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Beef Buzz News

Carbon Markets: The Wild West of Free-Market Enterprise

Wed, 01 Sep 2021 10:38:49 CDT

Carbon Markets: The Wild West of Free-Market Enterprise Ron takes one more bite of the apple with Scott Yager, chief environmental counsel for the National Cattlemen's Beef Association. Today they sit down, talking about carbon markets.

In 2015 the United States joined the Paris Agreement, which aimed to combat climate change. The document lists off nearly two pages of goals, which joining countries agreed to. The following are brief examples:

"Recognizing the need for an effective and progressive response to the urgent threat of climate change, acknowledging that climate change is a common concern of humankind and recognizing the importance of the conservation and enhancement, as appropriate, of sinks and reservoirs of the greenhouse gases."

The last goal, which talks about sinks and reservoirs, along with article six of the agreement, that allows countries to work together to lower overall emissions, opened a new market: the carbon market.

"There is a lot of interest, right now, in carbon markets," Yager said.

The United Nations Framework Convention on Climate Change (UNFCCC) website explains these markets well: "When countries set a limit, or cap, on greenhouse gas emissions, they create something of value: the right to emit. What happens if we apply market principles and rules? The countries or companies that reduce emissions below their cap have something to sell, an unused right to emit, measured in tons of CO2 equivalent. Countries and companies that don't meet their target can buy these one-ton units to make up the shortfall. This is called emissions trading, or cap and trade. The net effect on the atmosphere is the same."

According to UNFCCC, land use plays an important role in the carbon cycle. This article from the American Farm Bureau Federation explains the role farmers and ranchers are playing in carbon markets: "market forces are working as they should, and U.S. agriculture is lessening its environmental footprint in addition to offsetting the carbon emissions from other industries."

In other words, companies set on going green - whether that is looking good among growing environmental concerns or because they truly care - are paying farmers for their "unused" emissions.

"There's a lot of tricky issues," Yager said. "For the cattle industry specifically, the issue of early adopters is a very thorny one."

Yager explained that many farmers and ranchers have already been practicing climate-friendly farming techniques, which means those farms don't have any "extra" emissions to sell and companies are not interested in paying farmers to manage carbon.

"They just want to pay you for doing extra," Yager said. "That's called additionality - if you're doing something additional, that might be something that you could generate a credit for and sell into the marketplace, and that is a huge problem for us."

In a way, the producers who have already been doing right by the environment are being punished, Yager said.

"There needs to be a way to compensate and reward farmers and ranchers who have been good stewards of the land," Yager said. "Otherwise, you're creating the perverse incentive - we'll quit, start doing things the wrong way and get paid for fixing it."

In all, Yager said the carbon market is like the Wild West. He said if it were him, he would wait to see how things continue to play out before jumping in. If you are interested in this free-market enterprise, Yager urged producers to be diligent in their partnerships, knowing exactly what they could be getting themselves into.

Click on the LISTEN BAR below to hear Ron's conversation with Scott Yager.

The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.



Listen to Ron's conversation with Scott here
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