Latest / The Illinois Nutrient Loss Reduction Podcast / Episode 46 | What You Need To Know About Carbon Markets
Transcript
- Episode 46 | What You Need To Know About Carbon Markets 00:00:06:06 - 00:00:30:09 Todd Gleason This is the Illinois Nutrient Loss Reduction Podcast, episode 46 what you need to know about Carbon Markets. I'm university of Illinois Extension's Todd Gleason. Today, we'll explore carbon markets and how to find out information about them and how to use them on your farm. We'll begin our conversation by talking with a producer who already is involved in carbon markets. 00:00:30:11 - 00:00:42:17 Todd Gleason Jack McCormick lives and farms near Ellis Grove in Randolph County, Illinois. I asked him to tell me a little bit about his operation and the conservation methods he already uses. 00:00:42:20 - 00:00:57:05 Jack McCormick I'm about 50 miles south of Saint Louis, right near the Mississippi River, just a couple miles away from the Mississippi River. And we farm corn, wheat, soybeans. We got some beef cattle and, family farming partnership. 00:00:57:11 - 00:01:17:19 Jack McCormick We are. My family's been here. I don't know, some, like, 80 years. I guess I'm the fourth generation, McCormick to farm here and, basically rolling hills of southern Illinois. It's not quite like central Illinois, where, you see, for miles and miles, we got lots of trees and little fields and that sort of thing. And, it did suits very well for conservation practices. 00:01:17:21 - 00:01:37:25 Jack McCormick We farm 100% no till, you know, all of our crops, which my dad started, no tilling corn in 1970 before anybody really knew what that was or, or anything. And, we've been 100% a no till since 1990. We have a lot of terraces. We got a lot of short, steep slopes. So we use some terraces along with a no till. 00:01:37:27 - 00:01:53:24 Jack McCormick And I guess about five years ago we started experimenting with cover crops to see if we could, take what we're doing already with the no till and, and those good practices and see if we can make things any better or not. And, so far, we we like what we see there. 00:01:53:27 - 00:01:58:12 Todd Gleason Clearly, your family has been progressive in production and conservation practices. 00:01:58:12 - 00:02:02:22 Todd Gleason I know you're also interested in carbon markets. Why is that the case? 00:02:02:24 - 00:02:18:20 Jack McCormick Well, that's kind of the latest thing to come along. And you can't hardly pick up a, magazine or newspaper or anything like that and not hear something about carbon lately. And, basically they're kind of paying us to do some of the things that we're already doing. 00:02:18:23 - 00:02:36:23 Jack McCormick You know, they, there's, I figure if, if I'm willing to do a practice already and somebody can put a few dollars with that, I might as well look into that. You know, if it's not overly burdensome on the paperwork side or or the demands, you know, if you can meet the demands that these programs are looking for. 00:02:36:26 - 00:02:53:06 Jack McCormick You know, I'm also in the CSP program, which is kind of another thing where, if you're wanting to do some conservation practices, they put a few dollars alongside of what your art, what you're wanting to do and, you know, a few years ago, you know, a couple bucks an acre was was a really big deal. 00:02:53:06 - 00:03:13:16 Jack McCormick Now, today, when, you know, corn is $7 and beans or 15 or better somewhere in the teens. Maybe it's not as big of a deal as it was a few years ago, but still at all. And it's kind of seem to us, a few years ago that, you know, looking at the farm program, the way it was going, it seemed like everything was conservation minded. 00:03:13:16 - 00:03:30:14 Jack McCormick And, if a person was going to be eligible for any federal dollars, it seemed like we needed to be looking that direction, because that's that's very palatable to the public. To the taxpayers, for, you know, if we're going to get some, some dollars, why, you know, we we need to do some practice to justify those dollars. 00:03:30:14 - 00:03:50:02 Jack McCormick And and we just seen seems like conservation. Well, it fits so well for what we farm. Anyway, like I said, these these, rolling hills in southern Illinois, it's very productive soil, but it moves really easy. And if we don't do something to protect the soil that we have, you know, they're not making any more. So we got to keep track of the soil. 00:03:50:02 - 00:04:00:16 Jack McCormick We have, farm it, like, you know, we want it to be around for a few years. So the carbon market, it just seemed like a logical direction for us to to look to. 00:04:00:18 - 00:04:11:06 Todd Gleason The CSP program you mentioned stands for Conservation Stewardship Program, part of USDA. Can you tell me about the carbon markets you are using? 00:04:11:06 - 00:04:13:23 Todd Gleason They're not part of USDA. 00:04:13:26 - 00:04:37:06 Jack McCormick Yeah. So I guess, 2021 was the first year that we looked at into carbon markets. I guess starting in the fall of 2020 for the the upcoming 2021 crop year. There was there's a lot of people in the carbon market, and, we looked at two different programs. Seemed to be easiest to find the information on and that sort of thing. 00:04:37:06 - 00:04:57:13 Jack McCormick And, two different programs, it kind of were going sort of different ways that they pay for carbon credits. Of course, both of them, one of them was was thinking they were going to stack on some programs and we would get some larger payments one day. Another one, really was super easy to sign up for. Easier than the first one. 00:04:57:13 - 00:05:15:05 Jack McCormick So I looked at two. I actually enrolled in two different ones at the same time, not on the same acre, of course. I put a few fields in one, a few fields in another. And, the challenge seemed like at least last year with with the carbon programs is everybody thought it was a good idea, but nobody really knew how to implement the programs yet. 00:05:15:05 - 00:05:44:14 Jack McCormick And, some of the rules changed along the way, which made it a little somewhat difficult to, actually just simply stay engaged or stay enrolled. You know, I did everything on my end, and then the other folks seemed like, on the other end were changing the rules as we went. And the other thing I found, a little bit difficult to manage these programs is the idea of additionality, where if you've been doing something for a long time, that almost doesn't count. 00:05:44:20 - 00:06:05:00 Jack McCormick They're looking for new practices. Well, everybody gets to do a new practice once, you know, and then it becomes an old practice for you. And, that's what these programs are really after. So, you know, if a person is looking to start cover cropping or start. No, it's basically a new practice, for that particular, farm operation. 00:06:05:03 - 00:06:26:24 Jack McCormick Really? That's the time to you're you're a prime candidate for these, carbon programs if you've been doing something a long time. In a roundabout way, there's almost a penalty because you aren't a new practice anymore. So that was one thing that I had to look, when I was looking at carbon programs, I mentioned, you know, we've been noticing since 1990. 00:06:26:24 - 00:06:50:20 Jack McCormick Well, I don't qualify for anything for no till, it's kind of strange. You'd think, it might be the other way around, but it's not. But when we added the, cover crops into our rotation, that's what I was going after to slip into the carbon programs with. And, depends on how long you've been doing it, on which fields and whether it's back to back years or every couple of years or or what? 00:06:50:23 - 00:07:23:18 Jack McCormick Whether or not you fit into any one given program. So there is a lot of homework to do. Really. Just simply reading. I know I, I've talked to folks at, Illinois Corn Growers and Illinois Soybean Association, folks in the FS and grow marks system, basically just asking questions and, you know, the subject comes up, my ears perk up, you know, who knows what about do these programs and, gain as much knowledge as you can to see if and when it's right for you to jump in? 00:07:23:20 - 00:07:51:14 Todd Gleason Basically, just a quick note that Marshall McDaniel, soil scientist from Iowa State University, mentioned no till as it's related to not being paid for that good practice already in place. He suggested that over time, no till captures about one half ton of carbon per hectare per year and then maxes out as the soils reach their capacity. Now let's turn back to you, Jack McCormack. 00:07:51:14 - 00:07:56:00 Todd Gleason Do you have any advice for producers who are thinking about joining a carbon market? 00:07:56:02 - 00:08:10:26 Jack McCormick Well, I would say, you definitely do need to read the fine print. All of these programs, do have a legal binding contract that you need to be aware of. And I did not take mine to an attorney, but I've been told it. 00:08:10:26 - 00:08:40:26 Jack McCormick I should have and and probably will in the future. It was the the contracts I saw were verbiage that I think I understood. Of course I'm not an attorney. By no means, by trade, but, you just need to know, you know, what happens if you have a wet fall and can’t plant? What happens if you have a wet fall and you need to get some tillage equipment out to level out, maybe some ruts you made or just what happens if that sort of thing. 00:08:40:26 - 00:09:01:25 Jack McCormick Are you, you know, is it just simply that they won't pay you for that acre if you didn't plan it that year? And, you know, I don't have a problem with that. If there's a penalty for back years, you know, something like that, you need to know that stuff. Person certainly doesn't want to jump into, a program and, you know, trying to get a few dollars an acre and somehow would be jeopardized and have to pay a penalty back. 00:09:01:25 - 00:09:28:06 Jack McCormick That's that's not never a good day for a person. And then what what practices are you interested in doing that will fit into a program? Not every practice fits into every carbon program. There's definitely different, tenures of, of time to these carbon programs. And some programs have different tiers. And, you know, maybe it's a five year or a ten year or 20 year contract within, the same program you can choose from. 00:09:28:06 - 00:10:01:07 Jack McCormick So, a lot of due diligence on the farmers part, but it certainly can be understood. There are many people participating. So it's it's not something a person can overcome. He shouldn't be, intimidated. But you do get to do your homework and and know what you're getting into again. That was Randolph County farmer Jack McCormick. On the note of understanding carbon markets and finding information related to them, we'll turn our attention now to Jean Brokish, who's the Midwest program manager for the American Farmland Trust. 00:10:01:09 - 00:10:30:05 Todd Gleason There she leads, two watershed based initiatives that are working with farmers to implement conservation practices to help maintain soil health and clean up water, and has a primary role to provide coordination to the Illinois Sustainable AG Partnership. It's that second item we're interested in today as it relates to carbon markets. I asked Jean first to tell me a little bit about the Illinois Sustainable AG Partnership, what it is and who the partners might be. 00:10:30:12 - 00:11:02:20 Jean Brokish Yeah. So it's a, Illinois sustainable ag partnership, or oftentimes we abbreviate as ISAP, is a group of 13 member organizations all working collaboratively on, sharing information, looking at research and on farm data and messaging. All around, just and sharing resources with each other to build better capacity and understanding and move to make progress towards the nutrient loss reduction strategy. 00:11:02:20 - 00:11:26:27 Jean Brokish It was founded in 2016 2017 timeline really coincided with the release of the nutrient loss reduction strategy and at the same time, there was, severe budget cuts in the state of Illinois. And so it really just started by a group of, three women who work together and were friends. And they said, we need to collaborate better and share resources so we can accomplish all of this work. 00:11:27:00 - 00:11:52:22 Jean Brokish So current numbers include. And there's commodity groups like Illinois Corn and Illinois Soybean Association. We have U of I extension, Illinois Central College. So we have kind of an education piece. We have contractors associations through like Land Improvement Contractors Association and then the AG Drainage Management Coalition. And we have a handful of conservation groups like Pheasants Forever, the Nature Conservancy, AFT is on it, of course. 00:11:52:22 - 00:12:02:10 Jean Brokish And then, the Wetlands Initiative. And I might still be missing one there, but 1 or 2. But, generally that that's kind of a good representation of the members. 00:12:02:13 - 00:12:19:16 Todd Gleason You all came together last summer to put forward a webinar or a series of webinars. In the summer of 2021, about the ecosystem market, what exactly the webinars about and what is an ecosystem market? 00:12:19:18 - 00:12:45:11 Jean Brokish So essentially an ecosystem market or it's often called a carbon market is it's a relatively, new or growing. There's a lot there's a lot of new attention and new discussion and focus on it. It's but it's like any market where there's somebody wants to buy something and another person has something to sell. And in this case, we're we're buying and selling the reduction of greenhouse gases. 00:12:45:11 - 00:13:13:20 Jean Brokish So there's, a company or an industry that has a, has a sustainability target, a climate goal. And, and they're looking within their own systems. Can we cut enough carbon? Can we just enough greenhouse gases in house. And the answer is no. Then they have to look outside. And they look at these markets. And the markets are pairing them up with, someone else or a project maybe that's on the farm where they're implementing practices, or maybe it's forestry work or whatever. 00:13:13:23 - 00:13:40:25 Jean Brokish The project is actually then reducing or capturing those greenhouse gases and it's, it's the transaction is what the market space is. And we got into this. We're not we're not a market player in any form or fashion. We really got into this, when some of the market representatives were contacting ISAP and contacting American Farmland Trust and saying, hey, we want to share information with your farmer networks. 00:13:40:25 - 00:14:09:26 Jean Brokish Can you give us a platform? And we basically were like, whoa, well, this is interesting. Something's happening here. And we wanted we didn't want to just connect them with our farmers without understand what the message was. And so we actually kind of decided we wanted to drive the bus and we brought the different markets together. And we, encouraged them to present the information in a way that was very tangible and transparent, for the farmer audience. 00:14:09:26 - 00:14:39:16 Jean Brokish And so that's really what the, what the webinars were about was, was bringing these different market representatives all to the same table. They weren't doing their sales pitch. They were answering the questions we gave them around, contract length, around, terminology verification, things like that. And we then also curated a bunch of information and some, kind of some tables comparing the different market opportunities. 00:14:39:18 - 00:14:57:26 Jean Brokish And again, the idea was that we weren't there to sell or encourage farmers to do this. It was our goal was to provide clear and understandable information so that farmers and farm advisors could evaluate these different opportunities and make a decision that, whether it was going to be right for their farmer or not. 00:14:58:01 - 00:15:03:23 Todd Gleason Who are the players that participated and has the player list changed since the webinars? 00:15:03:29 - 00:15:30:18 Jean Brokish Well, we had a total of five webinars. The first one was actually in February where we had indigo Ag, Nori ecosystem services market Consortium, and then the Soil and Water Outcomes Fund. And those four entities, are still, still very much, active. They are more like market. Their brokers, they don't they're not selling the market or the credits themselves. 00:15:30:20 - 00:15:57:14 Jean Brokish But they're doing the matchmaking between the farmers and the corporations who wish to, to meet those climate goals. And then we had in the summer we hosted a series of webinars, where we had some input providers. So we had Corteva there and Nutrien. We also looked at data platforms. Those included companies that have some sort of technology that farmers might be using already. 00:15:57:14 - 00:16:24:15 Jean Brokish So like land O'Lakes has their two tier A platform, farmers business Network has a platform called gradable and then there's Sibo and those entities are, are adding some sort of carbon component to their data platforms. Then the corporations that we listened to or connected with and really the the purpose of that webinar was understanding some of the goals they've set and provide a context for these markets. 00:16:24:15 - 00:16:55:19 Jean Brokish So we had Cargill, General Mills and PepsiCo. And then the last, webinar in the summer series really kind of went beyond carbon. And we looked at broader ecosystem services and we had a representative from City and County Foundation and learned about the water quality credits we had. Right. Discuss their concepts for general accounting, all of the ecosystem services that are provided by a farm. 00:16:55:21 - 00:17:18:08 Jean Brokish And we also had a farmer from Arkansas who was the first in the country to actually sell carbon credits to a company. And so those perspectives were all really helpful. So to just to just illustrate kind of the bigger picture of where ecosystem markets may be going. And it's what we often call them, carbon markets. It's really there's more opportunities beyond carbon. 00:17:18:08 - 00:17:26:05 Jean Brokish If you're looking at the water quality, water quantity, piece to it. And there's even some entities that are looking at habitat or biodiversity in their markets. 00:17:26:09 - 00:17:41:12 Todd Gleason And so for those who are interested in watching those webinars, they can find them simply search for ISAP. Again, that stands for Illinois Sustainable Agriculture Partnership Ecosystem markets. So ISAP and then ecosystem markets. 00:17:41:12 - 00:17:51:16 Todd Gleason And that should be the first thing that pops up. How much, do you suppose has changed in the carbon market area since you put those together? 00:17:51:18 - 00:18:14:26 Jean Brokish Well, it's a very dynamic landscape and marketplace. At that time last summer or a year ago, some of the markets were still in pilot phases. And so those pilot phases might have had unique geographies they were looking at, or they had unique things that they were testing out to, to do payments on or to model and verify. 00:18:14:29 - 00:18:41:15 Jean Brokish And generally, if they, if there's, they may have an, another pilot phase in another geography, that might be similar or they've either or they've expanded the geography. So they might be using a very similar type. Approach, but now it's available on a larger scale. The biggest thing that I think has changed is, who's working with whom? 00:18:41:15 - 00:19:08:06 Jean Brokish There's a lot of partnership groups, that have formed where maybe Indigo Ag is also working with, corteva and or, or Nutrien or something like that. You know, where there's these different partnerships that have formed, to work with farmers and create those projects that can enter the marketplace. There's also some new entities that have popped up. 00:19:08:09 - 00:19:30:21 Jean Brokish It seems like it's a very growing and dynamic marketplace right now. And, it's something that I think it's important for farmers and farm advisors to be familiar with and understand the terminology, but also to approach it from a very, kind of a scrutiny in terms of risk management, because there are, it's relatively new. 00:19:30:21 - 00:19:36:12 Jean Brokish And so there's some unknowns in this space and there's some important questions that farmers need to ask. 00:19:36:19 - 00:19:46:01 Todd Gleason And finally, what advice do you have for farmers when they ask those questions? What should they be thinking about as it relates to the carbon markets and ecosystems? 00:19:46:07 - 00:19:52:07 Jean Brokish I think the first thing is to be realistic and set realistic goals for themselves. 00:19:52:09 - 00:20:15:22 Jean Brokish Some initially some of the market representatives were saying that there was a perception that you could make a lot of money doing this. That's not necessarily the case. And there's also, I think a really important consideration for farmers is to understand that there's, often these require a management change. And so are you prepared to do that? 00:20:15:24 - 00:20:55:03 Jean Brokish And what does that mean for your farm? There's also a significant recordkeeping component to participating in these markets. So understanding what that is and being prepared for that, not many farmers I know really enjoy recordkeeping. So it's it can be it can be a challenge or an obstacle for them. And then I think this the last thing that I have, really encouraged is I've been talking with farmers is if you're entering one of these to make sure you read the contract and understand it, because it's a relative new field and a new, market space. 00:20:55:06 - 00:21:10:25 Jean Brokish Where there's not a lot of standards set yet. So the so the terms of the markets vary from one entity to another. And so really reading the fine print and understanding what you're committed to is really important to just help offset the risk. 00:21:10:27 - 00:21:12:08 Todd Gleason Is there anything else? 00:21:12:10 - 00:21:25:25 Jean Brokish Well so I think farmers interested in looking at ecosystem markets could also or should also look at more of the traditional cost share incentives and payment incentives that are available through things like EQIP and CSP 00:21:25:27 - 00:21:44:19 Jean Brokish Because a lot of those, payment rates through those programs are actually on par, if not a little better than the ecosystem market payments are at this point in time. And so and they definitely have less risk. So I think it's a good way for farmers to increase their adoption of soil health related practices and be compensated for it. 00:21:44:25 - 00:21:59:04 Jean Brokish And I think there's also an opportunity you can actually stack the practices together, which then makes the management change and the recordkeeping more appealing. For a farmer who's interested in making this shift and being part of the market space 00:21:59:06 - 00:22:08:26 Todd Gleason That was Jean Brokish of the American Farmland Trust. She's the Midwest program manager and joined us here on the Illinois Nutrient Loss Reduction podcast. 00:22:08:29 - 00:22:22:07 Todd Gleason This has been episode 46 What You Need to Know About Carbon Markets. The program was produced in conjunction with Illinois Extension Watershed Outreach associate Rachel Curry, I'm Extension's Todd Gleason.