Agriculture Law Professor Advises Entering the Carbon Credit Market
The U.S. carbon marketplace is still evolving, leaving producers to discover both benefits and concerns as they get involved.
Dr. Shannon Ferrell, an agriculture law professor at Oklahoma State University, says farmers who lease land should be cautious of what’s in a carbon contract.
“Anytime you are contemplating any kind of change like that on leased landowner, you better involve the landowner in the conversation and that is a whole discussion on the negotiating power between the landlord and tenant and I think the inevitable question is how do we allocate any revenues we get from this between landowner and tenant.”
He says the goal is usually to sequester carbon permanently, which makes the length of a carbon contract an important consideration.
“I’ve seen some contracts for 10 years, 50 years, 100 years, so it just varies, but you have to ask yourself as a landowner, what am I going to have to do to sequester that carbon and guarantee that stays in place for the length of the agreement?”
He also suggests finding out how the agreement will be enforced.
“Can the purchaser of the carbon credits say, hey we had a deal you said you were going to sequester this carbon, you are not doing it i now have the right to seek an injunction to make you sequester the carbon, it depends on the language in the contract and how the court would view it if it rises to the level of injunctive relief.”
While current markets come in a wide variety of shapes and sizes, Ferrell is optimistic that they will continue to develop into a more accessible system.
“I think we are going to see a lot of movement, pretty dynamic. I would expect hopefully in the next 10 years to see some convergence in a lot of these terms, more consistency in how we verify the carbon sequestration and settle down to the point where there’s more certainty both for the producer and the people purchasing those credits as well.”
He also encourages producers to ask if the credits will be paid by the acre, or by actual carbon sequestered and to verify if there will be any fees collected by an intermediary company.
While the senate has passed the Growing Climate Solutions Act, in an attempt to put more federal resources into developing carbon markets, the house has not taken it up. House Agriculture Committee ranking member Glenn Thompson has requested a series of educational events on the subject before the committee votes on the legislation.