There are nearly endless opportunities for landowners looking to generate passive income with their property. From resource leases to conservation programs, almost every type of property has the potential to create income for a landowner, given they know where to look. One such opportunity that is often overlooked is carbon credits.
Here’s what to know about how carbon credits can make landowners money.
What Are Carbon Credits?
Carbon credits are a means of regulating the amount of carbon put into the atmosphere by companies and businesses. Essentially, these businesses can purchase carbon credits from other businesses or landowners to offset the amount of carbon put into the atmosphere by their operations. Carbon credits are typically produced by programs that reduce carbon emissions like solar or wind farms, or through carbon sequestration.
The ultimate goal is to provide incentives for businesses that produce a significant amount of carbon to reduce their carbon footprint and shift our society towards one with lower overall emissions. While carbon credits are obviously a benefit to businesses looking to offset their carbon footprint, they can be even more beneficial for landowners by creating passive income!
How Can Landowners Make Money with Carbon Credits?
Carbon credits can be a boon for landowners, as they provide a means for landowners to generate passive income without lifting a finger. During his recent appearance on the National Land Podcast, Co-founder of LandGate Craig Kaiser explained how landowners can utilize carbon credits to their advantage, stating:
Craig Kaiser: “Trees are sequestering carbon dioxide every day and as long as a landowner chooses not to cut those trees down, he’s willingly making a choice not to monetize the timber and let them sequester carbon. There are carbon credit companies that are willing to pay that individual for not cutting their trees down and letting the vegetation pull carbon dioxide out of the atmosphere.
Mac Christian: So I’m guessing the two sides of this equation are: those companies reimburse landowners for not cutting trees, and then companies are able to defer their carbon credits into this company as a relay of carbon credit. Do I have that right?
“Yeah, let’s talk about that a little bit. The landowner doesn’t necessarily have carbon credits. There’s a developer who develops the carbon credit. A landowner is going to sign a contract with a company who says, ‘Okay. I’m gonna verify, I’m going to come and test, I’m gonna measure the trees, I’m gonna measure the soil, the carbon organic content in the soil, and I’m going to offer you a contract and I’ll pay you 12 dollars per ton of carbon that your land has sequestered.’ And if you can show after 12 months that you’ve done all of these practices, you haven’t cut your trees down, if you’re doing an agriculture carbon credit, you’ve reduced your stocking rates or you did a certain amount of plowing, things like this. If you’ve done that over 12 months or 24 months or even 5 years, whatever it is, then that company is gonna pay you for doing that.”
“This is because the company has now taken that and turned it into a carbon credit where Southwest Airlines, United Airlines, Amazon, or whoever it is can buy that carbon credit and say ‘We’re offsetting the emissions that we are emitting through our operations.’ By simply not cutting your trees down, you could be earning a carbon credit there and a possible annuity on your property. A lot of people don’t even realize the potential value there.”
If you’ve still got questions about how carbon credits can generate passive income, contact your local Land Professional, and if you’re ready to identify potential income on your property, contact Landgate today!