The reason why governments choose trading over taxing to meet environmental goals is fourfold:
- Polluters pay.
- The financial resources flow into the businesses that are innovating new, low emissions technology and practices.
- The profit motive is universally attractive and is a flexible incentive.
- It can engage a large number of businesses in changing practices quickly.
Trading in soil carbon offsets or credits has many co-benefits beside the capture and storage of carbon: These benefits include less erosion, better soil structure, better water retention, higher levels of nutrient availability, and potentially higher production. Healthy soils mean healthier food and healthier people. There are also environmental benefits, such as greater biodiversity.
Growing and trading farm-based offsets is like growing and trading any other commodity. The grower decides which produce they will grow, they grow to a standard, they choose an agent, and deliver as agreed. They use financial instruments such as futures contracts and insurance to manage risk. They use pooling to spread risk.