How USDA can leverage a carbon bank for farmers, foresters and the climate

As the U.S. works to cut greenhouse gas emissions 50% by 2030, the agriculture and forestry sectors have important contributions to make to reducing emissions and sequestering carbon, as well as building resilience to climate impacts that are already here.

A carbon bank run by the U.S. Department of Agriculture is one policy option to help increase and reward agriculture’s climate contributions. Although a carbon bank — broadly defined as a set of policy tools to direct funding to incentivize voluntary climate mitigation — has been the subject of heightened interest for the past several months, the concept remains amorphous because it’s new. USDA, Congress and impacted stakeholders are still figuring it out.

While the need to address climate change is urgent, it’s also essential to get a carbon bank right so that farmers, policymakers, carbon credit buyers and everyone who depends on a stable climate don’t lose faith in agricultural and forestry climate solutions.

Here are four ways that USDA can move forward on a carbon bank, even in the face of uncertainty, to leverage the power of farms and forests to mitigate and adapt to climate change.

1. Direct investment toward the most impactful emissions reductions.

There’s a misconception that a carbon bank is all about incentivizing soil carbon sequestration. In reality, sequestration in agricultural soils, including through the use of practices like conservation tillage and cover crops, is only a small part of the climate potential in the agriculture and forestry sectors. Both sectors also have plenty of opportunities to directly reduce emissions.

A USDA-led carbon bank can and should direct public and private funding toward the most effective and certain climate solutions. These include protecting existing carbon-rich forests, grasslands, wetlands and peatlands from land conversion and reducing direct emissions of methane from manure management and enteric fermentation and nitrous oxide from excess fertilizer. This funding prioritization will reduce climate risk, build climate resilience and build public confidence in USDA’s climate policies.

2. Address financial barriers to climate-smart practice adoption.

Climate-smart practices can have expensive upfront costs or long pay-off periods, making it risky for farmers and forest owners to invest in them when voluntary carbon markets are uncertain. A USDA carbon bank should address these uncertainties, such as by compensating early adopters or providing a price floor for carbon payments.

Carbon bank funding should also seek to address gaps in the voluntary marketplace, for example by incentivizing practices that provide important climate benefits but don’t provide an easily measurable mitigation or sequestration benefit to sell as a carbon credit. Practices that increase wildfire resilience could fall into this category.

We can’t expect existing farm bill conservation programs to cover these important new investments. Oversubscribed and without an explicit focus on climate change mitigation and adaptation, farm bill programs are already stretched to the limit. Instead, carbon bank funding requires a fresh infusion of resources and a laser focus on the most effective climate practices.

A USDA NRCS staffer works with a farmer on cover crop production.

3. Build confidence in carbon markets.

Credible and consistent guidelines for measuring, monitoring and verifying the climate impacts of conservation practices and managing for uncertainty will be essential for buyers and sellers to be able to compare credits generated under different credit protocols and to know that carbon credits represent true climate benefits.

Many conservation practices like fertilizer optimization already have well-documented climate benefits and economical, technologically feasible ways to measure progress against a baseline. Other practices like applying compost to row crops or pasture will require additional research and guidance to verify and quantify climate benefits under various conditions. That’s okay and expected.

USDA’s scientists are perfectly positioned to help create guidelines, in consultation with other relevant agencies such as the Environmental Protection Agency, for practices where there is scientific consensus on climate impact. USDA should also support research by internal and external researchers to close knowledge gaps about the climate impacts of other practices.

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4. Increase access to carbon markets.

A carbon bank should increase equitable access to agricultural carbon markets. Large-scale farm and forest operations have an inherent advantage in accessing carbon markets because they have better access to capital markets that allow them to make the investments necessary to generate credits more profitably and to afford credit verification costs.

Black, Indigenous and producers of color often have less capital because of a legacy of being denied credit, forced removal and USDA discrimination that made it harder to purchase or keep their land. USDA must engage with producers of color to ensure they have access to credit, capital and an aggregation process that benefits them, as well as to identify and implement other ways to make market access equitable.

If USDA takes on the role of aggregator, it could combine contributions, particularly those from smaller operations, at regional scales. This approach would have important benefits for both equity and market integrity. First, bundling would allow small and mid-size farms and forests to participate in voluntary markets where buyers want credits equivalent to large amounts of carbon dioxide. Second, it would enable USDA to accumulate “buffer credits” that are set aside to mitigate the risk of climate gains being undone by practice changes or environmental events like wildfires and floods.

Next steps for USDA and Congress

USDA should start to implement pilot projects that remove barriers to climate-smart practice adoption and build confidence in and increase access to voluntary markets.

The Food and Agriculture Climate Alliance recently outlined how USDA should do this. While pilot projects may seem at first blush like a small step, they’re an essential first step to ensure a carbon bank is structured in a way that delivers maximum climate benefits, follows the science, and builds durable political and stakeholder support. With sufficient funding, a series of pilot projects could cover the full diversity of crops and operations, building the foundation for a robust carbon market by generating much-needed data, research and capacity.

Meanwhile, Congress should pass the Growing Climate Solutions Act to provide technical and credit verification assistance for farmers. Congress will also need to raise the Commodity Credit Corporation limit to ensure USDA can maintain essential farm safety programs while aggressively scaling climate solutions through a carbon bank.

This decade is our last best chance to harness the power of farms, forests and ranches to fight climate change and prepare for the climate impacts that are already here. Together, USDA and Congress can use a carbon bank and other policy levers to ensure producers have the financial and technical tools they need to implement climate-smart practices, and see benefits from doing so.

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