Hemp Stakeholders Look to Cash Dividends from USDA Carbon Bank

By Trevor Yahn-Grode, Data Analyst, New Frontier Data

The creation of carbon markets – exchanges through which carbon-emitting companies can purchase credits to offset their emissions – is widely considered to be a positive and necessary step towards achieving a net-zero global economy.

In the near future, as companies scramble to achieve net-zero status, carbon credits may provide a significant impact both on what gets produced and thus what gets grown in tomorrow’s economy.

Currently, two primary markets exist for carbon credits: voluntary or compliance models. Voluntary carbon markets are optional: Companies opt in as part of their demonstrated commitment toward reducing their net carbon impacts. Compliance markets are compulsory, mandated by governments and civil authorities.

Offset credits come in many forms. They might be derived from emerging technologies like direct air capture (DAC), but most come in the form of planting forests and crops. In the future, carbon credits might by earned by manufacturers who replace emissions-heavy products with low-carbon ones. However, as is common when implementing new ways of doing business, many kinks arise to be ironed out.

First and foremost is governance. Lack of control and governance around voluntary carbon credits has led to fears of polluters’ exploiting loopholes to abuse the system, making them seem as though they have achieved carbon-neutral status when they have not. Carbon credits are intended to offset emissions that are impossible or extremely difficult to avoid (e.g., aviation, concrete or steel manufacturing, etc.), but worries arise that polluters will instead use them to offset avoidable emissions, and continue unsustainable practices.

Carbon credits generally also require long, comprehensive contracts which some farmers consider invasive. As example, Nori (a leading carbon credit company), pays farmers $15 per ton of CO2e sequestered, but requires 10-year contracts from farmers to adopt low-carbon practices (i.e., no-till farming). Even so, there are then questions over permeability: What happens if the land earning a carbon-credit is later displaced? What if a farmer compensated for the carbon stored in his/her soil over many years then sells that farm to a real estate developer who subsequently tears up the soil for new construction, thereby releasing years of stored carbon from that soil and canceling out the accumulated credit? Long-term solutions must be found.

Within the specific context of the hemp industry, hopes are high among stakeholders that hemp’s superior carbon-sequestering qualities can make it a major source of offset credits. Fiber stakeholders are particularly excited, especially those manufacturers who see opportunities for carbon credits to help subsidize their low-carbon products, and lead them closer to price parity than they would find otherwise.

While carbon offset projects for now are rare in the industry, interest in them is rapidly increasing, fueled by government support. Robert Bonnie, an adviser to U.S. Secretary of Agriculture, recently mused in a transition memo about a USDA carbon bank which could spend up to $1 billion a year to buy farm-related carbon credits. With government support of carbon-neutral measures steadily increasing, New Frontier Data expects compliance-based carbon offset markets to comprise a major component of future industry.