Navigating Carbon Credit Decisions: What questions do producers need answered when entering the market
The carbon credit market is evolving, with increasing participation and rising demand. Farmers considering the market face crucial decisions.
One big question is what is carbon worth?
The Director of Sales of Indigo Ag in the Carbon Credit Space, highlights multiple metrics, such as the risk of reversal and permanence factor.
According to Travis Kraft:
“There is multiple metrics to actually talk about whether you are at risk of a reversal, meaning that you could let carbon back into the atmosphere, or you have a permanence factor, meaning it’s going to go deep into the soil. The more your permanence factor goes up, the higher that carbon credit is worth. So, whether you’re sitting at $37, $47, $57 a credit, the longer that thing stays in the soil, or the more practices that you can prove that you’ve done over time, the higher that credit value would be worth today and in the future, as well. If you’re just currently just turning and turning and turning the value of those credits gonna be very little. You can look at any other industry; there are over 175 different carbon credit financial models in the world. Ag fits a very small space. Only 8 percent of the entire market, but they’re worth the most because they have the largest amount of opportunity to sequester that much more carbon.”
Before entering carbon markets, Kraft advises farmers to ask essential questions, especially about the flow of money.
“There’s no tangible thing that you can hold for carbon. I think that’s what’s the biggest misnomer in the industry is that we’re all thinking of that, this, this stuff is in the ground, right? And who’s monetizing it? Who’s paying for it? And is the government involved? Is it not involved? There’s so many swirling questions and it’s really pretty simple,” he adds.
As Indigo Ag moves into remote data syncing and soil science, it marked a turning point for the company. They say that they can give data-backed assistance to growers to maximize their efficiencies.