Carbon credits have become an incredibly valuable commodity in today’s world. The concept of trading off carbon emissions against each other has nevertheless become a part of the global economy.
And it is becoming more and more sought after year on year, offering better returns than £5 slots.
Hence Bayer’s announcement that the German multinational will consider trading carbon credit with farmers who have recently started adopting green best practices. But is it a good move on the farmers’ part? Read on to find out.
Expansion of a previous programme
Bayer is already operating a program where farmers that adopt the best green practices can receive financial incentives, as Bayer cashes in their improvements as a carbon credit. The program has been operating in some US states for some time. However, their previous model did not include many farmers.
Only more recent converts to the practices (no-till, strip-till, and cover crops) were eligible for the credits plan.
Now, Bayer has extended the program on a case-by-case basis, offering to assess the eligibility of farmers carrying out best practices as far back as 2012. However, there are a few aspects of the deal that might not be ideal for farmers.
What the deal entails
The main part of the deal is to include farmers using green techniques as far back as 2012, rather than just recent converts.
However, it also stipulates that they will need to provide concrete data and evidence that the techniques were carried out, something that many farmers will probably struggle with.
They may not have the documentation to prove exactly how they’ve been using the techniques or for how long.
On top of that, Bayer requires farmers to sign up for an entire 10-year term of the deal, with an additional possible 10-year retention period.
Put simply; farmers would find themselves locked into a contract that depends entirely on the fluctuating prices provided by dealers of carbon credits.
Bayer understandably needs farmers to commit to a contract if they actually want to make the plan work.
But at the same time, there is no way of saying that signing up would be beneficial for a farmer or that it would be an easy thing to do.
Bayer would not only require information on a farmer’s green practices. It would essentially require that they hand over just about all data relating to their farming, covering many years.
Many farmers would understandably want to hold onto information on how they run their business.
The value of carbon credit
Bayer may be at the forefront of carbon credit trading, but that doesn’t make it the only company involved. There are plenty of other multinational businesses that are starting carbon credit plans.
What’s more, carbon credit will be more and more valuable in the future, making it likely that more and more businesses will get involved in trading. As the credits become scarcer, the odds are that their value will go up. What does this mean for farmers?
Essentially, it may be a far better idea for them to wait and see which way the markets go. Bayer’s deal relies on an ongoing contract with the farmers, which could easily become a bad deal by the time other companies get involved with credits.
The deal is not necessarily a bad one. It’s simply a fact that with an emerging market to sell carbon credits; it’s possible that farmers could get a better deal if they wait.
What can carbon credit do for the environment?
Bayer’s integration of carbon credit into their farming approach is going on among other industries around the world.
Carbon credit came to many people’s attention when it became big news in the airline industry, and it’s also become a major aspect of industrial niches such as manufacturing. But credits have a particularly effective role to play in farming.
By encouraging American farmers to adopt green, renewable practices, Bayer has the opportunity to change the farming culture of huge areas of the country.
The financing made available by the deals is much needed, with many farmers facing unprecedented problems in an industry that is currently struggling.
Critics, however, are quick to point out that letting people buy carbon credits is not doing enough to control emissions.
Part of this is down to the fact that any carbon credit scheme will never be big enough to change global emissions.
On top of that, it is easy to dismiss the plan as simply a way of building up an industry around emissions. As long as someone is willing to pay for the credits, the emissions will increase.
It is undeniable that the carbon credit market has become an important part of many different industries, and farming is one of them.
The credits are an effective incentive for many farmers. However, the Bayer deal isn’t necessarily the best one out there.
Any farmer who took up the deal would need to be ready to lose a lot of independence potentially.
On top of that, there is no evidence that the deal is the best one around. Farmers could benefit more if they simply started storing detailed data on their practices and waited for the ideal price of carbon credits deal to come along.
The 10-year conditions on either side of the Bayer offer are enough to make many farmers think twice. It remains to be seen how far the deal will go in the future.
Thomas Glare is an author who puts his experience in writing popular articles that help people succeed. It provides you with strategies with the possibility of significant investments and big wins.