Going Green to Earn ‘the Green’

CHARLENE M. SHUPP ESPENSHADE
Special Sections Editor

STATE COLLEGE, Pa. — Farmers have the opportunity to cash in on a new market for their farms: the environment.

The idea for market-based trading based on the environment is not completely new. Carbon credit trading has already created a successful market and improved air quality, according to some experts. With a more environmentally-aware public, questions abound on if the same idea could be done with water and habitat.

The Penn State Ag Council discussed the role agriculture could play in market-based environmentalism at its spring meeting April 12 here at Celebration Hall.

USDA and other federal governmental agencies have worked to incorporate the concept into their programs. “It is believed the market can reallocate resources better than government policy,” said Marc Ribaudo, agricultural economist, USDA Economic Research Service.

The markets that could potentially develop for farmers include recreational activities — such as hunting, fishing and wildlife viewing — as well as water quality, carbon markets, wetland mitigation and what Ribaudo called “green labeling” — open space and biodiversity.

Regulation has created a demand for many of these new markets, he said.

The benefit for farmers is providing new income streams to farms and more funds for conservation through privately funded stewardship.

USDA has been pushing these markets as a benefit for agriculture. In addition to funding more research to improve stewardship and market development, they have also passed policy permitting farmers to collect credits from conservation practices that use USDA funds for installation.

There has been criticism of the programs because if a farm receives cost-share funds for a conservation practice, some believe they should not be allowed to collect additional funds.

There are challenges for many of the new markets. Fee-hunting and recreational activities on farms has a negative meaning to some and few farms nationally participate. Its environmental benefit remains in question because profits are not reinvested into conservation work. However, Ribaudo said several farms in Maryland make more on recreational fees than on the farm’s crops.

Water quality trading has received attention in recent years. However, very few trades have happened because of market uncertainties. Ribaudo said it is costly for point source polluters to accumulate enough credits. Farmers hesitate because of the additional scrutiny required to participate.

Abdalla said water quality trading is a tool Pennsylvania is pursuing to help meet Chesapeake Bay nutrient load reduction.

In Pennsylvania, Abdalla said two trades have been made in Perry and Susquehanna counties.

“Trading is not a silver bullet” for correcting water quality, he said. A lot of groups look at the program and only “see what they want” out of the program.

Greenhouse gas or carbon markets have potential for farmers. Because of the international markets and the Kyoto agreement on reducing greenhouse gas emissions (of which the U.S. is not a part), carbon trading has gained a foothold internationally. Farmers can be paid for carbon sequestration by converting to no-till farming and methane digesters.

Scott Subler, president of the Environmental Credit Corporation, said that unlike the other options, the carbon market is more established.

Subler said his company has “written checks for five and six digits” to farmers on the carbon trading market. Subler’s company trades carbon credits on the Chicago Climate Exchange.

Farms have the opportunity to cash in on wetland mitigation but the problem with the market is it takes years to capture a return. In addition, Ribaudo said wetland protection is an “inexact science.”

Robert Brooks, director of the Penn State Cooperative Wetlands Center, said that it has been an “uphill battle” to get wetland banks established. Only 100 wetland banks are in the U.S. with the majority in Florida and North Carolina.

Brooks shared work by the Wetlands Center with protecting bog turtle habitat in Chester County with the establishment of a habitat bank pilot project.

Some farmers have attempted to capture a niche market with green labels promoting farming in an “ecofriendly manner.” Products have a higher price to ensure on-farm stewardship. The issue, Ribaudo said, is convincing consumers of its value. Some consumers have said there is often an information overload on the labels.

The role government needs to play in the development of these markets must be research, said Ribaudo. The hope is that established research will reduce market uncertainties. Education and research will also help establish the needed business models for success and reduce liability.