Carbon is number 6 on the periodic table and is made up of six building blocks: six protons and six neutrons. Contracts also have their own building blocks. Because there is a flood of new contracts being offered to farmers to sequester carbon in the soil, I thought it would be interesting to look at the six basic elements of these contracts.
1. Land registration
Whether it’s an 80-acre cornfield or a 1,000-acre pasture, the first part of any soil carbon contract is getting the land into the program. Farmers and ranchers need to identify the lands on which they commit to sequestering carbon and enroll those lands in a soil carbon sequestration program. These programs are offered by various parties, such as agricultural retailers and online digital platforms (“carbon platforms”).
2. Mandatory agricultural practices
3. Data collection
At least once a year, the carbon platform collects agricultural data from the farmer to confirm that the protocols have been followed and to estimate the amount of carbon sequestered. The carbon platform can also reserve the right to collect its own data by taking real samples, auditing farmers’ practices or using satellite imagery.
The carbon platform uses protocols developed by third parties who created the methodology for sequestering and measuring carbon in soil. Verification is necessary to measure the amount of carbon sequestered in the soil so that carbon credits can be generated by the efforts of the farmer.
5. Stacking prohibitions
However, a farmer who sequesters enough soil carbon to generate 100 carbon credits could, in theory, sign contracts with two carbon platforms to measure the same soil carbon on the same acres. The result would be 200 carbon credits when only enough carbon was sequestered for 100. For this reason, soil carbon contracts prohibit this type of “stacking”, but also rely on the honesty of the farmer to ensure that no stacking occurs. Since there is no national database for listed acres, there is no way for a rig to verify that no stacking has taken place.
6. Sale of carbon credits
At the end of the process, the carbon credit is ready to be sold by the carbon platform to a buyer who wishes to offset their carbon emissions. Some carbon platforms share these benefits. Other brokers pay a fixed fee per acre, retaining all the benefits of fluctuations in the carbon market, but also all the risks.
Of course, soil carbon contracts are much more complicated than these six building blocks. But if you’re writing or revising any of these contracts, make sure these six things are factored in.
About the Author: Todd Janzen is an attorney who is an author and frequent speaker on legal issues affecting agriculture. He regularly writes a column on legal and technological issues facing agriculture on his blog, which can be found on the Janzen Ag Law Blog.