Without climate legislation, carbon market collapsesby Dan Gunderson, Minnesota Public Radio
St. Paul, Minn. — Farmers in our region are losing a cash crop. Until recently farmers who employ environmentally friendly tillage practices could sell carbon credits.
Those credits were purchased by manufacturing companies or power plants to offset carbon dioxide emissions.
But when Congress failed to pass legislation to regulate greenhouse gases, the carbon market collapsed.
The North Dakota Farmers Union started buying carbon credits from farmers in 2006. Those credits were then sold on the Chicago Climate Exchange, a sort of stock market for greenhouse gases.
Farmers Union President Robert Carlson says the carbon market hit it's high point in 2008. Then it became clear Congress would not pass a cap and trade bill to regulate greenhouse gas emissions.
"It peaked briefly at $7 a ton and now for all practical purposes the trading market is worthless," he said.
Carlson says Farmers Union contracted with almost 4,000 farmers in 40 states. The Farmers Union still has about six million tons of unsold carbon credits. All contracts with farmers have been canceled starting in 2011.
Most farmers earned carbon credits by reducing carbon dioxide emissions. That was accomplished by reducing tillage or changing livestock grazing practices.
Companies bought the credits to offset smokestack pollution -- the basic premise of how cap-and-trade works.
Carlson says Farmers Union paid out $7.4 million to farmers. The average individual payment was only a few thousand dollars, but it was extra money in farmers pockets.
"So I think it was the right thing to do and I think a lot of our farmers felt it was the right thing to do for the future too, to try to address the issue of global warming," he said.
Many farmers saw carbon credits as easy extra cash since they were already using the no till farming methods that earned credits on the carbon market.
The city of Fargo saw an opportunity to earn some extra cash too and jumped into the carbon market.
Fargo had already built a system to capture methane gas generated by decaying garbage in the city landfill. Some of the gas is sold to a nearby company that uses it for heat. The rest is used to generate electricity.
Selling the methane quickly paid for the cost of collecting it from the landfill, but because the methane is burned, Fargo qualified for carbon credits. The city sold $700,000 dollars worth in 2008. Then the market took a nosedive. Fargo Solid Waste Manager Terry Ludlum said the city hasn't sold any more carbon credits, but he keeps an eye on the market and keeps accumulating credits.
"We decided with the weaker market we're just going to continue to quantify our credits and we're not really spending money or losing money on it," he said. "If they come back we're sitting in great shape, if they don't happen to come back we're not out anything except a few phone calls."
North Dakota Farmers Union President Robert Carlson said he's not sure if there's a future for the carbon market.
"I think probably, realistically the idea of buying offsets has lost some credibility because of the rejection of cap-and-trade," he said. "So the next step may be one that's forced on us by an agency like EPA that just sets up a punitive system rather than a reward system."
But while the air is out of the carbon market in the U.S., Carlson said the idea is gaining traction in other countries where the idea has political support. One of his staff members was recently invited to France to explain how the carbon market works.
"And they're trying to learn how they can set one up there. There's interest in China as well," he said. "So the issue of global warming may not be front and center attention in the U.S. right now but it is an issue I don't believe is going to go away."
Carlson says the even if the carbon market never makes a come back, it had positive effects. Farmers earned some extra money, and many turned to more environmentally friendly farming practices.
- Morning Edition, 12/21/2010, 8:20 a.m.