An upcoming U.S. farm bill presents both risks and opportunities for rural climate projects, depending on how a divided Congress crafts the legislation.

Republican lawmakers, who control the U.S. House of Representatives, could try to redirect billions of dollars approved for climate-focused conservation efforts through the Inflation Reduction Act of 2022. The farm bill could still support sustainable farming and forestry practices that sequester or avoid emissions; such projects can generate revenues for landowners through carbon credits or offsets, which utilities and other energy companies are eyeing to reach net-zero emissions targets.

The bill could "empower farmers to understand what sort of practices they need to undertake in order to ... generate marketable carbon credits," said Eric Washburn, a former Democratic staff director for the Senate Environment and Public Works Committee.

Washburn is developing a farm bill policy paper for the Clean Air Task Force, and he represents a company called Neutral Foods on policy issues before the federal government. Neutral Foods tracks the greenhouse gas emissions that come from the production of dairy products and buys carbon credits to compensate for those emissions. It also works with dairy farmers to help them reduce their emissions.

Conservation funding targeted

Farm bills are typically passed every five years, with the current one expiring Oct. 1. The legislation, which is considered a must-pass bill, contains a range of programs related to farming, nutrition, crop insurance, conservation and energy.

Rural climate projects got a boost from the Inflation Reduction Act. The law contained about $25 billion to promote climate-friendly agricultural practices and protect forests through existing farm bill programs run by the U.S. Department of Agriculture. The funding was partly aimed at cutting emissions from agriculture, which produces about 11% of U.S. greenhouse gas output and has lagged behind the power industry and other sectors in reducing emissions.

But the Inflation Reduction Act passed the House and Senate with no Republican support. Sources say GOP House leaders in the new Congress might try to repurpose some of that money for non-climate uses as part of the upcoming farm bill.

"The biggest challenge, I think, is going to be preserving that investment," Washburn said.

Whether Republicans can redirect that funding "is the question of the year," said Lesley Jantarasami, managing director of the Bipartisan Policy Center's energy program. Jantarasami noted that House Republicans can add legislative language changing the way that funding is allocated.

A spokesperson for the House Committee on Agriculture did not respond as of press time to questions on what could go in the new farm bill.

During a March 1 hearing on the upcoming legislation, U.S. Sen. John Boozman, R-Ark., ranking member of the Senate Committee on Agriculture, Nutrition, and Forestry, said the Inflation Reduction Act prioritized climate and carbon sequestration programs at USDA, "neglecting some important resource concerns regarding other things." Boozman did not state an interest in redirecting those funds, instead asking if farmers could tap that money for other practices.

Democrats control both the Senate and White House, making the chances slim for a major rollback of the Inflation Reduction Act, or IRA. But Republicans' thin House majority could allow more IRA-averse factions of the GOP, including the House Freedom Caucus, to hold up the farm bill to extract spending cuts or changes.

Freedom Caucus members are "probably going to be some of the most vociferous supporters of repurposing or repealing that IRA investment for USDA," Washburn said. "What happens with the Republicans putting the bill on the floor if it doesn't repurpose all that money or a substantial part of that money?"

The act also included $13.3 billion for farm bill energy title programs, with the goal of providing grants and loans for clean power deployment. That funding looks less likely to be touched in the upcoming farm bill, one policy expert said.

"I don't anticipate those electrification investments from the IRA are at risk," said Ben Thomas, senior policy director for climate-smart agriculture at the Environmental Defense Fund.

Carbon market prospects

Despite GOP concerns with the Inflation Reduction Act spending, support for climate-friendly agriculture is growing, with farmers standing to benefit financially from such practices.

The voluntary carbon market totaled about $2 billion globally in 2021 and could be valued at up to $50 billion annually by 2030, according to a study by the Taskforce on Scaling Voluntary Carbon Markets.

Platts, part of S&P Global Commodity Insights, produces a natural carbon capture price assessment that reflects the value of nature-based removal credits, including reforestation projects. The assessment for that credit stood at $12.50/metric tonne of CO2 equivalent on March 1, with soil carbon credits being offered much higher at around $30/mt CO2e.

The new farm bill could support a recently launched USDA program to encourage farmer participation in voluntary carbon markets. At the end of 2022, legislation called the Growing Climate Solutions Act became law as part of a U.S. government funding bill. The act ordered the USDA to create an online registry to connect farmers and other landowners with third-party service providers and consultants who can help them find ways to generate carbon credits.

The farm bill could also fund technical assistance for farmers seeking to adopt sustainable practices and support research into farm-centered climate solutions, such as sequestering carbon in the soil. Connecting that research with protocols for carbon offsets is "going to be just a very rich area for more work," Jantarasami said.

With a GOP-majority House wary of additional climate spending, such investments might need to be promoted from a different angle.

"Republicans are very sensitized right now to this notion of putting climate things in the farm bill," Washburn said. "I don't think you're going to see much in the way of a new program that uses the word 'climate' ... but you may see more money for things like 'building soil organic matter' or 'improving soil health.'"

Ultimately, "Some of this will come down to how excited [farming] groups are about this multibillion-dollar revenue stream that's out there," Washburn added.

Although the Inflation Reduction Act boosted support for climate-friendly farming and forestry, Thomas said Congress can do more.

"We have such an opportunity in this farm bill to kind of match the farmer interest that has been swelling in being a part of the climate change solution," Thomas said. "But no one is going to do this on the margins farmers operate under. They need that assistance."

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