INDIANAPOLIS, Ind. — National Farmers Union last week announced the expansion of its Carbon Credit Program to 14 Midwestern states. The program offers financial incentives for farmers who adopt practices that promote environmental stewardship.

“We view this as an exciting opportunity for farmers to protect the environment,” said NFU President Tom Buis. “Many farmers currently have conservation and planning practices that do capture carbon. We can market these credits and get them compensation.”

The voluntary, private sector carbon trading program at the Chicago Climate Exchange allows agriculture producers and landowners to earn money for cropping practices such as no-till, long-term grasslands, forestry and other practices.

These credits can be “stacked” on existing government programs for conservation.

These practices help store, or sequester, carbon and reduce carbon dioxide in the atmosphere. Carbon dioxide is one of six greenhouse gases that trap some heat in the atmosphere, producing an increase in the temperature and global warming.

“Farmers can play a key role in helping address one of the biggest environmental challenges confronting our nation and the world,” Buis said.

NFU has been approved by the Chicago Climate Exchange (CCX) to enroll producer acreages of carbon into blocks of credits that will be traded on the CCX, much like other agricultural products are traded. Large companies and other entities purchase credits on the CCX to offset their own carbon emissions into the atmosphere.

The CCX was recently created to trade carbon credits, allowing farmers to receive credits for the amount of carbon captured on their farm, depending on farming practices and type of plants. These credits are then aggregated and marketed on the CCX by NFU.

Once the credits are sold, producers earn income based on the acres they have enrolled. For example, no-till captures 1/2 ton of carbon dioxide per acre, and at today’s price would yield $2.

Sen. Dick Lugar, R-Ind., was the first farmer in Indiana to enroll his farm for the carbon exchange.

“I am hopeful that farmers in Indiana and across the nation will consider enrolling in the exchange,” Lugar said. “Together we can promote the practice of sequestering carbon and protecting the atmosphere, while also providing an additional source of farm income to those who qualify.”

If farmers sign up by Nov. 3, they can market their credits from both 2005 and 2006 and the credits will be sold in January 2007. If they sign up after Nov. 3, they can only claim credits for 2006.

There are no fees charged for the exchange. However, at 10 percent commission is paid to the NFU as the aggregator, or entity that must accumulate the 14,500-ton blocks of carbon required for trade.

There is also an escrow account of 20 percent of the payment for each participant. This account is set aside in the farmer’s name in the event farming practices change and a particular field is plowed, thereby forfeiting some credits.

“The bottom line is we’re trying to provide farmers with an incentive package that will address one of the world’s biggest environmental challenges,” Buis said.

How it works
Each fall, CCX or its designee will conduct a random spot check of land tracts. At the end of the year, all of the database information will be submitted to CCX and carbon credits will be issued to NFU’s aggregator trading account.

NFU will then sell the credits on the Exchange and the proceeds, less commission and escrow, will be sent to the producer or landowner.

Generally, the credits would be sold after Jan. 1 after they have been earned. This will allow participants to receive updated credit prices each year.

For more information, contact NFU at 202-554-1600 or visit www.nfu.org

This farm news was published in the Oct. 18, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.