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Trading carbon credits worth examining, Purdue expert says

WEST LAFAYETTE, Ind. — Farmers and landowners could receive extra income from already-existing land management practices by selling carbon credits on the Chicago Climate Exchange, said a Purdue University expert.

“Farmers and landowners have an opportunity to sell carbon offset credits into carbon trading markets if they implement certain conservation practices,” said Lenny Farlee, Purdue Extension forester. “Eligible practices include no-till farming – if implemented between 2006 and 2010 – grassland plantings that have been done since 1999, as well as forest tree plantings done since 1990.”

Carbon offset credits are emissions credits earned by eligible offset projects that sequester, destroy or displace greenhouse gas emissions.

Farlee said that forestland owners involved in the Indiana Department of Natural Resources’ Classified Forest Program also have an opportunity to trade carbon offset credits on the growth of their forest properties.

Before jumping in, Farlee said there are a couple of things farmers and landowners need to consider when determining whether to sell carbon offset credits.

“You are signing a contract to keep a practice in place,” Farlee said. “If the practice is removed, you would have to pay for the carbon that you’ve already been paid for.

“Once you understand that you are entering a contractual agreement and you are sure you are going to keep the practice, putting carbon credits on the market is actually another way to get a little bit of income.”

Last summer carbon had a value of $7 per ton. For an idea of just how much potential income selling carbon offset credits could provide, Farlee said no-till yields three-fifths of a ton of carbon per acre on Indiana farms. So for one 50-acre field a farmer could generate $210 of additional income with carbon valued at $7 per ton.

Grassland plantings yield 1 ton of carbon per acre per year, and tree plantings can range anywhere from 1-3 tons per acre per year. However, the value of carbon has dropped significantly, Farlee said.

Today, carbon offset credits are worth about $2 per ton of carbon.

“The price attractiveness is not quite as high as it was this summer, but we’ve got some interesting developments,” Farlee said. “The new administration has indicated an interest in a cap-and-trade program.”

President Barack Obama’s New Energy for America Plan would implement a nationwide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.

“A program like this would put absolute caps on emissions of carbon and allow for trading to help meet those caps through industry buying carbon offset credits from folks that are fixing carbon,” Farlee said.

Before a landowner can trade carbon credits, they must work with an aggregator, someone who accumulates pools of carbon from several different properties to get enough carbon to meet the trading thresholds required by the Chicago Climate Exchange. The aggregator essentially acts as a stockbroker, Farlee said.

A list of aggregators is available on the Chicago Climate Exchange’s Web site at http://www.chicagoclimateexchange.com/content.jsf?id=64. Purdue Extension also has “Cash for Carbon: A Woodland Owner’s Guide for Accessing Carbon Markets,” a publication that includes a short list of aggregators in the Central Hardwoods Region. The publication is available online at http://www.ces.purdue.edu/extmedia/FNR/FNR-228-W.pdf .

“Selling carbon credits is something that farmers and forestland owners should certainly watch as a real opportunity in the future to make some extra income off their property management practices,” Farlee said.

For questions and more information about carbon credit trading, contact Farlee at (765) 494-2153, lfarlee@purdue.edu

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