Who earns carbon credits on rented land?
This article was adapted and expanded from “Voluntary Versus State-Based Compliance Carbon Markets” by David Clay et al.
The short answer: This is a gray area for voluntary carbon markets and may change with time. In general, most carbon programs tie carbon credits to the land on which they are generated to prevent double counting, which means that landowners “own” those credits.
Break it down: About 40% of all farmland in the contiguous 48 United States is rented, according to the USDA Economic Research Service. And practice-based carbon programs are less common than those that pay for carbon credits generated. That is, most programs seek to make payments for each tonne of carbon dioxide equivalent reduced or sequestered, administering payments with a set price per credit generated.
Dig deeper: Here are some steps you can take to understand how carbon credits will be earned and paid out for rented land for the carbon program in which you are interested in participating.
- Seek legal advice for your specific situation before signing a contract to earn carbon credits.
- Research the carbon credit platform in which you might enroll. In some, the credit follows the field—i.e. the landowner—not the farmer. This could be different in other carbon programs.
- Check out how the carbon program completes the verification process and registers carbon credits. The ownership of carbon credits is recorded in registries which are checked during the verification process to prevent two parties from obtaining duplicate credits on the same ground. This will inform you about the program’s stance on carbon credits generated on rented land.
- Understand that emission reductions (avoidance of carbon dioxide, nitrous oxide, methane emissions, and the use of fossil fuels) and tillage and crop production practices (which generate offsets) are management choices and are the responsibility of the operator.
- Discuss the division of carbon credit responsibilities and ownership in rental agreements to help avoid conflicts between landowners and farmers.
Even if you’re not renting land, examining the ins and outs of any carbon program you’re interested in joining is worth the research—both for your peace of mind as you participate in a program and to avoid misunderstandings down the line.
In short, make sure that you have a clear understanding of how payments will be divvied up between the farmer and landowner. Adopting new practices to increase carbon sequestration (like converting to no-till) can come at an initial cost. Landowners and farmers should strive to maintain open channels of communication about carbon credits and payments to prevent potential conflicts and disagreements.