Question 1: With the recent downturn in the economy, is the carbon market still a viable option for farmers? As lenders shy away from risk and raise borrowing costs, the carbon market will likely become of greater importance to the viability of capital-intensive projects. In spite of the current economic turmoil, the incoming Obama Administration has signalled its intention of regulating greenhouse gas emissions. Although it is too early to tell what sectors will be covered by a national cap-and-trade system, it seems likely that agriculture projects will be able to generate emission offsets for sale to capped entities.

This will impact significantly what investments farmers are willing to undertake and will likely prioritize those projects that generate emission reduction credits. As such, the carbon market will only become more important as we move forward.

Question 2: What is the single most important factor about my farm to consider when deciding to enter the carbon market?

The carbon market is quite complex and different types of emission reduction projects have specific criteria that must be met in order to qualify as an emission reduction project. Nevertheless, it is crucial to understand a farm’s current, or baseline, emissions.

Installing an anaerobic digester for the purpose of capturing methane and producing heat and/or power does not automatically qualify to generate emission reduction credits. One has to evaluate what the project is replacing (in other words, does the current practice that is going to be replaced generate methane?). Replacing a deep lagoon with a lengthy residence time will likely generate emission reductions.

Replacing field application or other aerobic treatment practices will not generate emission reduction credits. Farmers considering installing anaerobic digestion equipment for the purpose of generating emission reduction credits should consider closely the criteria described in the article, as well as consider consulting a qualified carbon market firm.