Addressing Climate Change through Soil Carbon: What is needed to align incentives?

Authors: Taryn Goodman Gallery, Cultivian Sandbox Managing Director, & Alex Behar, Cultivian Sandbox VP

“There’s an opportunity for us to create new market incentives for soil health, for carbon sequestration, for methane capture and reuse. It has to be structured and devised and designed in a way in which the principal beneficiaries are farmers.” — US Secretary of Agriculture Tom Vilsack

As we have seen recently in Texas, climate change continues to disrupt our way of life and will have an outsized effect on our agriculture systems globally. Much has been written about the potential disruptions, yet there is also an opportunity to act now to mitigate these disasters. Soil carbon’s role in this is nothing new, but the potential for the earth’s soil to sequester 100–150 billion tons of carbon from the atmosphere cannot be ignored(*1).

Recent estimates of the social cost of carbon are about $50–100 per ton, meaning that soil carbon alone could represent a multi-trillion dollar opportunity. And, while this would only account for 10–15% of the estimates of how much carbon we need to remove from the atmosphere to mitigate the effects of climate change, it does mean that agriculture can play a meaningful role, and we can’t afford for it not to. We’ll get into the barrage of complexities that could prevent this value from being created, but it’s hard to deny the potential — which is what makes us excited.

Practices to improve soil health aren’t new, so what is different this time? Previous sustainability pressure from consumers and corporations has not been coupled with a willingness to pay, and has left farmers bearing the brunt of a supposed choice between profitability and sustainability. In conversations with our network, we’ve gotten feedback that this time is different — corporations across the food value chain are making climate change a strategic priority and are investing in regenerative agriculture initiatives, and growers, with line of sight to tangible incentives, including increased profitability, are getting a clearer idea of how the numbers may pencil out.

Further, and as noted above, the new administration has continued to call out the opportunity that lies in soil carbon. The USDA already provides some financial and technical assistance for practices that conserve natural resources through existing Farm Bill programs like the Environmental Quality Incentives Program (EQIP) and the Conservation Reserve Program (CRP). In addition, the USDA’s Climate 21 Transition Memo, recognizing the link between soil health and risk, notes the potential to use Federal Crop Insurance Corporation (FCIC)/Risk Management Agency (RMA) to incentivize climate-smart agricultural practices.

The above would not necessarily require direct quantification of soil carbon sequestration, but the USDA’s Climate 21 Transition Memo also contemplates establishing a ‘carbon bank’, which would look to compensate farmers based more directly on the tons of carbon sequestered. While it is unclear what government intervention could look like, it is clear that soil carbon is a focus within the USDA and the executive branch.

That said, the complexities associated with soil carbon capture remain. The conversation is still mostly focused on traditional regenerative agriculture practices like no-till and planting cover crops, and there is general acceptance that these practices support land conservation generally. However, there is a lack of consensus on whether this can meaningfully impact carbon capture. For example, the World Resources Institute (WRI) claims that the beneficial impacts of soil carbon on climate change are uncertain, and that any benefits are often offset elsewhere in the agriculture ecosystem (e.g. if there is a negative impact on yield, this may lead to deforestation to fill the production gap).

And even if you think the potential is there (as we do), there is no consensus on how to best measure and validate soil carbon capture. The complexities include (more here and here):

• Soil carbon is more abstract, diverse, dynamic and unpredictable compared to carbon capture from trees or direct carbon capture, indicated by the fact that in the US alone there are 19,000 different types of soils
• Additionality is key and incremental carbon capture depends on the base case, which can create a lack of incentives for farmers that have already adopted regenerative agriculture practices to continue this work or create an incentive to wait for greater compensation
• Permanence is an important consideration for buyers of carbon credits, so potential future actions that may undo any sequestration (e.g. tilling) need to be taken into account, and complications can be compounded by changes in land ownership and leasing

Adding to the complexity is the fact that soil sampling is an expensive, and therefore inefficient, tool given the frequency of measurement required. All of this makes it difficult to get consensus on measurement and validation.

To address these issues, we need to get back to what matters — aligning incentives and ensuring trust. Growers need to be compensated for additional cost and risk, and beneficiaries should be willing to pay for these improved practices either through government support or carbon marketplaces.

Existing models seek this alignment by focusing on incremental soil carbon capture. Since regular soil sampling isn’t currently an economically viable solution, consensus is that we will need to rely on models that link a set of practices to sequestration. For example, the COMET-Farm model (operationalized by Soil Metrics and used by the likes of Nori) and the DNDC model (operationalized by Dagan, now Regrow, and to be used by the likes of ESMC) use an understanding of the dynamics of soil carbon to estimate the impact of changes to farming practices.

Like any model, the output is only as reliable as its inputs, and technology start-ups can step up to help. Remote sensing technologies (e.g. Descartes Labs) can reduce the need for soil sampling and in-person verification of practices. We’re hopeful of an equilibrium level where these types of technologies can bring verification costs down sufficiently, while also maintaining an adequate level of credibility for buyers of carbon credits such that growers are incentivized to adopt regenerative ag practices.

With consensus on measurement and validation, we can begin to see how an active soil carbon market could take shape, and others do too: In addition to the USDA’s planned carbon bank, we know of nine active or planned marketplaces (note that only two of these were launched before 2020, Nori and Indigo Ag). It is clear that the opportunity exists for a functioning market and that there is a belief that the complexities of how carbon is sequestered and how we verify this over time will be overcome. With so many stakeholders aligning on this — entrepreneurs, consumers, corporations, and government — it is hard to disagree.

We should also bear in mind that there are innovative technologies that can support carbon capture while also supporting farmer economics: Companies are developing products for nitrogen fixation to decrease the use of fertilizer (e.g. Sound Agriculture’s SOURCE), or increasing arable farmland/soil (e.g. NOVIHUM’s soil enhancers). The broader environmental and productivity benefits of these technologies may incentivize grower adoption, especially in a situation where direct soil carbon incentives are insufficient or murky.

We are still identifying at least as many questions as answers when it comes to soil carbon, and there is unlikely to be a silver bullet to cure all the complexity. However, we believe that there are a wide range of opportunities for technology start-ups to play a role — increasing sequestration, reducing the verification burden and aligning the incentives of carbon credit buyers and sellers. We’re excited to look for opportunities to work with these innovators.

— — — — — — — — — — — — — — — — — — — — — —

*1: This predominantly considers the capacity of the top soil — practices that allow for carbon to be stored deeper in the soil may increase this potential (see ARPA-E’s ROOTS program)