Carbon Contracts for the Farmer

Private companies are approaching farmers and forest landowners about entering into carbon contracts, generating a lot of interest.  Carbon contracts are voluntary agreements that landowners can enter into promising to use certain practices such as limited/no-till farming, planting cover crops, or forego the harvesting of mature timber and then paying the farmer for sequestered carbon.  Contracts are difficult to come by and typically contain confidentiality clauses; however, there are some common elements that landowners should be aware of before signing.

  • The length of the contracts can vary substantially.  I have read contracts that range from one year to ten years in length, and some may be longer.  One contract required the storage of carbon in the field for the next one hundred years.  Ensure that you can comply with the contract for the entire life of the agreement.
  • To measure the carbon sequestered, the landowner often has to grant the other party access to the property to take those measurements. 
  • Payments, and payment mechanisms, can vary substantially. For example, some contracts pay for certain practices, such $3 per acre for no-till farming, while other contracts pay based on the tons of carbon sequestered, typically around $15-$20 per ton, but this can vary as well.
  • Read the definitions section carefully, as words may not mean what you think they mean.
  • Many contracts pay only for the carbon sequestered and allow the other party to sell off other environmental benefits, such as water quality credits. Unfortunately, some of the contracts do not have a mechanism to enable the landowner to realize any gain from the sale of other environmental benefits, so make sure that your contract allows you to profit from all potential environmental benefits.

If approached with a carbon contract, read it carefully, make sure that it makes financial sense to adopt the practices you will be required to follow, and consult with a knowledgeable attorney before signing.

Source – Considering Carbon Series from the National Agricultural Law Center

Rumley, Rusty. “Carbon Contracts for Farmers.” Southern Ag Today 1(43.5). October 22, 2021. Permalink