Carbon offset bill could lead to new market for Hoosier landowners

October 8, 2020

Much-needed additional income could be on the way for Hoosier farmers and forest owners if the Indiana legislature passes a proposed carbon offset bill that would compensate them for storing carbon dioxide in their land.

The draft bill, which in part mirrors the Growing Climate Solutions act that Sen. Mike Braun, R-Ind., proposed on the federal level, simplifies the process for interested landowners wanting to participate in a carbon market. Sen. Mark Stoops, D-Bloomington, presented the preliminary draft of the bill in September to the House Interim Study Committee on Agriculture and Natural Resources.

photo taken from Sen. Mark Stoops, D-Bloomington Facebook page

A carbon offset reduces carbon dioxide emissions made at one location by compensating for those emissions in secondary location. One of the most common ways to offset carbon is through carbon sequestration, the process of storing carbon dioxide captured from the atmosphere. In the case of the proposed bill, farmers would be paid to store the carbon dioxide in farm and forest land.

The strategy is used by corporations such as Microsoft and Amazon to offset their emissions and lower their carbon footprint to comply with state or federal laws.

“They can make their production more efficient, but there are a lot of carbon outputs that they can’t offset without buying carbon offsets from property owners that have forest or farmland that soaks up carbon dioxide from the atmosphere,” Stoops said.

Improving the process

Before landowners can sell carbon credits on a carbon market, the market often requires a property assessment by a technical service provider to identify how much carbon is in the land. That information must then be verified by a third party.

Stoops said companies are already buying and selling carbon credits, but not all of them may be legitimate actors.

“You could be in a situation where somebody contracts with a farmer to buy all of their carbon credits, locking that farmer in. But the farmer doesn’t know any better and would maybe get a bad deal,” said Stoops.

To help landowners find certified and reputable technical service providers, Stoops’s bill calls for an Indiana State Department of Agriculture website listing certified technical service providers. The site also would help landowners implement projects that can produce a tradeable carbon credit.

“The state can make sure they are following best practices,” Stoops said. “That way, people that are landowners in Indiana can go to the state’s website and have a look at what businesses have actually registered with the state and proven that they are legitimate. That way you’re protecting people in Indiana.”

Potential in Indiana

Indiana has 5 million acres of forestland, and 87% of that is privately owned. One acre of mature forest can store 6 tons of carbon per year, which means Indiana’s forests could store 20 to 30 million metric tons of carbon annually.

The state’s 15 million acres of farmland could store half a metric ton of carbon per acre, or 8 million metric tons total.

Stoops said that could add up to significant supplementary income for landowners.

“If you want to think about it in terms of additional revenue for these property owners, carbon offsets are going for anywhere from 50 cents to $22 per ton,” he said. “So, you start multiplying that to 20 to 30 million tons in forest land and 8 million tons for agriculture, you can see there’s a lot of revenue generated, worldwide that could be coming to Indiana with this program.

Stoops’s bill also would allow companies to invest in the President Benjamin Harrison Conservation Trust Fund, formerly known as the Indiana Heritage Trust, to purchase the carbon credits. Fees would cover the administrative costs of the program.

“It’s very difficult with the state budget to get additional money allocated to the Benjamin Harrison trust fund,” Stoops said. “It made sense, especially now, with climate change and many industries that are interested in offsetting their carbon dioxide output and trying to be carbon neutral.”

Currently, Indiana companies that are buying carbon credits must buy outside the state.

Daniel Poynter, founder of Carbon Neutral Indiana, said corporations and individuals have expressed interest in buying in-state carbon credits. Carbon Neutral Indiana is affiliated with the nonprofit Indiana Forest Alliance.

According to Poynter, 20% of Hoosiers are willing to spend $40 a month to offset their own carbon emissions.

“That’s over 500,000 Hoosier households,” Poynter said. “Even if just 5% of that 20% participated, that represents $12 million dollars in demand from Hoosier households. That money should be flowing to Indiana farmers and forest owners.”

The Landowner Perspective

Ray Moistner, executive director of the Indiana Hardwood Lumbermen’s Association, supports the proposal but said its success would lie in how it was implemented.

He said the greatest opportunity lies in family-owned forests, with an average parcel of 37 acres.

“Carbon tradeoffs would provide private landowners a diverse income stream,” Moistner said. “We are known as the patient farmers because our crop grows very slowly. Steady revenue while the trees are growing is an incentive to keep lands in forest versus conversion to other uses.”

Moistner pointed out that the proposal could provide much needed funding for the Department of Natural Resources, which could improve forest health, but that it didn’t take into account finished wood products.

“Our $10 billion-a-year industry must not be overlooked as a source of carbon credits available for purchase. We think there are manufacturers that should also receive credits to trade on finished products,” he said.

Rick Clark, a fifth-generation farmer from Warren County, hasn’t tilled his land in 16 years and has been using cover crops for the past 11 years. He wanted to make sure ethical practices were used in both farming and accounting of the carbon.

He said he had been approached by many organizations trying to buy his carbon credits, but he hasn’t sold any so far.

“It’s still a young market,” he said. “We need to be sure and careful. What I’m hearing here today is something that I like. We try to do everything locally, and if you can generate the sources from within the state of Indiana that’s a win-win for everybody.”

Ray McCormick, a farmer from the Vincennes area, said farmers are great innovators and would find additional ways to sequester carbon if given the chance.

“We don’t know yet just how much carbon these farmers can sequester,” he said. “But we do know that every Hoosier farmer is looking for a way for additional income, and what could be a better way to reward those farmers than putting them in the role of saving our planet by sequestering all this carbon dioxide.”

Rae Schnapp, conservation director of Indiana Forest Alliance, said the proposal could be vital in the prevention of converting forests into other land uses such as roads or homes. She also said forests provide important co-benefits such as recreation, cooler microclimates and help to prevent flooding and erosion.

“Forests in Indiana are worth at least $6,000 per acre in ecosystem benefits per year,” she said.

Jeff Stant, executive director of Indiana Forest Alliance, supports the proposal, as long as it doesn’t affect state forests.

“We would oppose legislation or language in this legislation that would link it up to state forest management and imply that it’s supposed to tell the division of forestry how they are supposed to manage their forest to sequester carbon,” he said. “We want to keep the management of public lands as an issue completely out of this bill.”

Stoops says the bill has had bi-partisan support so far.

“This can be a big business moving forward, and we just need to make sure that we do right by the Hoosiers that are interested in selling their carbon offsets,” he said.

The bill will go next to the Natural Resources Committee and then possibly to the Senate and House for voting.

Carbon offset bill could lead to new market for Hoosier landowners