Market-Based Farmland Conservation: Carbon Trading, Nutrient Trading, and Wetland Mitigation Banking A case study with Codorun Farms

Abstract

The burgeoning development of the market-based institutions of wetland mitigation, carbon trading, and nutrient trading provides farmers with economic incentives in the form of payments for credits to change land use practices. Payments are made to the farmer based on the number of credits generated by environmental benefits gained from changing to and continually using best management practices and a market-based determined price of those credits. Using a private client’s farm, this project explores the feasibility of participating in these institutions based on associated federal and state policies, eligibility requirements, enrollment processes, and economic costs and benefits. Codorun Farms (the Farm), a family owned 400-acre farm based in York, Pennsylvania, has asked for a guide to market-based payment programs that promote conservation practices. Codorun Farms is interested in understanding non-governmental economic incentives that can be earned in exchange for switching to and maintaining best management practices. The Farm would like to understand if it’s possible to make a profit while at the same time accruing environmental benefits. Questions to be answered include: what are the requirements for participation, is the Farm eligible, and does it make sense for the Farm to enter into contracts with these types of programs? Preliminary conversations with Farm family members have led to an agreement to investigate the following programs: Wetland Mitigation Banking; Carbon Credit Trading and Agricultural Offsets; and Nutrient Trading. Analysis shows that the Farm would benefit from participating in carbon and nutrient programs but not wetland mitigation banking. Since the Farm is already practicing notill, it is beneficial to enroll in these two programs as the Farm will receive compensation for operating its business as usual. However, the results of this case study demonstrate that payments from carbon trading alone will probably not be enough incentive to change tilling practices for the small farmer. Participation in nutrient trading alone provides a higher payment and may be enough of an incentive, however the number of pilot programs in the US is very small and thus impedes access to these payments.