Resource Guide for

Colorado Producers

on Carbon Markets

The Soil Carbon Solutions Center at Colorado State University has compiled resources on carbon markets for producers in Colorado. There is an urgent necessity for carbon dioxide removal as a complement to emissions reductions, but it is not a substitute for reducing emissions. There is a significant knowledge gap between the science on carbon markets and the information disseminated to producers on carbon markets. This resource guide aims to make important information about carbon markets and how producers can get involved more accessible. Its goal is to provide producers with the tools and knowledge needed to make informed decisions about whether participating in carbon markets is the right choice for them. Designed to offer clear, unbiased, and relevant insights, this guide outlines both the risks and benefits of carbon markets.

What are carbon markets?

Carbon markets are a means through which entities can buy and sell carbon credits as a means for global climate change mitigation. One carbon credit is equivalent to one ton of carbon dioxide sequestered from the atmosphere and stored in the soil. Organizations can buy carbon credits to ‘offset’ the emissions they produce in order to meet their climate goals. Those selling the carbon credits are storing carbon in the soil through a certain activity. In the context of agriculture, producers can implement farming/ranching management practices in order to sell carbon credits. It is important for Colorado producers to be knowledgeable on carbon markets. At the moment, carbon markets are the primary tool the world is using to create incentives for offsetting emissions that contribute to global climate change.

There are two types of carbon markets, Voluntary Carbon Markets and Compliance Carbon Markets. While they both aim to reduce emissions and operate through the buying and selling of carbon credits, there are some key differences.

Voluntary Carbon Markets

VCMs are a type of carbon market where an individual or organization can voluntarily sell credits and another entity can voluntarily buy those credits. The VCM operates similar to the stock market: prices fluctuate, players enter and exit the market, and it is operated outside of governmental frameworks. There are several voluntary carbon market platforms, but there is not a single authoritative marketplace. In the context of agriculture, carbon credits can be generated through measuring the amount of carbon that has been sequestered on farm land through the implementation of new management practices.

Compliance Carbon Markets

Compliance Carbon Markets are typically put in place by governments and set a limit on the total amount of carbon that can be emitted. These are mandatory restrictions on the amount that an organization can pollute. In a compliance market, companies will purchase offset carbon credits once they have exceeded that limit in order to balance out the emissions. Examples of current compliance markets are the California Cap and Trade and the European Union Emissions Trading System.

Process of Participation

In Colorado, producers only have the option of participating in a VCM since there is no compliance market. The process of participating in a VCM varies greatly depending on the project company you choose, due to varying standards and protocols.

While producers do the actual soil carbon storage, the carbon credits are sold through project developers that work with producers. Third party verifiers check the standards against the chosen protocols.

Oftentimes, there is a hybrid of sampling and modeling for the monitoring, reporting, and verification process of a project. This includes on-site soil sampling, testing, and computer modeling to track the amount of carbon in the soil.

A project usually includes a feasibility assessment, initial inventory, carbon modeling, project document development, initial verification, registration and carbon sales, and ongoing monitoring, reporting, and verification.

Players in a carbon project: third-party verifier, technical assistance provider, farmer, lawyer (recommended), and project developer company.

There are various challenges producers face and barriers when participating in VCMs that are important to understand in order to decide if a carbon market is right for a producer.

It is difficult to measure soil carbon due to expenses of sampling and the variability of soil carbon across landscapes. Modeling requires a lot of data and history of the farm in order to accurately be able to measure the carbon, so it is important to start collecting data as soon as possible.

The nature of markets makes it difficult to rely on them for addressing climate change since they are unpredictable. Markets aim to buy low and sell high, which translates to buying low quality and cheap credits and then selling them for more than they are worth, which takes advantage of those actually sequestering the carbon (Young 2024).

Carbon credits have been criticized as not making real progress towards lowering emissions because they allow companies to continue to produce emissions without changing their harmful practices.

The issue with carbon offsetting is that they lack rules and regulations that standardize the process and market.

Farmers will work with third-party verifiers for the verification process and technical assistance providers (TAPs) to help develop a carbon project. The USDA Growing Climate Solutions Act provides a list of qualified TAPs and third-party verifiers for producers. Third-party verifiers are in charge of verifying the project and making sure it meets quality standards, while TAPs assist producers in developing the project and implementing the new practices.

The company which you work on a carbon project with can vary in ethics, as well as the quality of the credits generated through the project. There does not exist a company with a protocol that is of high enough quality in all areas.

In order to decide if participating in a VCM is right for you, it is important to weigh the risks and benefits.

RISKS

  • Carbon projects usually require a 10 year initial contract, while the idea of permanence requires that the practice be carried out for 100 years. From a climate perspective, there is no point in participating in carbon sequestration projects if the carbon does not stay in the ground for a long period of time. This can be a significant barrier to participation among farmers due to uncertainty about their future farming practices or land management.

  • Additionality requirement: This requires that the practices sequestering carbon are newly implemented and are provide an ‘additional’ sink for carbon. 

  • There are many upfront costs associated with monitoring, reporting, and verifying (MRV) for a project. Costs include: soil sampling, purchasing new machinery and seeds, and getting the project third-party verified. Also, farmers sometimes have to pay a brokerage fee, holdback amounts, or a verification fee. The unpredictability of markets can present a threat to farmers participating in VCMs.

  • The issue of land tenure is another significant risk for farmers. About half of all farmers rent their land, so the ability to sign onto a 10-20 year contract is very limited. Oftentimes, farmers are unsure what they will have to do in the future to produce yields and are hesitant to sign onto a binding agreement. For example, if there is a flood and nutrients are washed away, farmers may have to use fertilizers on their land, even if that is not outlined in the carbon project.

  • It is often advised for farmers to get a lawyer involved in the process to aid them in understanding the contracts of these projects and to reduce the risks they may face.

BENEFITS

  • Regenerative agricultural practices have a variety of positive ecological impacts. By sequestering more carbon into the soils, they become healthier and more resilient. Soils with an increased ability to sequester carbon have more water retention capabilities, are more resilient to drought and disease, reduce the need for fertilizers, and are better-suited for future environments with climate change. Water scarcity will continue to increase in severity and soils that are able to retain more water will allow farmers to more efficiently grow crops. Soils with greater amounts of carbon also experience less erosion.

  • Financial payments can be made in different ways: payment per acre, as a percentage of the profit sale from the credit, a flat fee, or per ton of carbon sequestered.

  • There is also the potential for producers to save money by implementing regenerative agricultural practices. For example, no-till allows farmers to cut costs through reduced fuel costs and machinery expenses.

Payments for Ecosystem Services (PES)

PES are another method of getting monetary reparations for carbon sequestration practices and other activities that improve the environment such as protecting biodiversity that do not involve the carbon market. There are various organizations that aid and encourage producers to implement regenerative farming practices by providing financial support and incentives.

Additional Resources

List of quality consulting groups

  • The Soil Carbon Solutions Center is not endorsing any of these organizations.

    • Voluntary Registry Offsets Database | Berkeley Carbon Trading Project | Projects | Center for Environmental Public Policy (CEPP)
      This is a database that contains all carbon offset projects, credit issuances, and credit retirements under the American Carbon Registry, Climate Action Reserve, Gold Standard, and Verra.

    • BCarbon A nonprofit carbon registry that aids producers in participating in carbon markets and implementing carbon sequestration practices in a holistic manner.

    • Regenerative Organic Certified is doing work to provide support to farmers who don’t own their land

    • Zero Foodprint An organization that funds the implementation of regenerative agriculture projects to sequester carbon and improve soil health by providing grants.

    • Mad Agriculture Encouraging regenerative organic farming through supporting producers in their transitioning to these practices. They provide aid in financial resources, management guidelines, connecting farmers to markets, and education and outreach. 

    • FARMS – Farmers advancing regenerative management systems A project that focuses on supporting farmers in Colorado, Nebraska, and Kansas on improving soil health through financial rewards, context-specific plans, education and analysis of their soils. This organization is unique because it is led by farmers and ranchers.

    • Continuum Ag A company helping farmers profit more from improving their soil health. They also have a tool called TopSoil to aid with this. Their website contains a Regen Roadmap, which has information on how to implement regenerative agricultural practices. 

    • Climate Action Reserve Carbon credit registry that participates in both VCMs and CCMs.

    • The Climate Registry Non-profit organization that participates in carbon projects.

    • International Carbon Registry A carbon registry that focuses on VCMs and participates in climate projects.

Carbon Markets 101

2/20/2024

Carbon Market
Case Studies (grazing + cropping)

2/27/2024

Evaluating Whether
a Carbon Project
is Right for You

3/5/2024

Emerging Opportunities in Carbon Markets
and Beyond

3/12/2024

Video Recordings from the

Carbon Credit Conundrum Webinar

with Quivira Coalition + the Soil Carbon Solutions Center

Want more resources to learn more about soil carbon and regenerative agriculture?