GreenBiz: Digging into the complex, confusing and contentious world of soil carbon offset

Navigating the new path of carbon offsets from crop to shop can be a confusing path. This article explores how farmland soils can deliver the promised climate benefits and what barriers may be preventing the widespread uptake.

Digging into the complex, confusing and contentious world of soil carbon offsets

By Jim Giles
February 26, 2021

Are you fully caffeinated? This week, I’ll try to untangle one of the more complex, confusing and contentious aspects of our food systems: the emerging market for soil carbon offsets. I’ve been talking to people in this area for several months. Everyone was polite, but it’s clear that divisions run deep. I want to try to make sense of those divisions so you can figure out how to engage — or not — in the market. Coffee ready? Let’s dive in.

I’ll start with why any of this is happening. Multiple studies show that regenerative agriculture — principally, use of cover crops, diverse crop rotations and reduced till — builds soil fertility and stores carbon. Spread of these practices is slow, however, because each comes with upfront costs. Allowing farmers to earn credits for drawing down carbon, say advocates of the idea, would accelerate uptake, leading to more fertile soils and cuts to greenhouse gases.

That’s the why. There’s some kind of consensus there. It’s the how that people disagree on. Roughly speaking, there are two camps, which I’m going to call the Young Turks and the Establishment. According to the Young Turks, the traditional framework for developing carbon offsets is so cumbersome and ill-suited to ag that parts of it need to be blown up. To the Establishment, that’s dangerous thinking that threatens to undermine the entire market for soil carbon offsets.

This isn’t a niche debate. The National Academy of Sciences estimates regenerative ag can sequester 250 million of tons of carbon dioxide annually in the United States, around 4 percent of the country’s emissions. An opportunity to remove that much carbon from atmosphere alongside a bunch of other benefits has to be taken very seriously.

What counts as new?

The biggest source of contention is a principle that’s central to carbon credits: that buyers only pay for activities that would not happen without offsets funding. The whole point of an offset, after all, is to pay for an activity that cuts concentrations of greenhouse gases. If a farmer was to switch to regenerative ag anyway, say to save money on fertilizer, the offsets money isn’t actually driving those cuts. In offsets argot, such a credit would lack “additionality.”

Sound simple? It’s anything but. To determine whether a practice is additional, the third-party bodies that certify offsets have developed sometimes complex rules based on a farmer’s previous methods and how common a practice is on neighboring farms. The need to comply with these rules, say the Young Turks, is slowing the growth of soil carbon markets and, due to the costs involved, excluding some small farms altogether. The solution, they say, is to scrap the traditional definition of additionality.

The variability and imprecision of soil sampling is huge.

At Nori, one member of this camp, the additionality requirement is that farmers show they haven’t previously used a practice. In Nori’s methodology, what a farmer’s neighbors are doing is irrelevant. At a rival marketplace run by CIBO, the impact of a practice is compared to regional averages, but farmers can earn credits for a practice even if they have been using it for many years.

Loosening the rules in this manner is essential if the marketplace is to scale quickly, say both companies. “Less than 15 percent of farmers are doing this,” said Alexsandra Guerra, director of corporate development at Nori. Guerra also pointed out that it can take anywhere from three to seven years for farmers to see a payback in terms of yield increases. “Carbon markets provide a signal that they can make up the difference,” she said.

Digging for data

A second Young Turk heresy concerns the use of soil sampling. Under the Establishment approach, the carbon stored in a farm’s soils is sampled at the outset of a project and every few years after. The results from those samples, together with data on the practices the farmer uses, are fed into an agricultural carbon model that estimates the sequestration that’s taken place. At Nori and CIBO, by contrast, no sampling is required at any point: Storage estimates are determined solely by inputting the practices into the carbon models.

“The variability and imprecision of soil sampling is huge,” argued Jenette Ashtekar, vice president of sustainability and regeneration at CIBO. Results can vary widely between different methods and within fields, agreed Guerra. Both companies say they are open to using sampling to calibrate their models in the future, but right now say the costs don’t justify doing so.

These strategies have helped Nori and CIBO move fast to stake out a controversial position in the market. The companies’ credits are not certified by Gold Standard, Verra or the Climate Action Reserve, the third-party bodies behind the best-known methodologies for soil carbon offsets. Yet a business can go to Nori and CIBO’s websites to buy credits, which it then can use to offset its carbon footprint ($17.25 per ton at Nori and $20 at CIBO).

When I asked Ashtekar to confirm that CIBO’s approach was indeed different from the traditional approach, she didn’t hesitate to agree. “It’s absolutely different,” she said. “We believe this is the only thing that’s scalable and sustainable.”

Talk like that makes the Establishment more than a little nervous. “If you’re going to sell a credit, we have to be sure that credit exists,” said Debbie Reed, executive director of the Ecosystem Services Market Consortium (ESMC), referring to CIBO and Nori’s decision to eschew sampling. “I worry that people are rushing out tools that have not been tested and will undermine the credibility of ag credits for everyone.”

The ESMC, a nonprofit that counts many of the biggest names in food as its members, including Cargill and Nestlé, is also developing a marketplace for soil carbon offsets — but at a notably more cautious pace. On the issue of additionality, the consortium has proposed that a given practice qualify if it’s used by no more than half of a region’s farmers. Soil samples, taken at the outset and again every five years, will be used to calibrate the consortium’s models. These measures will be included in a new protocol that the consortium hopes to have approved by Gold Standard, although Reed added that her team is also looking at other existing protocols. Credits are slated to go on sale in 2022.

Market forces

As carbon offsets are not regulated, the market may decide which approach wins out. Soil offsets are so new that little sales data is available, but two notable recent purchases provide some indication of how things may develop.

Last month, following a detailed assessment of offset suppliers that submitted proposals to the company, Microsoft chose to fund two regenerative ag programs: a livestock project in Australia; and Truterra, a sustainability subsidiary of Land O’Lakes, a large U.S. farmer-owned cooperative. The tech giant will pay the latter to sequester 100,000 tons of carbon dioxide. Truterra is still developing its protocol, but Nick Reinke, a strategy manager at the organization, said soil sampling and additionality will be critical parts of a methodology that he will seek to have approved by one of the certification bodies.

One company that submitted a proposal to Microsoft, but did not get selected for funding, is Indigo Ag, a for-profit with a perspective that sits somewhere between the Establishment and Young Turk camps. Indigo worked with the Carbon Action Reserve to develop a soil carbon methodology that includes soil sampling and additionality — only to have the methodology attacked by some academics for setting too low a bar on both measures. Still, big companies seem comfortable with Indigo’s approach: The buyers for its first tranche of credits included Barclay, JPMorgan Chase and IBM. Including subsequent purchases from Maple Leaf Foods and others, Indigo has sold hundreds of thousands of credits.

I worry that people are rushing out tools that have not been tested and will undermine the credibility of ag credits for everyone.

Nori also has been making progress, raising $4 million in September and issuing credits for just over 40,000 tons of carbon dioxide. One of the biggest buyers was e-commerce firm Shopify, which purchased “several thousands” of tons, Guerra said. The company is on track to issue 10,000 to 20,000 tons of credits every month by the third quarter of this year, she added. CIBO recently announced a partnership with the Peoples Company, a land transaction and advisory firm, that will generate credits on 20,000 acres.

It’s early days for all the companies in the market, but these first sales suggest that Indigo, Truterra and, starting next year, the ESMC may create a market that connects larger companies with larger farms, while Nori and CIBO’s low-friction processes may help smaller farmers sell to individuals and smaller companies.

“Not every carbon credit will be valued the same way,” said CIBO CEO Daniel Ryan. “It’s a bit of a Wild West, and we don’t know how it will shake out. There will be a continuum of credits.”

A market in which different products meet the needs of different buyers sounds like a success. But caveat emptor doesn’t work so well here, because an offset purchase could satisfy the immediate need of a buyer — to reduce that year’s carbon footprint — without delivering long-term climate benefits.

What happens, for example, if a farmer reverts to conventional methods, causing the carbon stored in her fields to be released to the atmosphere? All of the marketplaces hold back some credits they develop in order to pay for what are called “reversals,” but critics question whether these reserves are deep enough to deal with problems caused by extreme weather and other hard-to-predict events. And what happens if one marketplace goes out of business, leaving buyers unable to verify that the carbon they paid for is still safely stored away?

“We have to think of it as an insurance and risk problem,” said Danny Cullenward, a lecturer at Stanford Law School and policy director of CarbonPlan, a nonprofit that evaluates climate solutions. “Is Indigo going to be around in 2100? That’s the kind of question that Swiss Re asks, that regulators ask.” Right now, however, the marketplace is operating without oversight from either big insurers or governments.

Siloed science

The diversity of approaches also slows down learning. There’s an awful lot we don’t know about soil carbon sequestration. Some experts argue that the potential of regenerative agriculture to mitigate climate change may be lower than we think. We have only hazy knowledge about exactly how specific regenerative practices affect carbon sequestration, and how that varies with climate and ecology. The fledgling soil carbon marketplaces together constitute an enormous data-collection exercise that could help prove how and where regenerative practices work, but at present that data is siloed by company.

Last month, Christophe Jospe, a founder of Nori, announced that he was leaving the company. Jospe affirmed his support for Nori, but cited the data silo issue as one reason he decided to step away. “Carbon markets, on their own, when competing against each other, create a ‘proving silo,’” he wrote. These silos restrict the flow of knowledge, which in turn slows the uptake of best practices.

As we wait to see how these debates shake out, it’s worth remembering just how new these endeavors are. Indigo announced its first buyers in October, Nori around a year earlier. The ESMC has yet to sell a credit. The Biden administration, broadly supportive of the marketplaces, has only just begun to consult with key players.

All this is to say that the current confusing array of issues and options — the “Wild West,” in the words of the CIBO CEO — likely will consolidate around a smaller number of approaches and products. As that happens, we’ll get an answer to the question that motivated this work in the first place: Can farmland soils deliver the climate benefits we all hope they can?

I’ll be keeping a close watch as the sector starts to fill in answers. As always, I welcome your thoughts on these issues and tips on other projects I should be highlighting. You can reach me at jg@greenbiz.com.

---

View the full article Digging into the complex, confusing and contentious world of soil carbon offsets