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Futures Market for Ag Carbon Offsets under Mandatory and Voluntary Emission Targets

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Abstract

Increasing concerns about climate change have prompted actions, both by governments and the private sector, aimed at curbing the emissions of greenhouse gases. An important number of such initiatives involve the trading of GHG allowances and offsets. An allowance permits its holder to emit a specified amount of GHGs, whereas an offset is a certified reduction in GHG emissions that can be used to compensate for GHG emissions elsewhere. Recently, carbon offsets have attracted the attention of decisionmakers in agriculture for their alleged potential to enhance farmers' profits, as some agricultural activities can generate offsets by capturing GHGs (e.g., methane capture from manure management, soil carbon sequestration, and fertilizer use reduction). The purpose of this article is to provide some background information on these markets and discuss the potential of the futures market for GHG offsets recently launched by the Chicago Mercantile Exchange Group to act as a catalyzer of the market for agricultural offsets.

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  • Oranuch Wongpiyabovorn & Alejandro Plastina & Sergio H. Lence, 2021. "Futures Market for Ag Carbon Offsets under Mandatory and Voluntary Emission Targets," Center for Agricultural and Rural Development (CARD) Publications apr-fall-2021-4, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:apr-fall-2021-4
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    File URL: https://www.card.iastate.edu/ag_policy_review/article/?a=127
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    1. Alejandro Plastina & Wendiam Sawadgo, 2021. "Cover Crops and No-till in the I-States: Non-Permanence and Carbon Markets," Center for Agricultural and Rural Development (CARD) Publications apr-fall-2021-7, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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    Cited by:

    1. Oranuch Wongpiyabovorn & Alejandro Plastina & John M. Crespi, 2021. "US Agriculture as a Carbon Sink: From International Agreements to Farm Incentives," Center for Agricultural and Rural Development (CARD) Publications 21-wp627, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Diaz-Bonilla, Eugenio & Echeverria, Ruben G., 2022. "Climate finance: Funding sustainable food systems transformation," IFPRI book chapters, in: 2022 Global food policy report: Climate change and food systems, chapter 5, pages 48-57, International Food Policy Research Institute (IFPRI).
    3. Elizabeth Canales & Jason S. Bergtold & Jeffery R. Williams, 2024. "Conservation intensification under risk: An assessment of adoption, additionality, and farmer preferences," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(1), pages 45-75, January.

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