measure the climate value of various farming practices. Here the U.S. Department of Agriculture could help. A Senate bill introduced last year would direct the USDA to create standards for measuring the effectiveness of climate-protection measures on farms, certify people to help farmers take such measurements and verify their value, and work with the Environmental Protection Agency to monitor private carbon-credit markets.

Such exchanges could go a long way toward encouraging farmers to reduce emissions and sequester carbon. But they won't work unless regulators can ensure that they'll actually bring substantial climate benefits. The danger is that a carbon-credit system might instead mainly enable airlines, investment funds, energy firms, agribusinesses and other companies to excuse their own greenhouse-gas emissions by purchasing inexpensive and largely meaningless offsets.

By setting standards for measurement and verification, and monitoring the private markets, the USDA can maximize the potential of “carbon farming.” It can also extend the benefits beyond the big operations, which can most easily demonstrate emissions reductions, to smaller farms — by helping them participate in collective efforts. If such measurements proved reliable, the Biden administration's proposal to create a government “carbon bank” — which would buy credits from farmers for a guaranteed price per ton — might act as a powerful incentive for farmers big and small.

Carbon credits won't be enough on their own; they should be thought of as a complement to other efforts to encourage climate-friendly agriculture, including existing USDA programs that help farmers finance conservation efforts (which also improve soil health and crop yields), and Energy Department research on soil carbon capture. Congress should also make possible improved terms on loans and reduced premiums on crop insurance for farmers who limit emissions (and water pollution) and conserve carbon.

That said, carbon trading does hold significant promise for limiting emissions on the farm — so long as it's based on verifiable practices that will allow markets to accurately value the credits. The first step is to get the right data.

Editorials are written by the Bloomberg Opinion editorial board.

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