U.S. climate-smart agricultural and forestry incentives: from offsets to clean energy credits

Abstract Climate-smart agricultural and forestry (CSAF) practices prevent greenhouse gas emissions from occurring or increase carbon sequestration. I examine how the development of U.S. CSAF incentives shifted from offset markets to biofuel regulations over time. My perspective is informed by two professional roles I had in developing these standards. First, as an economist at the Chicago Climate Exchange, I developed CSAF offset protocols between 2007 and 2010. Second, between 2022 and 2024, I was an economist at the U.S. Department of Agriculture (USDA) when USDA developed a climate-smart agriculture pilot protocol for the sustainable aviation fuel blender’s tax credit. Twenty years ago, there were no U.S. biofuel mandates and CSAF incentives were conceptualized as occurring through offset markets. I explain how, in contrast to cap-and-trade programs, greenhouse gas emissions from agricultural and forestry practices are already included in the baseline of biofuel regulations. This implies that additionality issues, which have impeded the development of CSAF offset standards, are not as applicable to biofuel programs. Specifically, I examine the development of agricultural soil carbon, livestock digester, and forest carbon protocols as case studies. I conclude by discussing how CSAF crediting may evolve in the future.