Private markets promise farmers monetization of a secondary crop: carbon stored in the soil. But questions loom about data ownership, consolidation, and increased pollution in communities of color.
Private markets promise farmers monetization of a secondary crop: carbon stored in the soil. But questions loom about data ownership, consolidation, and increased pollution in communities of color.
September 24, 2020
Update: On January 6, 2021, Senator Debbie Stabenow (D-Michigan)—the incoming chairmans of the Senate Agriculture Committee—announced that she would make the establishment of a federal agricultural carbon market a “top priority.”
Farmers, take note: Carbon stored in soil could soon become its own commodity crop. That’s the message from developers, corporations, and legislators pushing for new carbon markets specifically tailored to agriculture.
The idea is that soils farmed in a regenerative manner can act as a vast carbon sink that removes carbon dioxide from the atmosphere, helping reverse climate change. In return for switching to regenerative practices, new carbon markets aimed at providing a financial incentive to shrink the world’s carbon footprint would allow farmers and farm managers to get paid for the carbon they store by companies—and even other countries—wanting to offset their emissions.
Farmers were previously limited from participating in carbon markets due to high costs and a lack of tools to accurately quantify soil’s changing carbon content. But as global atmospheric carbon dioxide continues to rise and a slew of corporations and countries are pledging to go carbon neutral, the idea of economically incentivizing carbon farming is gaining traction.
Several startups have launched new markets, organizations are racing to develop methods to measure soil carbon, and new legislation has been proposed to help farmers access those markets. Presidential candidate Joe Biden has also mentioned the idea in his plan to tackle climate change.
“Let’s create a second crop, an underground carbon crop,” said Paul Zorner, chief agronomist at Locus Agricultural Solutions, a company that’s helping sign growers with a newly launched carbon market startup.
“Most growers realize the land is their legacy, and if they can do something to improve their yields and get additional farm income, they will adopt these practices,” adds Zorner.
Despite proponents’ zeal to embrace carbon markets, most American farmers have yet to implement regenerative practices. And some researchers warn that uncertainties persist around how to measure carbon and how it behaves in soil, calling into question the efficacy and long-term potential of carbon farming. Critics also worry that carbon markets could lead to further consolidation in agriculture, raise questions around data ownership, and add more pollution in low-income communities.
“Regenerative agriculture is not a silver bullet that will solve the climate crisis problem,” said David Montgomery, a geologist at the University of Washington and author of Growing a Revolution: Bringing Our Soil Back to Life. “But there are multiple benefits from restoring the soil and I see a strong value to setting up a system to reward farmers to take better care of their land, even if the carbon drawdown estimates [turn out to be] much lower than predicted.”
Agriculture Excluded from Traditional Carbon Markets
Carbon markets have operated around the globe for the past three decades, but they have mostly excluded agricultural projects. Companies buy carbon credits or offsets to compensate for their greenhouse gas emissions through voluntary markets managed by developers and nonprofits or government-created compliance (regulatory) markets, such as California’s Cap and Trade Program, and other international markets. Each credit represents the removal of one metric ton of carbon dioxide from the atmosphere.
“Most growers realize the land is their legacy, and if they can do something to improve their yields and get additional farm income, they will adopt these practices”
Most offsets are listed in registries, which track projects and set standards and protocols for carbon accounting. The most widely used registries include the Climate Action Reserve, Verra (previously Verified Carbon Standard), the American Carbon Registry, and Gold Standard.
Currently, most land-related carbon offsets are generated through tree planting and improved forest management. Other projects include methane gas capture, fuel switching, clean cookstoves, and energy efficiency. The Chicago Climate Exchange, a U.S. carbon market for credits generated by farmers and ranchers that ran from 2003 to 2010, failed when the price dropped too low and the market collapsed.
In recent years, as researchers have shown that atmospheric carbon can be sequestered in soil, the idea of farmers selling carbon offsets has re-emerged. On row-crop operations, most scientists agree that a combination of reducing or stopping tillage, planting cover crops, rotating diverse crops, and in some cases, adding animals for managed grazing, are most effective. But other practices, such as adding a layer of compost to the soil, adding trees and other perennials to farms, and maintaining riparian corridors have also been found to draw down carbon on rangelands.
Thus far, regenerative agriculture has remained a niche practice. It requires an upfront investment and most federal subsidies tend to incentivize land-degrading practices instead. The methods for measuring carbon are also expensive and controversial.
But the practice is gaining popularity outside farming circles. Over the last few years companies including General Mills, Danone, Cargill, McDonalds, Target, and Land O’Lakes announced plans to advance regenerative agriculture on millions of acres of North American farmland.
Simultaneously, demand for carbon offsets is booming, spurred by initiatives such as the U.N. High Level Climate Champions’ Race to Zero campaign. An unprecedented number of governments and corporations—including Apple, Microsoft, BP, Google, Facebook, and around 30 European companies—have recently announced plans to become carbon neutral by reducing emissions and buying offsets; some have even vowed to become carbon negative by balancing out all of their historical emissions through offsets.
In June, a group of bipartisan lawmakers introduced The Growing Climate Solutions Act, which would create a third-party verifier certification program at the U.S. Department of Agriculture (USDA) to make participation in carbon markets easier for farmers. And while farmers and most of the lobby groups that advocate for them typically oppose climate legislation, the recent bill is supported by everyone from the National Milk Producer’s Federation and the American Farm Bureau Federation, to seed and pesticide giant Syngenta.
Indigo Agriculture Draws Farmers into a New Carbon Market
Over the past few years, several groups have been working to launch carbon markets specifically for the agricultural sector. In Montana, the Western Sustainability Exchange in partnership with carbon developer NativeEnergy runs the Montana Grasslands Carbon Initiative for ranchers. The Ecosystem Services Market Consortium, a subsidiary of the Soil Health Institute, is launching a national scale ecosystem services market for agriculture. And in Europe, the French government is leading the “4 per 1,000″ initiative, which encourages countries to increase the carbon sequestered in their soil by 0.4 percent a year.
Last summer, Indigo announced The Terraton Initiative, an effort to sequester 1 trillion tons (1 terraton) of carbon dioxide—or the amount that has accumulated in the atmosphere since preindustrial times—in the soil. The company also launched Indigo Carbon, its voluntary carbon marketplace for farmers, at the time.
“Regenerative agriculture is a major opportunity . . . so the question is how do we get more growers to transition when there are all sorts of barriers for farmers,” Ed Smith, vice president of Indigo Carbon, told Civil Eats. “If a farmer can do two cash crops at the same time—wheat and carbon, or corn and carbon—I think growers will see the benefit.”
Indigo has already contracted with several thousand farmers that together manage about 7.5 million acres, said Smith. More have expressed interest, but they have yet to be vetted, he added.
“Regenerative agriculture is a major opportunity . . . so the question is how do we get more growers to transition when there are all sorts of barriers for farmers.”
The contracted farms, located in the Midwest and the Southeast, average 1,300 acres and grow mostly corn, wheat, soy, and cotton. Not all the acres will immediately qualify for payments, Smith said, because some of the farmers are starting with pilot fields. But the goal is for them to spread regenerative practices to the rest of their farms. To this end, the company offers free digital tools and, at an additional cost, a microbial seed treatment and a team of agronomists who offer hands-on, in-the-field advice.
Growers who have enrolled with Indigo Carbon have yet to see their first payments. When the program launched last summer, crops were already in the ground and it was too late to adopt new practices, Smith said. Those who can show that they have sequestered carbon will see payouts early next year.
Indigo is partnering with ag data collecting companies such as John Deere’s cloud-based system and others. To quantify farmers’ carbon sequestration, Indigo will run carbon modeling and take annual soil samples on 5 to 10 percent of its contracted fields, Smith said. The company also uses satellite imagery technology and geospatial intelligence to monitor farming practices such as no-till and cover cropping.
Data is key to the company’s business model; its other arm, Indigo Research Partners, focuses on connecting farmers with new technologies and products and analyzes one trillion data points from 120 large farms on a daily basis. Some worry the company could wield too much control over the data, to the detriment of farmers. At a time when data ownership has allowed companies like Google and Facebook to amass great power and large agribusinesses are shelling out millions for data on climate and weather, a number of researchers have suggested that data ownership will be central to consolidation and a more integrated approach to agriculture.
Smith said Indigo only has the legal right to use farmers’ data “to develop crediting baselines to assess greenhouse gas levels and inform payment.” Indigo does not sell the data to third parties or let other companies use it for marketing purposes, he said, although it does shares anonymized, aggregated data with its many research partners.
For farmers who enrolled in 2019, Indigo guaranteed $15 per ton of carbon dioxide sequestered, with a guaranteed price floor of $10 per ton for farmers who have enrolled in the program since then. Ultimately, the future market price of the credits is unknown.
Indigo has helped to draft new agriculture-centered carbon accounting protocols, which the company submitted to the Climate Action Reserve and Verra registries. The protocols are key, said Smith “to ensure a high degree of confidence in the measurement of carbon levels in the soil and net greenhouse gas emissions from the farm.” If approved, the new standards would be available to any carbon project developer.
Seattle-Based Start-Up Nori Advances a Competing Model
Nori, the Seattle-based start-up, is building a different kind of carbon market based on blockchain technology. And it says the blockchain database can make it more simple, speedier, and less costly for people to buy and sell carbon credits.
Nori is currently working with 40 to 50 farming projects in various stages of verification and quantification, with about 200,000 acres of farmland, although more farms are still waiting to enter the program, said Christophe Jospe, Nori’s chief development officer.
“The time is right, farmers are interested to join the program to monetize the outcome from their ecosystem services,” said Jospe.
While the amount of cropland enrolled in Nori’s program is much smaller than Indigo’s—the company said it’s purposefully starting small—Nori has already begun to make payments for the carbon drawdown. The first went to Maryland corn, wheat, and soybean farmer Trey Hill, who last year received $115,000 for just over 8,000 tons of carbon stored in 10,000 acres of soil (the payment was based on five previous years’ worth of carbon-sequestering practices). Hill has since received additional payments.
In the Nori platform, farmers get paid with Nori tokens, a form of cryptocurrency, which have a value that fluctuates with market demand. The tokens can be traded in for cash or any other cryptocurrency.
To measure the amount of carbon a farmer draws down, Nori relies on modeling that’s informed by a network of 1,200 federal soil sampling and testing sites, said Nori’s director of carbon economics, Aldyen Donnelly. After the data is verified and approved by a third-party verifier, a new Nori Carbon Removal Tonne (NRT)—equivalent to a ton of CO2—enters a queue in blockchain where it can be purchased.
Thus far, about 16,000 NRTs have been sold over the platform. The average has sold for $16.50 to $17.25 per NRT, with $15 going to the farmer. And while the market will dictate future prices, farmers enrolled in the Nori platform can set their own prices; if the market price falls, they can elect to wait it out.
Instead of creating a carbon accounting protocol and working with traditional carbon market registries, Nori uses a version of COMET-Farm, the farm and ranch carbon and greenhouse gas accounting system developed at Colorado State University and funded by the USDA’s Natural Resources Conservation Service (NRCS) to quantify the incremental changes in soil carbon associated with the adoption of regenerative practices. Nori is the first market to commercialize the official USDA estimation standard, Donnelly said.
Nori also aims to lower costs for farmers and carbon credit buyers. Traditional carbon registries generate most of their revenue from project listing fees and annual maintenance fees, because more than a third of their listed credits don’t sell, said Donnelly. They also place a portion of the credits in a buffer account in case of carbon re-release, meaning sellers get paid less. Nori, on the other hand, derives its revenue only from transaction fees paid by the buyer, meaning the company won’t succeed unless enrolled farmers sell their credits.
In addition to courting corporate buyers, Nori welcomes individuals, households, small businesses, and nonprofit organizations, who have been locked out of buying credits in the past. In fact, most of the credits sold thus far on Nori’s platform were purchased by individuals looking to offset their personal or household carbon footprints, Donnelly said.
Uncertainties in Sampling, Carbon Capture, and Practices Remain
The quest to develop carbon markets also relies on a field of science that is very much still developing. “If you ask 10 people how carbon sampling can be done, you’ll get 11 opinions,” said Zormer, the chief agronomist at Locus.
For starters, some scientists contend sampling should go much deeper than it currently does. What’s more, soil can store a finite amount of carbon, and once it gets saturated, it’s difficult to add more. And there’s uncertainty about how carbon sequestration differs across soil types, crop varieties, climate, and other conditions.
Currently, the most stringent soil sampling goes down 30 centimeters and collects over 30 separate soil cores per field. The costs include up to $2,000 per sampling event and another $2,000 to $3,000 per testing round, said Nori’s Donnelly, meaning it’s unrealistic to test soil in every field enrolled in a carbon market. Given the costs, most “carbon measurement” methods rely on modeling, while others focus simply on rewarding the practices.
Several groups are working to develop better carbon accounting methods, including The Soil Health Institute, which recently was awarded $3.25 million by the U.S. Department of Energy to develop a soil carbon measurement and monitoring system called the DeepC System. DeepC will include soil probes, equipped with sensors, that can be pushed into the ground in the field, allowing farmers to take their own soil measurements.
There’s also the question of how long stored carbon will remain in soil. A weather event such as a drought—or a farmer’s successor plowing up or selling the land for development—could re-release some or most of the carbon.
Given the uncertainties, some critics say the idea that carbon markets are ripe for corporate greenwashing and serves as a “Band-Aid for those who don’t want serious emissions-curbing legislation.”
And even if such challenges were inconsequential, Indigo acknowledges that if it were truly going to sequester 1 terraton of carbon, regenerative practices would have to be implemented on all 3.6 billion acres of cultivated farmland across the globe.
Montgomery, the University of Washington geologist, also cautioned that farmers must be rewarded for using multiple soil health practices together, not just no-till, which has been widely adopted by large conventional farms, the main contenders for carbon markets. Currently, just over one-third (37 percent) of the country’s cropland—some 108 million acres—is farmed using low or no-till practices, according to the 2017 Census of Agriculture. But cover crops—which many experts see as key to the transition to no-till—are grown on just 15.4 million acres (although they have seen a 50 percent increase between the 2012 and 2017 census).
“The biggest impediment to carbon sequestration is tillage, but no-till by itself isn’t good enough,” Montgomery said. “If you want to stop the bleeding and increase carbon storage, you’ve got to have a diversity of [cash crops] and cover crops.”
“The biggest impediment to carbon sequestration is tillage, but no-till by itself isn’t good enough.”
No-till farmers who want to regenerate the soil also need to wean themselves off their massive chemical use, Montgomery said. The good news, he added, is that farmers don’t have to go organic to improve soil and sequester carbon. But continued use of large amounts of glyphosate (which often replaces tilling for wed control) and other herbicides reduces microbial life and makes soil more susceptible to disease (in addition to harming pollinators, wildlife, and a slew of other impacts), he added. Adhering to multiple regenerative practices can help growers to significantly reduce the amount of chemicals used on the farm, said Montgomery.
Carbon Markets Not for Everyone, Other Options for Sequestering Carbon
Critics such as the Institute for Agriculture and Trade Policy and the National Family Farm Coalition (NFFC) have argued that carbon markets are inherently inequitable, lock out most farmers, and could lead to more pollution, particularly in disadvantaged communities.
A key problem, NFFC’s national programs and policy coordinator Jordan Treakle told Civil Eats, is that carbon credit prices are too low to make transition to regenerative practices practical. Offset prices would have to rise to $40-$80 to tackle climate change, while in 2018 the average price on the voluntary market was $3 per metric ton of CO2. Indigo and Nori are currently offering $10-$15 per metric ton, but those prices may change depending on market demand. And if they fall too low, only very large-scale agricultural operations with vast acreage will benefit.
“We’re not convinced this system will anytime soon reach the kind of price levels that can provide a source of income for a smaller or mid-sized diversified family operation,” Treakle said.
Rewarding only large industrial-sized farms can also feed into the trend of farm concentration and consolidation, he said, and benefit the large food corporations that are now clamoring for regenerative practices and carbon markets.
“At a broad level, reducing carbon is a good thing,” Treakle said. “But if not done well, these programs can lead to corporate capture. We don’t think commodifying pollution is an effective strategy for addressing the climate crisis.”
And while rebuilding soil and carbon sequestration are critical parts of conservation work, carbon markets can undermine more holistic conservation efforts on smaller operations, Treakle said, including building pollinator habitats and protecting wetlands and wildlife.
“We want to incentivize smaller and mid-sized operations to be compensated for the work they’re doing,” he said, “rather than creating another program and taking away dollars from existing conservation programs, which are already underfunded.”
Also problematic is the fact that carbon markets don’t actually stop companies from polluting, Treakle said. For instance, an analysis by ProPublica last year showed that carbon emissions from California’s oil and gas industry have risen by 3.5 percent since cap and trade began. And because most power plants and polluting industries are situated in or near low-income communities and communities of color, Treakle said, carbon markets can enable them to disproportionately impact such communities.
Treakle and Montgomery also pointed to the fact there are many other ways to incentivize regenerative practices and carbon removal through soil. They include beefing up funding for existing federal conservation programs such as the Conservation Stewardship Program or EQIP and creating more local programs such as the California’s Healthy Soils Program Incentives Program .
Last year, shortly after Indigo announced its Terraton initiative Jeanne Merrill, policy director at the California Climate and Agriculture Network (CalCAN), weighed in on the difference between private carbon markets and Healthy Soils program. It wasn’t clear how much farmers would benefit, she said, adding: “Will the company scale up with the intention of being bought out by a larger ag or tech industry player—much like Climate Corp sold to Monsanto and Blue River sold to John Deere? Furthermore, will farmers be left holding the bag if the initiative collapses like the Chicago Carbon Market did?”
“If we’re going to be subsidizing farmers, it should be to repair the soil.”
Merrill pointed to public policy as a more promising solution, provided there’s enough funding to go with it.
Montgomery agrees. He says federal policies should be put in place “to ensure that the regenerative work that’s done today remains viable into the future.”
The sweeping climate proposal released by House Democrats this summer, which includes an entire section on increasing carbon sequestration on farms, also focuses on strengthening existing conservation programs. Notably, the proposal does not promote carbon markets for agriculture, though it does support developing better tools to quantify carbon sequestration. It also proposes reforming lending and crediting to include soil health and carbon sequestration.
It’s also important to reform the current agricultural incentive system, which over the last 100 years has mainly subsidized farming practices that boost yields and (inadvertently) degrade the land through crop insurance and direct payments for commodity crops, said Montgomery. “If we’re going to be subsidizing farmers, it should be to repair the soil,” he added.
Such reform could include direct cash payments for increasing soil carbon, reshaping crop subsidies and the commodity price support program to require regenerative practices, and subsidizing new equipment that allows farmers to diversify crop rotations and grow alternative crops, he said. Linking crop insurance to soil health is also key, he added.
This doesn’t mean carbon markets should be abandoned as an incentive, he added, even if agricultural soils prove not to absorb as much carbon as is believed.
“One way to figure it out is to run the experiment,” he said. “We don’t have to give anything up to harvest multiple benefits from restoring soil.”
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