In the past year, private investment in removing and capturing carbon from the atmosphere has grown exponentially. However, there are few cost-effective ways to accomplish this. One alternative that is being pursued is storing carbon in soils, either as organic soil carbon or plant material.

Texas landowners, farmers, ranchers and forest owners are now being contacted by entities hoping to broker deals for this fast-growing carbon credit market.

The subject was the topic of a recent episode of Texas A&M AgriLife Extension’s Ag Law in the Field podcast. In the podcast, Todd Janzen of Janzen Schroeder Agricultural Law firm described carbon credits as “environmental cryptocurrency.”

“Like any cryptocurrency, it’s not really a thing. A Bitcoin doesn’t actually exist, but it represents one unique unit that can be transferred from person to person,” Janzen told podcast host AgriLife Extension Ag Law Specialist Tiffany Lashmet. “Carbon credits are similar in that a farmer undertakes certain practices on their land, and once it’s verified that they’ve done those, it creates a carbon credit that can then be sold to whomever wants to buy these. Then, for example, an Amazon-sized company can say they’re carbon-neutral.”

Companies, businesses and individuals seek to purchase the credits to mitigate their carbon footprint or the carbon dioxide emissions produced by various activities such as manufacturing or frequent use of large aircraft.

Lashmet noted the largely as-yet unregulated carbon exchange market is enticing to many farmers and ranchers hoping to make some additional income. But she cautioned landowners, farmers and ranchers to think twice and contact a lawyer before entering into any binding agreement.

“This is new territory, and many unknowns exist about the carbon market and these carbon agreements. I highly recommend engaging an attorney to review any carbon contract prior to signing,” she said in an AgriLife Today story.

In the episode of Lashmet’s podcast exploring the carbon exchange market, San Antonio attorney Anson Howard said a carbon storage contract typically involves four entities—the landowner, broker, verifier and purchaser.

Contracts generally specify terms such as the duration, when and how the landowner gets paid and protections for each party in the event complications arise, he noted.

The entrance of the group Grassroots Carbon into the Texas marketplace sparked a wave of interest among Texas ranchers, Howard said.

“They were the first group to come in and sign up Texas regenerative grazers. I think, right now, there are about 65,000 acres enrolled in these carbon storage agreements that are now entering the verification process,” he said. “There’s another group called Ecosystem Market Services Consortium that will be entering the marketplace sometime in 2022. It will be interesting to see with two groups going how much of a continued energy there is for this.”

If farmers or ranchers are interested in finding a broker or entering a carbon storage agreement, Janzen advised them to begin looking at companies they have existing relationships with. Many crop protection solution and farm data management companies already have or will soon be introducing carbon exchange platforms.

Something to consider before seeking a contract is how much land can be dedicated to the practice, according to Janzen.

“If you don’t have at least 100 acres to dedicate to this, it’s probably not going to be worth your while to sign up because the amount paid per acre just isn’t that much,” he said. “So, it will probably be more trouble than it’s worth if you just have a 10-acre field where you want to implement those practices.”

Another consideration is the length of the contract. Land may change hands over the length of a 10- or 15-year contract, which he said is common among carbon contracts he’s reviewed. Some of them specify the contract will continue even if the land is sold or gifted.

What you should know
Understanding some of the basic concepts related to carbon contracts is an important starting place, Lashmet said.

Each contract will likely have specific definitions of terms, so it is critical for landowners, farmers and ranchers to carefully review the definitions in any contract before signing.

Terms like additionality, carbon market, carbon practices, carbon credit, carbon emissions, carbon sequestration, permanence, stacking and verification each have a specific meaning within a contract and must be analyzed and understood.

Lashmet recommends farmers, ranchers and landowners considering a carbon agreement be absolutely sure they understand the document they’re signing.

“The most important advice I can offer is to carefully read the entire contract,” she said.

Resources
To find a reputable lawyer with agricultural experience, people may find the American Agricultural Law Association helpful. Another resource is the state bar association.

For more information on understanding and evaluating carbon contracts, Lashmet has a detailed blog post available on the topic.

To listen to the podcast episode featuring Janzen and Howard, click here.

More information on carbon markets is available on Texas Farm Bureau’s Climate Issue Resources page at texasfarmbureau.org/climate.