Rabobank has launched a pilot North American carbon sequestration program as part of a global Carbon Bank initiative it hopes to finalize by the end of 2022.
The pilot will see the Dutch bank’s North American lending unit Rabo AgriFinance partner with Iowa-headquartered agronomic software and consultation provider Continuum Ag. The pair will offer five existing customers across Iowa, Arkansas and North Carolina an opportunity to be paid for carbon sequestered through agricultural practice change.
Farmers in the program will be paid at “the upper end” of the range of between $15 and $20 per ton of carbon sequestered per acre, which has emerged as the standard price in voluntary US carbon markets, according to Cristian Barcan, vice-president for sustainability in North America at Rabo AgriFinance.
Barcan told Agri Investor the initial phase of the North American pilot follows an earlier effort to test sequestration practices and approaches with dairy and crop producer clients in Europe. He explained that both pilots are part of a broader effort by Rabobank to harness its unique position in the global agriculture industry, to find commercially viable sustainability projects throughout the food chain.
In addition to carbon farming, the Rabo Carbon Bank is pursuing pilots in supply chain decarbonization and carbon reductions in retail.
The decision to structure a global offering in the form of a carbon bank, Barcan said, came after observation that the growing credit markets are populated by a variety of buyers, sellers and brokers, but few trusted intermediaries.
“When you think of a bank, you think of various financial services that come together to offer certain things, some of which have to do with accounts where you hold money, some of which have to do with transactions or borrowing money. Think of carbon credits as a currency that could function the same way,” he added.
“We are not about just selling the credits; we are here to engage the whole of agriculture as much as possible in trying to produce more sustainable food.”
As part of that effort, he explained, the North American carbon farming pilot was designed to focus on sequestration potential of a variety of crops and agricultural practices.
While much of the carbon farming market’s early focus has remained on corn and soybean production, he added, partnering with a producer in North Carolina provides the opportunity to learn which practices reap the best soil health and carbon capture results across crops that include broccoli, peanuts, watermelons, tobacco and others.
Rabobank plans to continue exploring the carbon potential of other commodities and markets such as cattle grazing as it works to rapidly expand the North American pilot into new US states in its first phase over the next six months, Barcan said. The bank expects that by the end of 2022, he added, the global Carbon Bank concept will have completed its second development phase and Rabobank will decide what to do with the credits it has amassed.
“We’ll see whether we will keep them, sell them or use them for other purposes,” Barcan said.
He stressed that while carbon credits have been an early focus in part because of the market’s success in attracting investors, the market’s growth itself has highlighted a broader opportunity in establishing sustainability standards.
“We need water credits, we need soil health credits, we need biodiversity credits, we need employment management credits, community engagement credits, succession planning credits,” he said. “Big picture, the carbon credit is just a pilot for more inclusive sustainability credits.”