If agricultural producers are allowed to participate in a national cap-and-trade system to curb greenhouse gas emissions, the opportunity to sell carbon offsets could prompt farmers to manage their land differently, according to a new USDA report. The policy would encourage farmers to manage land in ways that increases the amount of carbon stored in soil organic matter and plant biomass, including residue.

Land ownership, the report notes, could play a role in the participation decisions of agricultural producers. A large share of agricultural carbon sequestration potential is on high-tenure farms. As a group, these farms are more likely to focus on livestock production. They may also be more willing than nonlivestock farms to convert marginal cropland to grazing use.

High-tenure farms are also more likely to enroll land in the Conservation Reserve Program, the report notes, direct evidence of their willingness to accept payments for land use change. While it is not yet known whether or to what extent farmers will be eligible to participate in a carbon-off-set market, previous land-use and farming practice decisions suggest that high-tenure farm operators will account for a large part of the agricultural sector’s carbon sequestration potential. If so, distribution of farmland ownership should not be a limiting factor in the sector’s participation in climate change programs for the foreseeable future.

The report’s authors base their analysis on assumptions that price signals from a national cap-and-trade system would encourage farm operators to make marginal changes in their operations, but would not encourage non-operator landlords to make radical changes in their rental arrangements. If, however, carbon offset prices are high enough relative to applicable agricultural commodity prices, landowners may choose to alter their leasing arrangements, taking land out of production or placing restrictions on the farming practices operators can adopt.

Read the full report.