Carbon farming proponents must step up to keep market relevant

Myriad concerns mean ‘uncomfortable’ players are offering carbon markets while harboring doubts because they don’t want to lose ground to competitors or miss out on business.

As carbon farming has migrated from the margins of conversation in agriculture to its center, the entire supply chain has understandably been pulled towards an innovation that could make ag a key part of the solution to climate change, rather than simply being one of its causes.

Investment managers, meanwhile, have seized on carbon sequestration as a bridge that could connect their assets and expertise to the wider effort of addressing finance’s role in climate change.

Enthusiasm for carbon opportunities is also strong among ag market pillars such as Cargill – which launched a carbon farming platform in 2020 and will enroll farmers for the new season in the fall – and Rabobank, which plans to launch a Global Carbon Bank.

However, multiple reports suggest key questions about the environmental and business cases surrounding ag-derived emissions credits must be properly addressed if the market is to thrive over the long term.

In a July report, the non-profit Environmental Defense Fund analyzed 12 existing soil carbon protocols and highlighted the current inability of any to reliably verify carbon at the field level. Jonathan Sanderman, an EDF soil scientist and one of the report’s authors, told Agri Investor the verification and efficacy concerns raised in the paper are well-known to players throughout agribusiness, who now face what the report characterizes as a “gold rush” surrounding soil carbon.

“From my private conversations with some of these companies, they are not all comfortable offering a carbon market, but feel like they are going to lose customers or business if they don’t offer something because all of their competitors are offering something,” he said.

As the EDF report explains, all soil carbon protocols quantify emissions reductions through some combination of soil sampling, remote sensing and process-based modeling. Although such models are necessary for markets to reach proper scale, variability among them and lack of specificity about individual performance are key sources of skepticism slowing uptake of carbon farming among producers, Continuum Ag founder Mitchell Hora told Agri Investor.

“We’re seeing lots of interest in the space and the door has been open, but nobody has established a moat around them yet,” said Hora, who founded advisory and software provider Continuum. The company has partnered with Rabobank for its Global Carbon Bank pilot.

“Nobody has been able to really start delivering value to the farmers and I really worry that there’s been a lot of overpromising and underdelivering in this space.”

Hora echoed others in questioning the market’s current focus on ‘additionality.’ In other words, paying only for practice changes that otherwise would not have occurred. Most existing marketplaces focus too narrowly on gaseous carbon stored as a solid in a way that does not truly reflect the variability of production, he added.

“Additionality for agriculture is not a one-time change. That’s where we screwed up,” he said. “In an agricultural context, carbon is not long-term stable. It’s not supposed to be. Carbon is supposed to be in the system, it’s the driver of life, and we need to better understand that farmers have the ability to draw down carbon and keep it in the agricultural system, but it’s as a solid, a liquid and a gas.”

Addressing such systemic issues is made more challenging by the current lack of consistency among protocols, according to EDF’s report. It highlights that a lack of standardization could limit soil carbon’s role as the US formalizes its nationally determined contribution to United Nations climate efforts.

Many net-zero pledges are framed by 2030 targets and the next few years will see existing momentum keep carbon farming in high demand while plans are formulated. As those self-imposed deadlines draw near and the possibility of additional regulation continues to loom in the second half of the decade, it will take leadership and innovation among the companies and investors that brought soil carbon onto the agenda to keep it there.