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Editor’s note: This is part three of a three-part series on carbon credits and markets discussed during PDPW’s Carbon Conference Jan. 31.
MADISON, Wis. – From manure management to soil carbon management to Clean Fuel Standard programs, dairy farmers can participate in carbon markets. However, farms should understand their carbon footprint and explore practices that make the most sense for their operation in generating carbon credits.
“In order to make environmental changes, a practice must have good overall economic return and impact,” said Katie Catron, lead agronomist at Sustainable Environmental Consultants. “Carbon credits and markets are an opportunity, and there are a lot of publicly available funds out there to pay for these projects.”
Catron and three project developers – Jamie MacKinnon, Nathan Schuster and Ryan Stockwell – shared opportunities dairy farmers can tap into within carbon markets during the PDPW Carbon Conference Jan. 31 in Madison.
The group recommended establishing a carbon baseline so future practice changes will be eligible to receive carbon credits. To help farmers determine their carbon footprint, Catron and her team conduct a four-step sustainability analysis process beginning with data collection and discovery. Offering a third-party verification and quantification platform for regenerative and sustainable agriculture, the company works with farms with less than 100 cows up to 10,000 cows.
“We work across a variety of systems to collect data where it is and how it is to ease burden on the producer,” Catron said.
When looking at carbon footprint, the farm system is broken into two parts – the dairy operation and field management. The key areas analyzed are manure, crop and dairy production. Catron said the main areas that impact carbon footprint are feed production, enteric fermentation and manure management.
On the field side, crop rotation, tillage practices and nutrient applications are assessed. Looking at the amount of time soil is bare is an important factor, Catron said. Field maps, the nutrient management plan and updated soil samples are used to conduct a field-by-field assessment that takes into consideration the geographic location of each field, soil type variations and passes made across the field.
On the dairy side, they look at the number of animals on-site including the number by each life stage, milk production in pounds per head per day as well as protein and butterfat, feed consumption and rations by life stage, manure storage system and application methods, energy usage for on-farm activities and irrigation, water use, and recycling.
Highlighting the farm’s carbon footprint, the report details what is driving that number to be higher or lower and suggests opportunities for altering that number.
“This report provides a basic understanding of where you’re at and the reasons why,” Catron said. “It could be in total tons of carbon produced or an intensity value on a per-product scale, such as tons of carbon per tons of milk produced.”
The report outlines progress made in each category along with ideas for short-term and long-term goals. For example, one progress item under soil health could be that 62% of acres had a cover crop to build organic matter and protect the field through winter. A short-term goal might then be to increase the usage of radish and cereal rye mixture for a cover crop. A long-term goal could be to determine the optimum cover crop mixture and continue to experiment with species.
Jamie MacKinnon, senior vice president with Anew, compared carbon offsets and insets and opportunities for each. Carbon offsets are a commodity sold into a $270 billion carbon market, MacKinnon said. Offsets make up $50 billion per year of that market and range in price from $3 to $40 per credit.
“The difference between a $3 offset and a $40 offset is in the environmental and social co-benefits,” MacKinnon said. “Ag carbon credits sell at the high end because they have a great story to tell about the change in the industry.”
Leading Anew’s agri-carbon business across North America, MacKinnon has pioneered solutions that include the implementation of a first-of-its-kind carbon-finance program for farms adopting soil amendments and other regenerative practices, completing the first-ever trade of compliance-grade offsets in the secondary market and authoring an offset methodology.
The types of companies buying credits has changed dramatically in the last few years, MacKinnon said.
“Offsets are pretty widely distributed now amongst airlines, tech companies and consumer packaged goods companies,” he said. “There are over 6,000 entities that have made net zero commitments, and many of those are procuring offsets.”
Carbon credits sold within a supply chain are known as carbon insets. Only a handful of actual buyers exist, MacKinnon said, as standards and frameworks are not well established. However, he said there is a space for this type of credit and believes this market will grow.
“You don’t need to associate yourself with only one downstream buyer when selling insets,” MacKinnon said. “Carbon inset projects can be done with suppliers of dairy that are closer to your operations, such as your dairy cooperative.”
MacKinnon said the Renewable Fuel Standard and Clean Fuel Standard markets offer higher returns than carbon offsets and insets for renewable natural gas production from anaerobic digesters but have the challenge of capital investments.
“There is an opportunity for a standalone project where the farm negotiates for carbon rights which lie with the end user of the RNG,” MacKinnon said.
Enteric fermentation, reduced nitrogen application and fuel efficiency are another cluster of carbon credit opportunities that do not require long-term commitments. Furthermore, they cannot be reversed. The farmer owns the carbon rights but likely needs to participate in a project aggregation.
“Insets in this area afford potentially higher pricing but restrict sales to one or few buyers,” MacKinnon said. … “The offset market offers greater prospects of selling on a timely and competitive basis.”
Soil carbon/cover cropping/low-till programs involve carbon dioxide sequestration and commitments to retain in the soil for more than 30 years. As with enteric fermentation projects, the farmer owns carbon rights but likely needs to participate in a project aggregation, MacKinnon said.
“These types of carbon projects have a very difficult avenue through the supply chain program,” MacKinnon said. “The permanence requirement makes this difficult to do within an insetting framework. Offsets are better equipped to manage permanence.”
When deciding what project is right for a particular farm, MacKinnon said integrity is the No. 1 thing to pay attention to.
“In the name of making it work for ag, many regenerative ag programs are ignoring fundamental principles of the carbon market that underpin demand,” MacKinnon said. “These programs are not sustainable and will be tainted as greenwashing. You don’t want to be associated with that.”
He recommends a farmer insist on working with someone using third-party, independent registry standards. Also, he suggests taking time to learn what is being done with the data and understand the incentives offered. Different programs offer incentives, such as rebates on inputs, a share of offset revenues or per-acre payments.
“You don’t have to choose one path of insets or offsets,” MacKinnon said. “You can choose to play in this market and retain some flexibility.”
A 2,000-cow dairy participating in a feed additive project to reduce enteric methane emissions would be looking at earning carbon credits of one to three tons per head, MacKinnon said. If doing cover cropping or reduced tillage in row crops, that number would be closer to 0.25 to 0.5 tons of carbon offsets per acre. At a carbon price of $20 per ton, the farm would potentially earn $5 to $10 per acre.
“No one single regenerative practice is going to make for a viable option when it comes to row crops,” MacKinnon said. “You’re going to have to combine different practices, such as cover cropping and reduced nitrogen use.”
Nathan Schuster of 3Degrees also cited several carbon market project opportunities for dairy farmers. Schuster and his colleagues have expertise in managing agricultural-methane projects and supported the development of carbon projects from several manure management technologies including vermifiltration, chemical flocculants and advanced solids-separation systems.
Digester alternatives like Alternative Manure Management Projects can generate carbon credits for avoiding methane. One example is vermifiltration, which uses layers of media to break down manure. Manure goes through several steps of separation before it begins trickling down through the layers that include worms to eat the bacteria.
“What comes out at the end is irrigation-quality water and worm castings, which are a byproduct that can be used as composting,” Schuster said. “From a carbon perspective, you should ask what the volatile solids separation rate is. You need a high rate for the carbon offsets market.”
Algae raceways and chemical flocculants are other examples of carbon projects in the AMMP category, along with many others, Schuster said. Finding a technology solution that can achieve high volatile solids reductions in manure greater than 85% is the goal. The estimated value of an AMMP project is five credits per animal per year. At a price of $15 per credit, the payback would amount to $75 per animal per year.
Projects ranging from biogas to electric vehicle charging are part of the Clean Fuel Standard, and buyers include fossil fuel providers in states with CFS regulation. Markets are geographically dependent. Fossil fuel providers and importers across the nation are the buyers in the Renewable Fuel Standard market, which Schuster said is an emerging market.
“There is a key change happening right now that has the power to transform markets for biogas and add another value stream for biogas producers like dairies,” Schuster said. “eRINs under the Renewable Fuel Standard will provide new possibilities for digesters in carbon markets.”
eRINS are credits produced when qualifying biogas is used to generate renewable electricity for charging electric vehicles. Schuster said the eRIN rule is not yet finalized but is expected to become effective in 2024.  
“This is a huge deal and a huge expansion to the program,” he said. “eRIN is another environmental commodity, and people who have digesters will be able to generate electricity and contractually demonstrate that it’s flowing to electric vehicle chargers.”
Schuster said companies like Tesla, Ford and General Motors are going to generate the eRINs. The potential pay range for a megawatt hour is $85 to $300.
“Even $85 is a strong incentive, and people will finance projects based on that amount,” Schuster said. “This will transform economics around digesters producing electricity in states like Wisconsin and all over the country.”
A handful of buyers are using enteric methane and soil carbon projects in the supply chain context, Schuster said. Enteric methane reductions can be achieved through feed additives, and certain seaweeds have been shown to reduce enteric methane production in ruminants.  
The estimated value of such projects is two credits per animal per year. At a price of $15 per credit, the expected payback would be $30 per animal per year.
“Efficacy and dosage amount can make this number move a lot,” Schuster said.
When it comes to soil carbon management, changes to farming practices can generate carbon credits if they reduce or improve nitrogen application and build soil carbon. The estimated value is one credit per acre per year at a price of $15 per credit.
“This is optimistic,” Schuster said. “You need to stack practices to realize one credit per acre.”
According to Schuster, credits generated from these activities that can be demonstrated to be in an organization’s supply chain can dramatically increase the value. However, there are limited transactions at $40 per credit.
Major companies such as Nestle, The North Face and Walmart are investing in sustainable agriculture, Ryan Stockwell said. Senior manager for grower engagement at Indigo Agriculture, Stockwell also operates the north central Wisconsin farm he grew up on, where he raises cash crops.
Stockwell identified two paths for farmers interested in partnering with corporations looking to meet climate goals. The first is the supply chain insets market where farmers can earn premiums for crops grown with qualifying sustainable practices, regardless of best practices. This is a newer concept with programs still developing, Stockwell said. Various farming practices are eligible based on the requirements of the buyer. The farmer receives a cash premium for the crop after harvest and delivery.
The second path is the carbon credit offsets market in which farmers can earn long-term annual revenue by adding qualifying sustainable practices. Farmers choose from eligible practices that sequester carbon in the soil. Farmers receive payments for credits that are generated and sold, and payments are often vested.
“Supply chain insets are tied to a commodity, which simplifies payment structure,” Stockwell said.
Sustainable crop programs enable farmers to earn a premium for their crops. Stockwell said buyers are paying more for crops grown using practices that conserve resources and reduce emissions.
Making practice changes on the farm is the backbone of the carbon program. Stockwell said farmers get paid when they prove through farm records that they made those qualifying changes.
“Your first year in the carbon program, you will need to provide field records from three or more years to set a baseline so Indigo can calculate your carbon credits,” Stockwell said. “After that, you will only need to enter information on the current season.”
Eligible practices include adding or extending cover crops, diversifying crop rotation or reducing tillage. Farmers receive a portion of the carbon credit price or a straight per-acre payment.
Agronomic flexibility and contract length vary by program.
“For most programs, when you produce more carbon, you earn more income,” Stockwell said.
Before signing up for a carbon program, Stockwell suggests asking the following questions: What practices qualify? Is the program backed by notable partners? How long has it been around? Does the program stand to win when growers get more money, or is there another corporate motive? Are payments competitive and paid in cash? Are the farm’s fields and crops eligible? Are credits backed by a third-party registry, giving the program the scientific rigor buyers are demanding?
“There are no right or wrong answers necessarily,” Stockwell said. “It’s about finding the right fit for your comfort level.”

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