For Release February 20, 2005
Carbon Trading in the New Marketplace
by Chuck Otte, Geary County Extension Agent
In days gone by, commodities were traded in the market place. These commodities were tangible, they were visible, they were real and could be touched. They were items like corn and cattle, wheat and oil, gold and silver. But times are changing. The latest trend is to trade carbon. No, not hardened carbon, like diamonds, but carbon as in carbon dioxide. While this is still a fairly new and experimental concept, there is a potential for farmers to make a few extra dollars simply for doing what many of them have been doing.
Regardless of your take on global climate change and greenhouse gases, there is no denying that in the past 150 years, as humankind has utilized more and more fossil fuels, carbon dioxide content in the atmosphere has risen dramatically. This fact has many people very concerned. In fact, the United States is currently putting over 1,700 million metric tons of carbon into the atmosphere every year in the form of carbon dioxide. (For those of you like myself who are somewhat challenged by the metric system, a metric ton is 1,000 kilograms or about 2,200 pounds.)
Other than the obvious need to reduce our consumption of fossil fuels through conservation, we are looking at trying to remove some of that carbon from the atmosphere and tie it up in inert forms that don't cause concern. This process is called carbon sequestration and it occurs when plants grow and convert carbon dioxide into starches and sugars. Trees do this, grasses do this and growing crops do this. But if the growing crops are not well managed, primarily through the method of planting and soil management, much of this carbon will be lost back into the atmosphere. No till farming can easily sequester upwards of 0.5 metric tons of carbon per acre per year and in some cases close to 1 metric ton. Grasslands can tie up about 0.75 metric ton per year, even if we do burn the above ground portions of the plant.
So we have farmers that are capturing carbon and sequestering it away and we have various industries, including power generation and large industrial manufacturing firms, that release a lot of carbon through combustion of fossil fuels. While not a legal requirement in the USA, where we haven't signed the Kyoto Treaty, there are still many companies that would like to pay farmers for their "carbon credits" to recognize their industry's need to offset the carbon they are putting into the atmosphere.
Enter now into the picture the Chicago Climate Exchange. They started trading a couple of years ago and while slow, it is starting to show some increase in activity. The challenge in making trades is that they don't trade at the one ton level. A contract is for 100 metric tons and if you want to sell, you have to have at least 12,500 tons to deal with, so that requires going through an aggregator.
Kansas farmers now have a limited chance, until April 1, through Iowa Farm Bureau to participate in this project. Farmers accepted into the program will receive annual payments for cropping practices from 2003 through 2006. We aren't talking about a pot of gold here. At current prices, farmers would be getting about 75 cents per acre per year. There are too many details to go into in this column so if you are interested you can contact me at the Extension Office, or go online at http://www.iowafarmbureau.com/special/carbon/default.aspx. This could be the wave of the future, but step carefully on to each and every wave!
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