Cornhusker Economics

By Andrew Havens, Richard Perrin and Lilyan Fulginiti

What is carbon farming?

Carbon farming refers to a carbon-sequestering change made in some farm practices in exchange for receiving payment for carbon credits. A carbon credit is essentially a certificate attesting that a specific amount of carbon dioxide has been removed from the atmosphere and sequestered for a long period. Buyers of these credits can then claim credit for carbon sequestered on their behalf by someone else, and in this way offset their own carbon emissions.  Here we examine some issues related to the benefits and costs of agricultural carbon credits.

Recent press reports (Dunn 2021, Olick 2022, Plume 2021) have noted that some farmers are currently signing contracts to sequester carbon for credits that can be sold on carbon credit markets. The contracts are signed with intermediary companies that identify the quantity of carbon to be sequestered and in turn sell the credits to buyers. These carbon markets commodify agricultural carbon sequestration by allowing producers to sell agricultural carbon sequestration credits.