Will carbon pricing mean an increase in farm income?
As the federal government gets ready to increase the carbon tax on April 1st, we are hearing a lot from Canadians, including farmers. And, rightly so. As farmers, we view the carbon tax as a direct hit to our bottom line. But, I’m not writing today to debate the carbon tax. What I would like to focus on is a topic still new to many of us, and that is carbon pricing. We must tread carefully, but I believe there is a great opportunity sitting in the soil of our fields and pastures.
Soil as a carbon sink
Soil can play a major role in the global carbon cycle, by acting as a carbon sink, or a carbon source, to the atmosphere. There’s actually 5-6 times more carbon in the soil than in the atmosphere, according to Canadian Agri-Food Policy Institute (CAPI) researcher Susan Wood Bohm.
“Carbon sequestration in agricultural soils, through the adoption of beneficial management practices (BMP), could help mitigate climate change, improve soil health, resilience and productivity,” she said at a recent CAPI webinar.
Her research shows that from 1971 to 2015, soil organic carbon (SOC) stocks actually increased in Western Canada thanks to the adoption of no-till farming practices and naturally drier soils than in Eastern Canada.
So, how does this translate to farm income? Carbon pricing is a hot topic and while it’s still early days, I believe farmers could stand to benefit. In a way, it’s the commodification of what many have been doing all along – carbon positive practices such as low till/no-till farming, fall cropping, nitrogen inhibitors, etc. These BMPs help to increase and keep carbon in our soils.
Responsible farming practices already utilised allow Canadian farmers to sequester 11 million tonnes of greenhouse gas in their fields each year.
Doing the math on carbon pricing
I’ve been watching what’s happening in the EU and the US, the southern states in particular, where carbon trading is already happening. Here in Canada, we’re still waiting to hear a plan from the federal government.
According to my math, carbon credits could increase net farm income by 40-50%. Here’s how the math breaks down:
Let’s assume the federal government increases the price of carbon from $40/tonne to somewhere between $70-$100/tonne. If we can prove we are sequestering a tonne of carbon per acre, then we can sell that back to companies and industries that are looking for carbon offsets.
If the average farmer makes $50-75 in profit per acre and can sell another $50 in carbon credits, which goes right to your bottom line, then it’s almost a doubling of their income. Even when that is decreased by the amount of carbon tax paid by farms, it still has the possibility to be a significant net positive to net farm income.
Does it sound too good to be true? I’m optimistic, but I’m also a realist. We’ve got a long way to go. We need several things to happen in Canada before farmers can get the recognition they deserve for providing a natural solution to climate change and can begin to see some positive economic benefits.
Mass adoption of soil testing – we need to get better at this in Canada; there are not enough farmers doing regular soil testing. It would be great for the Federal government to undertake a national soil health study, especially focusing on organic matter, bulk density, and carbon burn-off.
Better measurement tools – more research and development is needed in this area so we can quantify the amount of carbon in the soil. This will be the hardest part when carbon credits start to trade – how do you prove and verify your carbon credits? The weaker your verification is, the more your carbon credits will get discounted.
Canadian rules around carbon pricing – we need the government to announce rules around carbon pricing and trading so we can start to prepare and formulate a plan.
Get clear on exactly what practices we are required to undertake and how much will those cost?
In my opinion, the government needs to be a referee, not a player, in the carbon game. This hasn’t been made clear yet.
Carbon contracts – there are many questions about how these contracts can or will be set up and we’d be wise to advocate that farmers who’ve been early adopters be allowed to participate.
Carbon credits shouldn’t just be available to those who start implementing carbon positive practices now; there should be some kind of retroactive benefit
Awareness and education – as an industry we need to do a better job of telling Canadians and our government about all of the positive impacts agriculture has in soil preservation, capturing carbon and growing nutritious food to bolster our domestic food supply.
What can farmers do to prepare for carbon pricing?
My advice to other farmers is to do your research – and I’ll be providing any insights I get through this blog, my newsletter and upcoming speaking engagements. We shouldn’t let this happen to us. Rather, let’s proactively plan to make this a win-win situation – doing the right thing for the farm and the environment while putting money back into farmers’ pockets. We should keep an open mind, share resources and look for possible partners versus relying on carbon brokers. These aggregators/brokering agents stand to benefit greatly and, if we’re not careful, they will be the big winners in the carbon pricing game.