An inexorable shift towards climate benefits: system adaptation a possible outcome from a moratorium on soil-based carbon credits

This article is co-authored with Sarah Nolet, Tenacious Ventures. You can find the same article published on their site & Sarah's LinkedIn. 

Last month, 25 folks stepped out of the World Agri-Tech Summit hubbub to join Sarah Nolet (Tenacious Ventures) and me for a working session. 

Our goal was to use a shock scenario to jolt our collective thinking around driving transformation in agriculture production towards a more regenerative system. 

The ‘shock’ scenario

A Moratorium on Soil-Based Carbon Sequestration as a Tradable Offset

When it comes to efforts to reduce emissions intensity within and outside of agricultural value chains, there has been significant focus on the potential for soil carbon sequestration and offset markets. But of course, there are no silver bullets, and soil carbon offsets are increasingly scrutinized.

We split participants into five groups and established some ground rules.The groups were challenged to imagine a world where soil-based carbon offsets were no longer an option for influencing agriculture production systems. We then prompted the groups to think through what this world would be like, including the first- and second-order consequences of this “shock”. In the 60 minutes of time we had for the workshop, groups saw two big levers that would drive change: food companies and government. 

Food system driven action

Food companies are not considered to be buyers of potential carbon offsets generated from their supply chains, but rather beneficiaries of the activities that generate credits. The benefit The Nature Conservancy believes the food companies would secure is: more resilient production systems from both production shifts towards more regenerative practices required to sequester carbon (see additional resources below) and business diversification from the additional farm revenue stream generated by soil-based carbon credits. Without that benefit, there is a recognition that increasing production volatility brought on by climate change means that food companies with a vested interest in securing their supply chain may have to engage more directly in how their inputs are produced to build that resilience. 

Two different ways the groups saw this play out was in connection with the food system: 

1. Without the support of additional value being brought to the sector via carbon offsets, the groups churned on other ways value could be added. One thread started with farm operations seeking new knowledge to innovate and their interest landing on nutrition. From there-  farm operations increase the value of their production through price differentiation based on nutrition. This approach would require research and technology solutions to measure and monitor nutrition differentiation and investment in physical infrastructure to segregate, store, and process a food supply chain that is suddenly much more diverse. 
2. Without the support of a more resilient supply chain brought on by a booming soil carbon off-set market, the groups churned on the impact and consequences. Food companies focus on building supply chain resilience through increased direct contracts with farm businesses. An example of this is the long-term contracts component of The Nature Conservancy’s work with the Republic of the Marshall Islands to build Walmart a resilient tuna supply chain. Companies that choose this approach may need solutions that allow them to work more closely with their suppliers to build up resilience. Farm management solutions that support in-season decision making based on weather events to optimize profitability through a focus not only on yield but also input usage including water for irrigation, fertilizer and chemical input usage will play a key role. 

Government driven action

Without carbon offsets and corresponding revenue for farm operations, several of the groups wondered what it would be like if governments stepped in and mandated that farm operations take certain actions to mitigate climate change while also offering critical services to provide stability for the sector. 

The general consensus was that the goal of these mandates would likely focus on ensuring that there is fertile soil for crop production, and would establish targeted ecosystem services to meet this goal. In this world, governments would also need to provide de-risking mechanisms to support farm operations in the short-term. 

Three interesting ways participants saw this play out:

1. Mandates that would allow the government to effectively standardize data reporting for carbon sequestration and soil health across the country. With this, the government could create predictive mapping for the needs of specific regions and then develop a corresponding suite of support mechanisms for regional improvement and integration. 
2. The government institutes a carbon tax on agriculture. A portion of the revenue for this tax could be reinvested into rural communities with the intention to fund new agriculture education and workforce development opportunities. 
3. The focus shifts away from “carbon tunnel vision” entirely. Governments instead focus on specific nature-based outcomes, including biodiversity. This would lead to more investment in positive nature-based outcomes and the creation of corresponding blended credits promoting the most effective and critical benefits for nature. 

Some global governments are already moving away from the fixation on carbon and exploring new avenues for agriculture to provide climate benefits and mitigate climate change. As reported by The Washington Post in February 2023, the government of New Zealand is proposing a first-in-the-world tax on cow emissions, which will basically tax the methane-emitting burps of cows. The government plans to reinvest all funds generated by the tax in 2025 into incentives for farm operations struggling to reduce the methane contribution of their herds and further research. 

What wasn’t discussed 

Surprisingly, not many of the workshop participants focused on financial tools as a pathway to drive behavior change across the agriculture system. We think that mechanisms such as sustainability-linked loans (like Geora is enabling) and embedded insurance will be key levers to drive change, whether or not offsets go out of favor. Other real-world examples include a warranty-backed sustainability crop plan The Nature Conservancy is piloting through Growers Edge and Sound Agriculture’s yield loss guarantee (thanks for participating, Sound Ag team member!). These are examples of the types of tools that the Tenacious Ventures team thinks can help create new pathways for change. 

Our Conclusion

Across all 5 groups that participated in the workshop, the prevailing view was that with or without offsets, we would still find a way to shift towards agricultural practices that have climate benefits and mitigate climate change. Some groups thought the shifts would be underpinned by sticks, like government-mandated practices, while others focused on carrots, like price premiums for nutrient content. Regardless of the approach, the overwhelming consensus was that climate-focused agriculture is a trend that will stick and is not just a fad tied to offsets. For those who hope that the emissions focus will shift away from agriculture in an offset-free future, this doesn’t bode well. 

This post was co-authored by Sarah Nolet (Tenacious Ventures) and Renée Vassilos (The Nature Conservancy, TNC). To get the latest research, insights and investment news about the innovators who are having an impact in agriculture, sign up for the Tenacious Ventures Newsletter. To learn more about TNC's work in the agriculture innovation space, check out Building Soil Health through Innovation.

Our goal was to use this shock scenario to jolt our collective thinking around driving transformation in agriculture production towards a more regenerative system. Did it work? Do you agree with some of the potential outcomes? disagree? Please share your insights with us.

Thanks to my newest team member, Kayla Sainato, for your support in getting this written!

Additional Resources

Soil Organic Matter Protects Yields and Lowers Crop Insurance Payouts 

Initial Indications that Conservation Practices Mitigate Farmland Susceptibility to Flooding

Workshop tool adapted from Institute for the Future