It’s no surprise to farmers that the carbon market is crowded. Maybe you’ve already been courted by several companies, both large and small, to sign up for a program. Promises of additional revenue and better soil for you abound. But what is happening on the flip side? What does the company running the program get out of it…or out of you?
Knowing whose incentives are prioritized in a carbon program is key to understanding whether that program is right for you and your operation. Andrew Esser, an agronomist working with Indigo, shares: “Make sure you find a program where it’s clear how both you and the organization you’re working with are getting paid.”Ask the following questions to determine whether a program is truly grower friendly:
1. How am I getting paid for carbon credits?
Different companies have different pay structures. Some companies that also sell products will pay growers for their carbon credits through product vouchers or discounts. That doesn’t sit well with all growers. “We wanted to be paid in cash,” said Clint Orr, who farms in north central Indiana. “We didn't want to be paid in products or a voucher or something that necessarily tied us to that company, where we didn't then have control over whether we are really getting a good price for this input. Or are they simply marking it up to offset the carbon payment that we would've received? So that was one early red flag for us,” he said. If, like Clint, you are wary of a company that pays in discounts, vouchers, or products, instead look for a company that pays cash, and make sure you ask when the company last paid growers cash through the program.
2. Who is buying the carbon credits I produce?
The number of companies operating carbon programs just so they can “buy” their own credits has grown. This could be a worrying trend, especially for growers who aren’t researching the ins and outs of a program. Nate Platt, a crop production executive at Indigo notes, “If you look at the carbon programs that are purchasing their own credits, they’re wanting to purchase as cheaply as possible, because your income is their cost at the end of the day. They’re not on your side; they’re sitting across the table from you.” Instead, you’ll want to choose a carbon program that sells the carbon credits to third-party buyers who care about credit quality to ensure you’ll receive the income you deserve.
"When we are looking for carbon credits, we are looking for credits that meet the ICROA, or the International Carbon Reduction and Offset Alliance's, best practices,” explains Audrey Waldrop, Sustainability Manager at Blue Bottle Coffee Company. “That means that these credits are real. There's real science behind the measurement. They're measurable, as well. They're additional, which means it's not business as usual, but it needed the carbon credit, or the financing, to take that action. It's unique and it's permanent. The change that happens today is still going to be in practice going forward. That's why we're excited about Indigo's credits coming to a registry, because that verifies for us that it meets these best practices."
3. Will I benefit from the price growth of carbon credits?
Growers who believe the carbon market will grow significantly should ensure they can benefit from that growth. “I think as the price of carbon continues to go up, which seems to be the trend, it's not an insignificant portion of the revenue per acre on the operation. It's in line with our vision of what we want to see happen here at the farm, and how we want to work on the land,” says Will Drucker, a carbon farmer who grows cereal rye and soybeans in northwestern Illinois. That means looking for programs that pay for outcomes (verified carbon credits), not just practices. It also means focusing on programs where growers are guaranteed to receive a meaningful share of the revenue. For example, growers participating in Carbon by Indigo receive at least 75% of the credit revenue, which allows them to enjoy current carbon income and benefit from future carbon price increases. So far, the price paid to farmers has doubled in the first two years.
Indigo sees a vibrant and growing carbon market. Earlier this year we announced that we would be paying $30 per credit to Carbon by Indigo farmers for verified credits produced and sold in both the 2020 and 2021 carbon crop years. This fall, we paid growers a total of $3.7 million for the carbon credits produced in our second carbon crop, and are making estimated payments for our third carbon crop shortly. As we enter our third year of the Carbon by Indigo program, momentum continues to grow, with more farmers enrolling in the program and more supporters seeking credits.
For more information on selecting the right carbon program for you, read The 6 Questions to Ask Before Signing Up for a Carbon Program.