Carbon credit programs fail without climate bill

[December 06, 2010]  BISMARCK, N.D. (AP) -- A national program that paid farmers millions of dollars for reducing greenhouse gasses has fizzled amid uncertainty about U.S. climate legislation, has stopped paying dividends and will no longer take enrollment after this year, the president of the group running it said.

The North Dakota Farmers Union awarded farmers carbon dioxide credits for using techniques that reduced emissions of carbon and other gasses tied to global warming and distributed the proceeds when those credits were sold to businesses, cities and others. About 3,900 farmers and ranchers from 40 states have earned about $7.4 million through the program since it started in 2006.

But carbon credits that fetched up to $7 a metric ton a few years ago are now nearly worthless, said Robert Carlson, president of the North Dakota Farmers Union. The group has 6 million tons worth of credits that have gone unsold, and while it will continue to try to sell those, no new credits will be issued after this year, Carlson said.

The program based in Jamestown,  N.D., is the largest of about a dozen similar carbon credit programs nationwide that cater solely to farmers and ranchers. Those other programs are facing the same difficulties, said Roger Johnson, president of the National Farmers Union in Washington and a former North Dakota agriculture commissioner.

The credits would have had value if Congress had passed so-called cap-and-trade climate legislation. A bill that would have limited greenhouse gas emissions but let companies and others offset their pollution by buying carbon credits passed the Democrat-controlled House last year but has languished in the Senate. Republicans have derided the bill, which had strong support from Democratic President Barack Obama, as "cap-and-tax" because they said it would increase the cost of energy.

"The high point of the prices coincided at the time of the presidential primaries and the economy was strong," Johnson said. "Pretty much everyone thought there would be some sort of cap-and-trade legislation because of support from Obama and McCain.

"But then came the collapse in the economy and support for legislation died, and it all happened kind of at the same time."

The North Dakota-based program had pooled farmers' carbon credits for sale on the Chicago Climate Exchange, a private agency that trades greenhouse gases and other pollutants just as other exchanges trade such commodities as crops and livestock.

Farmers, ranchers and landowners earned credits by growing grasses and trees or using no-till farming practices, in which seeds are injected into the soil to reduce the amount of dirt turned over and carbon released. Livestock producers could participate by installing systems to capture methane from manure.

Ten million tons of carbon dioxide have been sequestered under the program since it started -- the equivalent of carbon emissions from about 2 million cars, Carlson said.

Wayde Schafer, a North Dakota spokesman for the Sierra Club, said the carbon credit program had promise.

"It was a good idea. It does reduce CO2 in the air, and it does benefit farmers," Schafer said. "But national cap-and-trade legislation probably won't see the light of day, though it still could work with regional cooperation among state and government entities."

It would take a cap-and-trade bill for the credits to regain their value.

"These (carbon credit programs) started because there was a presumption there would be a value on carbon and there would be legislation aimed at reducing greenhouse gasses," Johnson said. "Carbon really has no value now."

Terry Ulrich, who raises cattle and crops near Ashley in south central North Dakota, said he pocketed about $6,000 during the first three years of the program for employing no-till farming techniques on about 2,000 acres of his land. But it's been about two years since he received a dividend from the program, he said.

"I thought it was good for no-till farming, but the price has gone to pot, the market is almost zero and legislation doesn't look promising," Ulrich said.

Without incentives, some farmers will go back to less environmentally friendly farming practices, he said.

"The contract will be broken now, and we can all do what we want to do," Ulrich said. "But I'll still no-till the land, absolutely. That, I'm sold on."

[Associated Press; By JAMES MacPHERSON]

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