How the agricultural carbon market works

There is an increasing demand for carbon credits, as companies look to offset their carbon emissions. This demand is likely to increase in years to come due to consumer and investor pressure. Over 30% of Fortune Global 500 companies have committed to a significant sustainability milestone.

Carbon credits operate similar to commodities on the market: the buyer wants to to have confidence in the quality of the commodity. This is why Indigo is so focused on helping growers produce high-quality carbon credits — only the highest quality credits will be able to capture top dollar long-term in the ag carbon market. It's also important for companies to take into consideration who is verifying the credits, who is buying them, and what it means for long term price appreciation. Click here to read key questions to ask before signing up for a carbon program. 

As previously stated above, third-party verification of carbon credits builds confidence in the commodity and can reassure growers and buyers in the quality of the product. There are 10 requirements for a carbon credit verification, and in order to be verified with the stamp of approval, the carbon credit must meet all 10 criteria. Indigo is the only ag carbon program on the market operating at scale with methodology approved by industry-leading third-party verifiers Climate Action Reserve and Verra.

Additionality is one of the key 10 criteria in creating a high-quality carbon credit. Additionality means a farmer incorporated a newly adopted practice that either increases soil organic carbon and/or reduces greenhouse emissions. There are several different ways to earn carbon credits with additionality, for example:  if a farmer usually does 5 tillage passes and reduces to 4, they could receive credit for that. A grower that used strip till and went to no-till could also receive credit. There are many ways for growers at all stages of adopting carbon farming practices to generate credits.

Who is buying these carbon credits from farmers? Due to consumer and investor pressure to reduce emissions and the risks associated with climate change, many companies are attempting to cut back on carbon emissions, but often cannot eradicate them completely. After reducing emissions, they look to offset remaining emissions by buying carbon credits. 

The North Face Senior Manager of Sustainability, Carol Shu, says this is a great opportunity for her company to “think more holistically about what we are using in our products.” As a major purchaser of cotton, The North Face has a large opportunity to positively impact sustainability at the raw material level, Shu says, and they want to make it economically feasible for farmers to be sustainable land managers.  

JP Morgan Chase & Co. has also been a regular buyer of carbon credits for 10 years.

By enrolling in the Carbon by Indigo program, farmers can increase profitability by improving their soil health and productivity while also earning a supplemental income. “Being profitable is the goal. By being profitable you can keep the farm in the family” says Illinois farmer Will Drucker.