AUTHOR:Clint Wilder with Nicole Lederer

HEALTHY SOILS AND THE CLIMATE CONNECTION A Path to Economic Recovery on America’s Farms

© USDA N

RCS Montana

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TABLE OF CONTENTS

Introduction: An Opportunity On Four Fronts ........................................................................................................4

The Challenge .....................................................................................................................................................5

Opportunity No. 1: Farm Economics .....................................................................................................................5

SavingCostsAndBoostingProfitsThroughRegenerativeAgriculture ....................................................................................5

RewardingFarmersForCropRiskReduction............................................................................................................................8

BuildingMarketDemandForAgProductsThatRemoveCarbon ............................................................................................8

Innovators On The Frontlines: Locus Ag Helping Farmers Monetize Carbon Stored In Soil ...............................................10

Opportunity No. 2: Ag Tech ................................................................................................................................11

A21stCenturyJobCreator ..................................................................................................................................................... 11

Innovators On The Frontlines: FarmSpace Systems And Precision Carbon Measurement ................................................ 12

Opportunity No. 3: Valuing Carbon Removal And Ecosystem Services ..................................................................13

CarbonAsTheNextCashCrop ............................................................................................................................................... 13

CarbonMarketsAndMetrics ....................................................................................................................................................14

TheSoilCarbonAccountingChallenge ................................................................................................................................... 15

Innovators On The Frontlines: Nori, Blockchain, And Carbon Markets ................................................................................16

Opportunity No. 4: Bridging the Partisan Divide ..................................................................................................17

LeveragingTheHealthySoilsAndClimateConnection ..........................................................................................................17

A Win-Win-Win ..................................................................................................................................................19

ACKNOWLEDGEMENTS

This report was made possible thanks to contributions from:KeithAlverson,CornandSoybeanFarmerLaraBryant,DeputyDirectorofWaterandAgricultureattheNaturalResourcesDefenseCouncil(NRDC)Lt.Gen.(ret)JohnCastellaw,Co-founderandCEOofFarmspaceSystemsChristopheJospe,Co-founderofNoriDavidKolsrud,FarmerandEntrepreneurClaireO’Connor,DirectorofWaterandAgricultureattheNaturalResourcesDefenseCouncil(NRDC)KeithPaustian,ProfessorofSoilandCropSciencesatColoradoStateUniversityLorenPoncia,OwnerofStempleCreekRanchGaryWertish,PresidentatMinnesotaFarmersUnionPaulZorner,ChiefAgronomistatLocusAgriculturalSolutions

E2R:21-01-A©E22021

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INTRODUCTION: AN OPPORTUNITY ON FOUR FRONTS

Mostinitiativestofightclimatechangetodayfocusonreducingfossilfuelemissionsfromelectricitygeneration,transportation,andbuildings.Buttoavoidtheworstimpactsofclimatechangewemustalsosignificantlyreducetheatmosphericcarbonthathasalreadybeenemitted.Whileeffortsareunderwaytodevelopnewandhightechmechanismstoaccomplishthis,thereisanimmediatelyavailableandeconomicallyviablepathwayforatmosphericcarbonremoval—onethatprovidesacompellingnewvaluepropositionforfarmerstorevitalizetheirsoilsandgetpaidfordoingit.

Regenerativeagriculturemethodssuchascovercropping,croprotation,low-tillorno-tillpractices,andreducedrelianceonfossil-fuelbasedinputscanmitigateclimatechangebydrawingdownatmosphericCO2andsequesteringthatcarboninthesoil,whileimprovingmicrobialsoilhealth,andincreasingsoilfertility,cropyieldandresilience.Thesepracticesalsoproducemultipleadditionaleconomicandenvironmentalbenefits.

Formostofthepastdecade,agriculturehasbeenoneofthemostchallengingsectorsoftheU.S.economy.Americanfarmershavehadtoendureplummetingcropprices,trade-wartariffs,risingcostsforinputslikefertilizer,andincreasingcropandlivestocklossesfromextremeweathereventsandlesspredictablegrowingseasons—anestimated85%ofU.S.croplossesareduetoextremeweatherevents.1ThencameCOVID-19,disruptingsupplychains,upendingmarketssuchasrestaurants,schools,andinstitutionalfood,andfurtherdimmingfarmers’prospectswithalikelyextendedrecession.AccordingtotheFoodandAgriculturePolicyResearchInstituteattheUniversityofMissouri,netfarmincomecouldplungeby19%($20billion)in2020.2

Butclimate-smartagricultureandsoilcarbondrawdownareinthenascentstagesofusheringinapotentiallygame-changingchapterin21stcenturyagriculture.ThroughstrategicdirectionofFarmBillfundsandotherstateandfederalpolicies,partnershipswithprivatesectorcompaniesseekingtogocarbon-negative,andincreasedconsumerdemandforlow-carbonfood,fiberandfuel,regenerativecultivationpracticescandeliverfoursignificanteconomic,environmental,andpoliticalopportunitiesfortheU.S.farmeconomy.

©JohnBrecherforN

RDC

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FARM PROFITS AND ECONOMIC RECOVERY

Climate-smartagriculturalpracticesofferapathtoeconomicrecoveryandlong-termprofitabilityforhard-hitfarmersbydeliveringincreasedandmoreconsistentcropyields,reducedcostsforinputs(fertilizer,fuel,pesticides)andcropinsurance,andtheopportunitytoparticipateinmarketsforsoil-basedcarbonremoval.‘Reducedcarbon’or‘negativecarbon’cropoutputsandtheproductsderivedfromthemmayalsohaveincreasedmarketvalueasconsumerawarenessanddemandincreasesforproductswiththeseattributes.3Healthiersoilsalsomakefarmsandranchesmoreresilientinthefaceofincreasinglycommonextremeweatherevents.

AG TECH AND JOB CREATION

“Agtech”isoneofthefastest-growingtechnologysectors,withinvestorsfromacrossthefinancialsectorfundingstartupcompaniescreatinghighlyskilledjobsintechnologiessuchasmicrobialsoiladditives,advancedsensors,drones,monitoringsoftware,GPSmapping,genomics,AI,anddataanalytics.Thedemandforaccuratesoildatameasurementandanalysisisstrong,andcollegeprogramstotrainnewagtechprofessionalsaregrowingthroughouttheFarmBelt.Additionalinnovationistakingplaceinthecreationofagriculturalcarbontradingplatforms,establishingcarbonasanewfarmcommodity.

VALUING CARBON REMOVAL AND ECOSYSTEM SERVICES

Whilestoringcarbonfromtheatmosphereinagriculturalsoilscanbeakeyfactorinthebattleagainstclimatechange,thepracticesthatsequestercarbonalsodeliverawiderangeofotherenvironmentalbenefits—includingimprovedwaterqualityandconservation,improvedairquality,greaterbiodiversity,andreducedtoxicinputs.Marketsandotheropportunitiesthatmonetizethesepracticesareemerging,creatingnewrevenuestreamsforfarmersandranchersacrosstheU.S.

BRIDGING PARTISAN DIVIDES

Supportforpoliciestoincentivizeagriculturalcarbonsequestrationhasbridgedthehistoricallycontentiousdividebetweentheenvironmentalandagriculturalcommunitiesbecausethepracticesthatrestoreandenhancesoilcarbonproducebotheconomicbenefitsforfarmersandnaturalresourcebenefitstosociety.In2017,forinstance,anunprecedentedcoalitionofenvironmental,business,andfarmindustrygroupshelpedforgeandrecruitbipartisanCongressionalsupportfortheSoilHealthDemonstrationTrialinthe2018FarmBill,akeysoilhealthenhancementandsoilcarbonmeasurementprogram.Sincethen,numerouspoliciesbuildingonthatprovisionhavebeenproposedatthestateandfederallevelsbylawmakersonbothsidesofthepoliticalaisle,asdiversestakeholdersrecognizethebenefitsofvaluingagriculturalcarbonremoval.

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THE CHALLENGE OF A DEPRESSED FARM ECONOMY BATTERED BY CLIMATE CHANGE

EvenbeforetheCOVID-19pandemic,theAmericanagriculturesectorwasarguablysufferingfromtheworsteconomicconditionssincetheFarmCrisisofthe1980s.Americanfarmershavebeencaughtinafierceconfluenceofglobaleconomic,political,andenvironmentalpressures,tothepointwherebreakingevenisconsideredasuccessfulcropyear.

FARM DEBT IN THE U.S. EXCEEDS $420 BILLION, AN ALL-TIME HIGH

IntheMidwest,Chapter12farmbankruptciesincreasedby12%intheyearendingJune2019,andby50%intheNorthwestinthesameperiod.MorethanhalfofU.S.farmershavebeenintheredeveryyearsince2013.4 Not surprisingly,thisbleakeconomiclandscapehascausedwould-beproducerstoseekotherlinesofwork,oftenendingmulti-generationalfarmsdatingtothe1800s.Between2011and2018,morethan100,000U.S.farmsceasedoperations.5

More than half of U.S. farmers have been in the red every year since 2013.

Forfarmersinsomeareas,themostdevastatingeconomicimpactinrecentyearshascomefromthefrequencyandseverityofextremeweathereventsandincreasinglyunpredictablegrowingseasons.In2019,thewettestyearonrecordintheU.S.,farmersinpartsof12statescouldn’tplantcropswiththeirfieldsunderwaterfromrecordspringrains.Cropscouldnotbeseededonanastounding19.4millionacres,themostpreventedplantacressincetheUSDA’sFarmServiceAgencybegantrackingsuchdatain2007.6

And2019wasnotaone-off.InMissouri,forexample,24ofthelast39yearshavehadabove-averagerainfall.Muchofitfallsintheearlyspringplantingseason,delayingorevenpreventingplantingaltogether.7TheFourthNationalClimateAssessmentin2018predictedthat“yieldsfrommajorU.S.cropsareexpectedtodeclineasaconsequenceofincreasesintemperaturesandpossiblychangesinwateravailability,soilerosion,anddiseaseandpestoutbreaks.”8

Atthesametime,theagriculturesectorcontinuestobeasignificantcontributortogreenhousegasesandotherdetrimentalenvironmentalimpacts.FarmingandranchingaccountforroughlyonethirdofGHGemissionsglobally,andmorethan9%intheU.S—nearlyasmuchasallresidentialandcommercialbuildings(11.6%).9 Thosenumbersdon’tevenincludeag-relatedlife-cycleemissionsfromtheproductionofsyntheticfertilizers,pesticides,andotherfossilfuel-intensiveprocesses.10

Poorsoilandlivestockmanagementpracticesresultinnutrientandmanurerunoff,impairingriparianecosystemsandfishpopulations,spurringalgalbloomsandtheassociatedhypoxicoceandeadzones,andcontaminatingdrinkingwatersourcesacrossruralregions.

Policiesandimplementationineachofthefouropportunitiesmappedoutinthisreport,webelieve,willproducepositiveoutcomesinfarmsectoreconomicrecovery,climatechangemitigation,andenvironmentalimprovement.

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FIGURE 1: U.S. FARM SECTOR TOTAL DEBT, 2013-202011

Source:U.S.DepartmentofAgriculture,EconomicResearchService

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OPPORTUNITY NO. 1

FARM ECONOMICS: SAVING COSTS AND BOOSTING PROFITS THROUGH REGENERATIVE AGRICULTURE

Regenerativeagricultureandsoilhealthconservationarebroadterms,butgenerallyrefertofarmingtechniquesthatdrawfromindigenousandtraditionalcultivationpracticesandfocusonbuildingthehealthofthesoil.Assoilhealthincreases,farmscanbothsequesteradditionalcarbonandreducetheirrelianceonfossilfuel-derivedinputs.Enhancedsoilhealthmakesthesoilmorefertileandproductive,supportingcropsthataremoreresilienttopests,invasiveplants,erosionandrunoff,extremeweatherevents,andotherstresses.Manykeyregenerativepracticespredatethe20thcenturypost-warexpansionoflarge-scaleagriculture,buttheyarenowbeingdeployedonfarmsthatrangeinsizefromafewtothousandsofacres,supportingawidevarietyofproductionsystems,includingrowcropssuchascorn,soybeans,wheat,andcotton,livestockoperations,andspecialtycropfarms.TheNationalAcademyofSciencesestimatesthatdeploymentofcarbonremovalpracticesonagriculturallandcouldsequester250millionmetrictonsofcarbondioxide-equivalentgreenhousegases,whichiscomparabletoremovingtheannualemissionsof64coal-firedpowerplants.12

Thepreponderanceofdatafromfarmsadoptingthesetechniquesshowsconsistentlypositiveeconomicbenefits.NotablecasestudiesconductedacrosstheU.S.bytheNationalAssociationofConservationDistricts(2017)13andAmericanFarmlandTrust(2019)14haveyieldedimpressivefinancialresults.IntheNACDstudy,fourcornandsoybeanfarmersintheUpperMississippiRiverBasinsawtheseaveragegains,mainlyfromusingno-tillandcovercropping:

// Increasedcropyieldrevenuebyupto$76peracre

// Reductionoffertilizercostsofupto$50peracre

// Reducedoutlaysforerosionrepairbyupto$16peracre

IntheAFTstudy,sixfieldcropfarmersandtwoalmondgrowersinfourstatesaveraged$41peracreinincreasednetincome.Averagesavingsincluded$36peracreforfertilizerand$35peracreformachineryuse,fuel,andlaborfromreducedtillage.

Another2018studybythenonprofitEcdysisFoundationinSouthDakotareportedadramatic78%increaseinnetincomeon20farmsthatadoptedregenerativetechniques.15

“Agriculture is often overlooked as a solution to climate change. Policies that recognize the value of carbon sequestration from certain cultivation practices are a huge step in the right direction. With the right policies in place, helping the environment can also be very financially rewarding to

farmers. Agriculture’s next cash crop is carbon farming.” –DavidKolsrud,SouthDakotafarmerandentrepreneur

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FIGURE 2: KEY REGENERATIVE PRACTICES

Practice Description Benefits

Covercrops Plantsusedforthespecificpurposeofimprovingsoilhealth.Oftenplantedintheoff-seasonforannualcropsorinbetweenrowsofpermanentcrops.Canbeamixofspeciesincludingrye,buckwheat,radishes,peas,andmanyothers.

Carbonremoval;erosionprotection;cropresilience;waterquality

Diversecroppingsystems

Rotatingmultiplecrops,andpotentiallyalsoincludingperennialsandgrazinganimals,ratherthanplantingjustthesameoneortwocropsyearafteryear.Indigenouscultureshaveplantedcropsinthiswayforgenerations,mostfamouslythe“threesisters”growingofmaize,squash,andbeanstogether.

Waterquality;carbonremoval;reducedsyntheticinputs;weed,pestanddiseaseprevention

Avoiding syntheticinputs

Usingnaturalfertilizersandweedandpestcontrolmethods,ratherthanrelyingonfossilfuel-derivedchemicals

Reducedemissions;waterquality;biodiversity

Low-and No-Till

Reducingoreliminatingmechanicaldisturbanceofthesoil(e.g.,plowing)

Reducedemissions;carbonstorage

IntensiveRotationalGrazing

Movinglivestockbetweenpasturesonaregularbasistoallowfeedcropstoregrowandsoilstorecover.AnIndigenouspractice,thismimicsthewayherdanimalsmovethroughgrasslands.

Forageresilience;biodiversity;potentialcarbonremovalinsomecases

Composting Turningwaste(frommanureorfood)intoaproductthatcanimprovesoilhealth

Resilience;carbonremoval;emissionsreductions

Riparianbuffers

Plantingtrees,shrubs,orotherperennialvegetationalongstreamsandrivers

Carbonremoval;resilience;waterquality;downstreamfloodcontrol;wildlifehabitat

KeithAlversonisasixth-generationcornandsoybeangrowerinChester,SouthDakota,andformerboardmemberofthe36,000-memberNationalCornGrowersAssociation.Astaunchadvocateforclimateaction,AlversonwasthechairofNCGA’sClimateTaskForceformedin2017.His2,500-acrefamilyfarmhasbeenusingregenerativetechniquesbyexperimentingwithcovercropsinrecentyearsandusinglow-tillandcarbon-richcroprotationsfordecades.Oneofthemanybenefitsheextollsissoilwaterretention.Withachangingclimatecausingmoreintenserainevents(fourtofiveinchesperdeluge)everyyear,Alversonsaysthatevery1%increaseinsoilorganicmatter—thussoilcarboncontent—hasadded1.4acre-inches(approximately38,000gallons)ofwater-holdingcapacity.Thathelpsinbothwetanddrytimes.

“Wecangetthroughtwodrysummerweeksalotbetter,”hesays.“It’smadethecroppingseasonmuchmoreresilient.”ThehealthiersoilshaveincreasedAlverson’syieldpotentialby14bushelsperacre—anincreaseofabout7%overhisaverageproduction—givinghimthepossibilitytoearn$45moreperacreatcurrentcornprices.Applyingthis7%increaseinyieldpotentialacrossthe84millionacresofcornexpectedtobeharvestedin202016suggeststhatapossible$3.8billioninadditionalrevenuecouldflowtothefarmeconomyfromcornproductionalonethroughtheadoptionoftheseregenerativepractices.

“We can get through two dry summer weeks a lot better. It’s made the cropping season much more resilient.”

–KeithAlverson,SouthDakotacornandsoybeanfarmer

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REWARDING FARMERS FOR CROP RISK REDUCTION

Federalcropinsuranceisthelargestfederalfarmsubsidy,andanimportantconsiderationforfarmersastheymaketheirproductiondecisionseachyear.Federalcropinsurancecoversmorethan90%ofU.S.cropland,costingtaxpayersupto$10billioneachyear.

Despitethefactthatregenerativefarmingreducestheriskofcroploss,therearecurrentlynoincentivesbuiltintotheFederalCropInsuranceProgramtoencouragefarmerstoadoptregenerativepractices.Thispresentsamissedopportunityforenhancedclimateresilienceandmitigation.17Butnowfarmersintwostates,IowaandIllinois,canreceivea$5peracrebreakonfederalcropinsurancepremiumsiftheyplantcovercrops,thankstoapartnershipbetweenthefederalRiskManagementAgency(whichadministersfederalcropinsurance)andthestates’departmentsofagriculture.Theseprogramshaveproventobepopularandcost-effective,withtheIllinoisprogramreachingitsmaximumenrollmentinthefirsttwoweeksthatsignupswereavailable.Wisconsinisnowconsideringasimilarmeasure.Expansionofsuchincentivestofarmersinmorestatesandatthefederallevelpresentsakeyopportunitytomonetizethevalueofhealthiersoils.

BUILDING MARKET DEMAND FOR AG PRODUCTS THAT REMOVE CARBON

Theeconomicpromiseofregenerativefarminghasgainedtheattentionofsomeofthefoodindustry’slargestplayers,mostnotablyGeneralMills.The$17billioncompanyisaimingtosourceitscommoditycropsfromonemillionregenerativelyfarmedacres—aboutaquarterofthelandfromwhichitsourcesproductsinNorthAmerica—by2030.In2019,theMinneapolis-basedcompanylaunchedtwomajorpilotprogramstohelptraingrowersinregenerativeandcarbonremovaltechniques.Participantsinclude45oatsfarmerscomprising170,000acresinNorthDakota,Minnesota,Manitoba,andSaskatchewan,and39wheatgrowerson85,000acresinKansasandNebraska.18

Byhelpingitsgrowersincreaseyields,cutcosts,andsequestercarbon,thecompanyisalsoadvancingitscorporatesustainabilitygoals.GeneralMillswasthefirstlargefoodcompanytosetGHGemissionstargetsforitsentiresupplychain,19andmorethanhalfofthatcarbonfootprintcomesfromagricultureactivities,accordingtoJeffHanratty,thecompany’sappliedsustainabilitymanager.GeneralMillshascommittedtoreducesupply-chainemissionsby28%(from2010levels)by2025.

Otherlargefood/agcompaniesthathavelaunchedregenerativeinitiativeswiththeirsuppliersincludeBunge,Danone,LandO’Lakes,Anheuser-Busch,Cargill,andBayer.InApril2020,CargilllaunchedtheSoil&WaterOutcomesFundinpartnershipwiththeIowaSoybeanAssociation.Thefundwillpayparticipatingfarmersforcarbonsequestration(anestimated$35-$40pertonofCO2)andreducedwaterrunoff;CargillwillbuyabulkofthecarboncreditstooffsetGHGemissionsfromitsoperations.20InJuly2020,BayerannouncedtheBayerCarbonInitiative;itwillpaysome1,200rowcropfarmersintheU.S.andBrazilforcarbonremovalusingthecompany’sClimateFieldViewdigitalfarmingplatform.21Theseactionsindicatethatagribusinessisshowinginterestinsoilcarbonsequestration,buttransparencyandverificationarecriticaltoensuringthatresultingcarbonremovalisnotoffsetbyincreasedfossil-basedinputs.

90% $10BofU.S.CroplandisCoveredbyFederalCropInsurance

Costing U.S. Taxpayers$10BillionEveryYear

9 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

Foodcompaniessuchastheseforeseegrowthindemandfromenvironmentally-mindedconsumersforproductsmadewithregenerativelyfarmedingredients,followingthepathcarvedbyorganicfoods.WholeFoodsMarketratedregenerativeagricultureasitsNo.1foodtrendof2020,22andsomebrandssuchasNature’sPathOrganicFoodsandGeneralMills’EPICProvisionsalreadyhaveregenerative-certifiedproductsonthemarket.

Thereisalsoinnovationintheprivatesectormarketplaceforcarbon-negativeagriculture.OneexampleistheZeroFoodPrintprogram,createdbyaward-winningrestaurateursAnthonyMyintandKarenLiebowitz,whichallowsconsumerstooptintoa1%surchargeonmealsatparticipatingrestaurantsoradollarpermonthsurchargeontheirhomewastehaulingbills.Basedonsuccessfulrenewableenergypolicymodels,thisprogramallowscitizensto“improvethegridoffarming”bydirectlyfundingproducerstoincreaseregenerativepracticesandcarbonremoval.23

“Thisapproachisavailabletoeverysingledinerandeverycityandregionalproviderofwasteremovalservices,”saysMyint,“sinceitisoptionalandisnotconstrainedbybudgets,anddoesnotrelyonregulatory/carbonmarkets.Currently,over100citiesandstatesareontrackfor100%renewableenergy,andthosesameregionscouldestablishrenewablefoodeconomies.”

Despitethepromisethatregenerativepracticeshold,inertiapersistsasmanyfarmers’appetitefortakingariskonanewpracticeinuncertaintimesislow.However,innovativepublicpolicyinitiativesandgrowingprivatesectorengagementinthisspaceareincreasinglypersuasiveindicatorsoftheemergenceofcarbonremovalasanewagriculturalcommodity—onethatoffersanewrevenuestreamandeconomicrecoveryopportunityforfarmers,whilecreatingnewag-relatedjobsintheprocess.

FIGURE 3: SOME OF THE MAJOR FOOD COMPANIES THAT HAVE RECENTLY LAUNCHED REGENERATIVE INITIATIVES IN THE U.S.

©iStock

Anheuser-Busch

Bayer

Bunge

Cargill

Danone

General Mills

Land O’Lakes

Nature’s Path

Whole Foods

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INNOVATORSONTHEFRONTLINES: LOCUS AG HELPING FARMERS MONETIZE CARBON STORED IN SOIL

Soilsandhumandigestivesystemshavesomethingincommon:probioticmicrobesthatimprovethehealthofboth.LocusAgriculturalSolutions,aSolon,Ohio-basedinnovator,createsproductsthatsignificantlyimprovesoilhealth,cropproductivity,andsoilcarbonsequestrationcapabilitiesforafast-growingnumberofAmericanfarmers.

RhizolizerDuo,thecompany’sflagshipproduct,isanorganicmixturecontainingfungalandbacterialmicrobesthatamplifysoil’snaturalmicrobialprocesses.Thatleadstobiggerandstrongerrootsystems,increasedplantnutrientuptake,andnotableincreasesinthedepositionofsoilcarbon.

“Microbesworkwithcropstodrivecarbonsequestrationwhichinturncreateshealthiersoil,andourproductamplifiesthosenaturalprocesses,”saysPaulZorner,LocusAG’soriginalCEOandnowchiefagronomist.FarmersuseRhizolizerDuotoenhancethegrowthandyieldofcorn,soybeans,wheat,almonds,potatoes,cotton,citrustrees,andmultipleothercrops.Theproductwasusedonabout60,000acresofU.S.croplandin2020,andZornerexpectsusagetogrowtoabout350,00acresthisyear.

RhizolizerDuo,namedasametaphorforanatural‘rhizospherefertilizer’,essentiallyincreasessoilmicrobialactivity—boostingcropyieldsandreducinginorganicfertilizerneeds.Itsusershaveseenon-farmincomeincreasefrom30to50%fromacombinationofincreasedyieldandlowerfertilizerinputs,andthecompanyestimatesthaton-farmincomecanpotentiallybedoublediftheirsequesteredcarbonismonetized.

LocusAGisfocusedonhelpingfarmersamplifyandmonetizetheCO2extractedfromtheatmosphereanddepositedintheirsoils.InJanuary2020,thecompanypartneredwithagriculturalcarbonmarketplaceoperatorNoriandinJanuary2021addedanadditionalpartnershipwithBluesource—thelargestcarbonandenvironmentalmarketplacedeveloperintheU.S.LocusAG’sCarbonNOWprogram,launchedin2020,iscurrentlyprovidinggrowerswith$15foreachtonofCO2equivalentstoredintheirsoilsfromrecentlyimplementedregenerativepractices.

UndertheCarbonNOWprogram,LocusAGrecentlybecamethefirstcompanytofullyqualifyandhelponeofitsgrowersmarketasignificantnumberofsoilcarboncreditsassociatedwiththeircurrentregenerativepractices—20,000metrictonsforamarketvalueofjustover$340,000.“It’sexciting,”saysZorner.“Theindustryhasbeentalkingaboutdoingthisforever,andnowit’sactuallyhappening.”

Thecompanyhaswonnumerousnationalandglobalawards,includingthe2019BestNewProductintheGlobalCropScienceAwardsandthe2020NRELOutstandingVentureAward.LocusAGisalsooneofthefewagriculturalproductcompanieswithBCorpcertificationforsustainableandsociallyresponsiblepractices.

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OPPORTUNITY NO. 2

AG TECH: A 21st CENTURY JOB CREATOR

Precisionagtechnologiesthatmeasuresoilcompositionandcrophealthonanincreasingnumberofdatapointsusingever-moreprecisecoordinates—downtotheindividualplantinsomecases—havemadegreatstridesinrecentyears.Thisisonekeynicheintheburgeoningsectorofagtech,whichencompassestechnologieslikeadvancedsensors,drones,internet-enabledmonitoringtools,robotics,GPSmapping,genomics,AI,machinelearning,anddataanalytics.

It’sahotsector—agtechstartupsgarnered$7.6billioninfundingin2019,amorethanfourfoldincreasesince2012,accordingtotheannualindustryinvestmentreportfromleadingventurecapitalfirmAgFunder.24Thenumberofdiscreteinvestmentdealsincreasedfivefoldinthesameperiod,from200in2012to1,039in2019.Therewere1,336differentinvestorsinthesector,includingventurecapital,privateequity,Fortune500corporations,impactinvestmentfunds,andsovereignwealthfunds.Twosub-sectorsthatdominatedearly-stageseedfundingin2019,accordingtoAgFunder,wereAgBiotechnology(on-farminputsforcrop&animalagincludinggenetics,soilcompositionknownasmicrobiome,livestockhealthandbreeding)andFarmRobotics(on-farmmachinery,automation,drones,andprecisionmeasurementequipment.)

Thesenewaginnovationcompanies—suchasthethreeprofiledinthisreport—areboostingemploymentnumberstoaideconomicrecoveryintheagsectorwhileattractingyounger,tech-savvyworkersintoagriculture.U.S.farmers,ranchers,andotheragriculturalmanagersare56.4yearsold,onaverage,while60%oftech-sectoragriculturalengineersareunder34.25

Agtechalsorepresentsastrongemploymentopportunityformilitaryveterans.FortypercentofthosewhoserveintheU.S.militarycomefromthesmallsegment(19%)ofAmericanswholiveinrural/agriculturalcounties,accordingtoretiredMarineCorps.Lt.Gen.JohnCastellaw,co-founderandCEOofFarmspaceSystems,whichisequippingunmannedaerialvehiclestocollect“precisionag”soilhealthdata(seeprofileonpage12).“Theyneedgoodjobstocomehometo,”saysCastellaw,“andhelpingthemfindjobsinprecisionagjustmakessense.”TheUSDA’sEnhancingAgriculturalOpportunitiesforMilitaryVeterans(AgVets)programawardsgrantstonon-profitsacrosstheU.S.thattrainveteransforagcareers.26 Onegrantee,Tennessee-basedVeteransEmployedinTechnologyandServiceinAgriculture,focusesonag-relatedtechnicalskillsincomputers,remotesensing,datamanagement,GIS/GPS,andmechanics.

Inrecentyears,two-yearcollegesthroughouttheFarmBelthavelauncheddozensofagtechprograms,offeringdegreesinsubjectslikeagriculturalgeospatialtechnology(KirkwoodCommunityCollegeinCedarRapids,Iowa)andprecisionagronomymanagement(ChippewaTechnicalCollegeinEauClaire,Wisconsin).27In2016,SouthDakotaStateUniversitybecamethefirstuniversityintheU.S.toofferabachelor’sdegreeinprecisionagriculture.InCalifornia,thenewCenterforRegenerativeAgricultureandResilientSystemsatCalStateUniversity-ChicorunsaMaster’sprograminregenerativeag.2012 2013 2014 2015 2016 2017 2018 2019

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FIGURE 4: ANNUAL INVESTMENTS IN UPSTREAM AG STARTUPS, 2012–201928 Investmentinstartupsoperatingupstream, closertothefarmerandbeforetheretailer, grew124%from2016to2019.

“[U.S. military veterans] need good jobs to come home to and helping them find in precision ag jobs just makes sense.”

–Lt.Gen.JohnCastellaw(Ret),co-founderandCEOofFarmspaceSystems

Source: AgFunderAgri-FoodTechInvestingReport,2019

12 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

Manystateandlocaleconomicdevelopmenteffortsareseekingtoleveragethisnewlyqualifiedworkforcetoattractestablishedagtechplayersandnewinnovativestartups.NorthCarolinahasmadeagtechaneconomicdevelopmentpriority,andit’snowakeypartofthestate’soverallagindustry,whichemploys728,000peopleandaccountsfor17%ofstateGDP.Thestateishometomorethan165agtechcompanies.29

InIndiana,thestate’sEconomicDevelopmentCorporationandAgriNovusIndiana,itsinitiativeforpromotingandacceleratingthegrowthofagtech,areworkingtogethertoattractcompaniesinwhatittermsagbioscience—theconfluenceofproductionagriculture,lifesciences,advancedmanufacturing,logistics,andtech.Indianaisalreadyhometo75,000suchjobswithagoalforthatnumbertogrowexponentially.“Wethinkalotaboutnext-generationtalent,”saidBethBechdol,AgriNovuspresidentandCEO,attheAgbioscienceInnovationSummitinNovember2019.30

IndianawasabletoattractSolinftec,aBrazil-baseddigitalaganddatasciencecompany,toopenafacilityatPurdueUniversity’sResearchParkin2018.Ayearlater,thecompany’sglobalheadquartersfollowed,bringingwithit90jobsin2020andplanstocreatemorethan300jobsby2023.TheResearchParkalsohousesasecondlocationforCambridge,Mass.-basedseedtechcompanyInari.31

Startupaccelerators,afixtureinindustrysectorslikecleantechandbiotech,arespringingupforagtechinstatesacrosstheU.S.withsubstantialfarmingeconomies.OneisrunbytheDairyFarmersofAmericaatitsKansasCityheadquarters,whereyoungruralagtechentrepreneursparticipateina90-daytrainingandmentorshipprogram.32

Jobgrowthinthissectorisclearlyenhancedbyincreasedmarketcreationforcarbon-negativeagproducts,contributingtoeconomicrecoveryinruralAmerica.

INNOVATORSONTHEFRONTLINES: FARMSPACE SYSTEMS AND PRECISION CARBON MEASUREMENT

IfyouheardaboutastartupcompanythatusesAIandimage-processingsoftwaretoanalyzedatagatheredbyremotesensor-equippeddrones,youmightpictureateamofSiliconValleytechentrepreneurs.Youprobablywouldn’tthinkofaretiredU.S.MarineCorpslieutenantgeneralworkingoutofthetownofAlamo(population2,500)inwesternTennessee.

Butthat’swhereyou’llfindLt.Gen.John“Glad”Castellaw,USMC(Ret)andhiscompany,FarmspaceSystems.Farmspaceisontheleadingedgeofsoilhealthdatacollectionandanalysis,atechnichepoisedforgrowthtomeetdemandformoreaccurate(andcheaper)dataasthemarketforsoilcarbonsequestrationincreases.Farmspacehasaddedunmannedaerialvehicles(UAVs)tothearsenalofexistingprecision-agdatacollectiontoolssuchassatellites,airplanes,andon-groundsampling.

Castellawserved36yearsintheMarineCorps,buthegrewupinafamilythathasbeenfarminginAmericafor300years,soitmakessensethathereturnedtothefamilyfarmafterhisretirement.Heseesgoodsymmetrybetweenmilitarytechnicaltrainingandprecisionagriculture.HiscompanywasfoundedbyveteransandFarmspace,througheducation,outreach,andparticipationinVETSA(VeteransEmployedinServiceandTechnologyinAgriculture),promotesfarmcareersfor

veterans.Castellawoftenpointsoutthat40%ofthosewhoserveintheU.S.militarycomefromthesmallsegment(19%)ofAmericanswholiveinrural/agriculturalcounties.“Weneedveteranstocomebacktoruralareaswiththeirleadershipexperienceandtechnicalskills.Andprecisionagriculturecanprovidethosegoodpayingjobstheydeserve.Whenthishappensweallwin.”

Castellaw’smilitaryexperience,coupledwithhisworkinclimatesecurityasacivilian,providesadeephands-onunderstandingofclimatechangeasamajornationalsecuritythreat.Heseesfarmersusingregenerativeagriculturalpracticesplayingamajorroleinsequesteringcarboninthenextdecades,helpingtoslowandreverseclimatechangeandopeningnewrevenuesourcesforthemselvesintheprocess.FarmspaceSystemsispoisedtoplayamajorrole.

13 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

OPPORTUNITY NO. 3

VALUING CARBON REMOVAL AND ECOSYSTEM SERVICES: CARBON AS THE NEXT CASH CROP

Inthecontextofthevastcostsofclimatechangethatweareonlybeginningtoattempttocalculate,mitigatingclimateimpactsbyremovingcarbonfromtheatmosphereisaserviceorproductwithenormousinherentvalue.Therearemultiplepathwaystomonetizethatproductthroughpublicandprivatemarkets,stateandfederalpolicies,andconsumerdemand.

Transitioningtothepracticesthatyieldhealthiersoilscandrawdownpotentiallygame-changingamountsofcarbonfromtheatmosphere.A2017studyinthescientificjournalNature33reportedthatglobalregenerativepracticescouldstoreuptoanadditional1.85gigatonsofCO2peryear—roughlytheamountemittedannuallybytheglobaltransportationsector.Asaneconomicopportunity,becomingcarbon-negativecanopenthedoorforfarmerstothemarketplaceofcarboncredits,wherecarbonproducerspurchasecreditstooffsettheirlevelsofCO2emissionsortoachievecarbon-negativitybyoffsettingtheirlegacyemissions.Higherandmorepredictablefarmprofitscanalsoberealizedthroughthevaluationofecosystemservices—throughwaterqualitymarkets,forexample—aswellastaxcredits,andlowerloan,rent,andinsuranceratesinrecognitionofclimateandcropriskmitigationandotherenvironmentalservices.

“Among countries of the world, the United States showed the highest total annual potential in soil organic carbon.”

–Nature,November2017

Whensoilhealthisrestored,theamountofcarbonitcancontainincreases.Thusthesameregenerativefarmingandranchingtechniquesthatimprovesoilhealthandcropproductionalsopositivelyimpactthegreenhouse-gascalculus.Healthierrootsystems,forexample,drawmoreCO2outoftheatmosphereandkeepmorecarbonintheground.Thesepracticesalsogreatlyreducenitrogenandpesticiderunoffinwaterways,lessenparticulateairpollution,andpreservegreaterbiodiversity.

Earningcreditsforthecompositionofthesoilitselfisanewandpotentiallybigrevenuesourceforfarmers—whichinturnwouldhelptorevitalizetheirlocaleconomies.Amarketthatfinanciallyrewardsland-basedcarbonremovalalsounlocksnewopportunitiesinwealthandjobcreationforentrepreneurialinnovators,investors,scientificresearchers,anddataanalysts.Butthehurdlestocreatingviablemarkets,appropriatepolicies,andespeciallyreliablemetricsarenottrivialandstillchallengingforgrowerstounderstandanddeployfrombothtechnicalandaccountingperspectives.

Thebuyingandsellingofrenewableenergycredits(RECs)andcarbonoffsetslikereforestationprojectshavebeenastapleofthecleaneconomyformorethantwodecades,withCalifornia’scap-and-trademarket,launchedin2013,asaprimeexample.TheemissionstradingsystemhashelpedCaliforniaachieveambitiousdecarbonizationgoals,thoughithasgeneratedsignificantcriticismfromcommunitiesdirectlyaffectedbyenvironmentalimpactsoffossil-intensiveindustries.Butcreatingcreditsforatmosphericcarbonremovalthroughland-basedsystemsisanentirelynewvaluepropositionontwoparameters.First,currentRECcreditsarebasedonreducing or avoiding greenhouse gas emissions(byreplacingcoal-firedpowerwithrenewablegeneration,forexample),ratherthanremoving CO2 from the atmospherebyabsorbingandsequesteringitasplantsinhealthysoilsdo.

Thesecondkeydistinctionbetweenvaluingemissionsreductionsversusatmosphericcarbonremovalisthemethodologyfordatacollectionandverification.Obtainingaffordableandaccuratemetricsforhowmuchatmosphericcarbonisremovedandsequesteredintheagsectorismorechallengingthanmeasuringreducedsmokestackemissions.Thescienceandtechnologyforsoilcarbondetectionisstillevolving,takingintoaccountthemanyvariablesthatoccurinnaturalsystems.Verifiablemeasurementofagriculturalcarbonremoval,however,isnecessaryformanagingandmonetizingthisnewagriculturalcommodityandthekeytoestablishingrobustmarkets.

14 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

Butchallengeequalsopportunity,andthereisprogressonboththemarketplaceandmeasurementfronts.Entrepreneurs,NGOs,andcorporateplayersareworkingwithfarmerstocreatesoilcarbonmarketplaces,whilefuelingthebusinessopportunityforbetter,faster,cheaper,andmorestandardizeddatacollectionandanalysis.

CARBON MARKETS AND METRICS

Threeoftheleadingsoilcarbonmarketplacesindevelopmentare:

TheEcosystem Services Market Consortium (ESMC),foundedin2017,isapartnershipoffarmers’tradeassociations,largefoodandagribusinesscompanies,andNGOsworkingonwaystomonetizeenvironmentally-soundandclimate-positivefarmingandranchingoperations.FundersincludeGeneralMills,theUnitedSoybeanBoard,TheNatureConservancy,andtheUSDA’sNaturalResourcesConservationService.Theconsortiumplanstolaunchamarketplacein2022forbothcarboncreditsandotherecosystemservicessuchaswaterretentionandreducedfertilizerandpesticiderunoff.

MarketdemandforU.S.carbonandecosystemservicescreditscouldbeashighas$13.9billion,accordingtoanESMC-commissionedstudyin2019.34Akeygoalfortheconsortiumistohelpdevelopaccurateandstandardizedmeasurementprotocolsforsoilhealth,includingcarbonstorage,waterretention,microbialactivity,andnutrientcontent.Inonepilotprogram,ESMCandpartnersGeneralMillsandtheKansasDepartmentofHealthandEnvironmentareworkingwithSouthernGreatPlainsrowcropfarmersonsuchmeasurements.35

ThestartupcompanyNori(seeprofileonpage16)hasdevelopedablockchain-enabledmarketplaceforcarbonspecificallyearnedbytheagriculturesector.TheNoriMarketplacewillpayfarmersanestimated$15pertonofCO2thattheirfieldsdrawfromtheatmosphere.Approximately150operations,farmingmorethan500,000acresspanningtheMidwest,PacificNorthwest,andCalifornia,haveappliedtotakepartinNori’spilotprogram.

Indigo Ag’scorebusinessissellingseedcoatingsandotherproductsthatincreasecropyieldsandimprovesoilhealth,andtheyarenowdevelopingacarboncreditsmarketplacecalledIndigoCarbon.Thecompanyhasraised$1.2billionincapitalfromhigh-profileinvestorsthatincludepotentialcarboncreditsbuyersFedExandGreatWesternBank.Whiledevelopingitsmarketplace,IndigoAghaslaunchedanational“CarbonCup”contest,withfarmersandranchersfrom15statescompetingtoachievethehighestsoilcarboncontentin2020.36

Smaller-scalecarbonexchangeeffortsalreadyunderwayincludetheMontanaGrasslandsCarbonInitiative,37inwhichcarbonoffsetproviderNativeEnergywillissuecarboncreditstothestate’scattleranchers,andTexas-basedstartupnonprofitSoilValueExchange,38whichwillalsofocusonranchers.

Forcornandotherfeedstockgrowerssellingtoethanolrefiners,anotherpossiblerevenuesourcefromhealthiersoilsisthepotentialtoearnadditionalcreditsfortheproductionoffeedstockforlowcarbonfuels.CaliforniaandOregonhaveenactedaLowCarbonFuelStandardtoreducetransportationemissions,withseveralotherstatesconsideringdoingso,particularlyintheMidwestwheremuchofthefeedstockforlowcarbonfuelsisproduced.Whilethecarbonaccountingtoqualifyaslowcarbonethanolhasfocusedonreducingthelifecycleemissionsassociatedwithitsproduction,farmerscouldpotentiallyearnadditionalvaluebydemonstratingnegativeemissionsfromcarbonsequestrationintheirsoils.

Forcorporationsthathavecommittedtobecomecarbon-neutralorevencarbon-negative,theideaofpayingforcarbonremoval—i.e.goingastepbeyondtraditionalcarbonoffsets—isstartingtogaintraction.Microsoft,mostnotably,launchedtheClimateInnovationFundinJanuary2020toinvest$1billionoverthenextfouryearsincarbonremovalcompanies,technologies,andprojects.OnlinepaymentcompanyStripehasinvested$1millioninfourcarbonremovalprojectstodate.NearlyonequarterofFortuneGlobal500companies39havecommittedtobecarbon-neutralby2030,whileMicrosofthaspledgedtobecarbon-negativebythesameyear.Since2016,thenumberofFortuneGlobal500companiesthathavemadeapubliccommitmentthattheyare,orwillbeby2030,carbonneutral,using100%renewablepower,ormeetingascience-basedemissionreductiontarget(SBT)haveincreased500%(seeFigure5).

©LaurenH

affordE2

15 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

FIGURE 5: 30% OF FORTUNE GLOBAL 500 COMPANIES HAVE MADE A PUBLIC COMMITMENT THAT THEY ARE OR WILL BE BY 2030 CARBON NEUTRAL, MEETING AN RE100, SBT OR NET ZERO TARGET40

Theselarge-scalecorporateefforts,alongwithhundredsofpublicsectorcarbonneutralitycommitmentsaroundtheworld,createanearlyincalculabledemandforcarbonreduction.ManyR&Dinitiativesareseekingtocreatetechnologiesthatdrawcarbonfromtheatmosphere,butregenerativefarmingpracticesthatexisttodaywillreadilyfinddemandfortheircarbonremovalresults.

THE SOIL CARBON ACCOUNTING CHALLENGE

Measuringsoilcarbonsequestrationisacomplexundertaking,morechallengingthanquantifyingthetonsofCO2infossil-fuelemissionsdisplacedbycleanenergygenerationorlow-carbontransportationfuels.Butaccuratemeasuresofthe“beforeandafter”resultsofregenerativepracticesarecriticaltocertifyingsoil’sefficacyasacarbonsink.Somestandardmeasurementtoolsareavailable,buttheneed(andeconomicopportunity)forR&Dinsoilcarbonmeasurementisperhapsthebiggestchallengetoscalingupagriculturalcarbonmarkets.ImprovingandapplyingeffectivemetricsisacriticalpieceoftheUSDA’sfirstroundofSoilHealthDemonstrationTrialprojectslaunchedin2019.41

Acommonlyusedcarbonquantificationtool—theUSDA’sstandardmeasurementproductsince2017—isCOMET-Planner,developedbyColoradoStateUniversityandtheUSDA’sNaturalResourcesConservationService.TheCOMETteamisalsoworkingwithkeystate-levelCO2reductionefforts,suchasCalifornia’sHealthySoilsInitiativeandtheU.S.ClimateAllianceof17bipartisangovernors.

FarmerswhouseCOMET-Plannerenterdatasuchaslocation,soilcharacteristics,landuse,tillagepractices,andnutrientinputsintotheonlinetool.Usingsophisticatedmodelingalgorithmsthatextrapolatefromweatherdata,soilmaps,andlandmanagementusehistory,COMET-Plannerestimatessoilcarbonlevels.Thetoolcanbeappliedtocroplands,livestockoperations,orchards,vineyards,andagroforestry.

“Thisisnotblackmagicthatwedon’tunderstand,”saysKeithPaustian,professorofsoilandcropsciencesatColoradoStateUniversityandthemaindeveloperofCOMET-Planner.“Bettersoilmanagementpaysforitselfinthelongrun,andyou’reholdingmorecarbonintheground.Thisisthewayitmakessensetofarm.”

“Better soil management pays for itself in the long run, and you’re holding more carbon in the ground. This is the way it makes sense to farm.”

–KeithPaustian,professorofsoilandcropsciencesatColoradoStateUniversity

30%

25%

20%

15%

10%

5%

0

Year action was taken/commitment announced

% o

f For

tune

Glo

bal 5

00 (1

com

pany

= 0

.2%

)

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

5X ■ SBT■ RE100■ RE100 & SBT■ Carbon neutral & SBT & RE100 & net zero■ Carbon neutral & net zero■ Carbon neutral & RE100 & net zero■ Carbon neutral & SBT & RE100■ Carbon neutral & RE100■ Carbon neutral & SBT■ Carbon neutral

Source:NaturalCapitalPartners,2020

16 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

INNOVATORSONTHEFRONTLINES: NORI, BLOCKCHAIN, AND CARBON MARKETS

AsU.S.farmersincreasinglyadoptgrowingmethodsthatdrawcarbonfromtheatmosphere,theobviousquestionishowwilltheygetpaidfordoingso—intheabsenceofanationwidepriceoncarbon?

Seattle-basedstartupNoribelievesithasananswer.Norihasdevelopedablockchain-enabledmarketplaceforcarboncreditsspecificallyearnedbytheagriculturesector.CurrentlytheNoriMarketplacehashadthreeprojectsverifiedandlisted;theseprojectshavepaidanestimated$15permetrictonofincrementalCO2(dubbedaNoriCarbonRemovalTonorNRT)thattheirfieldsdrawfromtheatmosphere.ThepriceforeachNRTissetbythefarmer.Thesecreditswillmainlybepurchasedbyindividualconsumers,corporations,andotherorganizationssuchasuniversitiesthatbuycarbonoffsetstohelpreachsustainabilitygoalssuchasnet-zerocarbonemissions.

Carbonoffsetmarketsdatetothemid-2000s,butthecreditsaremainlyearnedbyrenewableenergygenerationorreforestationprojectsaroundtheworld.Noriisamongthecompaniesattheforefrontofbringingthismodeltoregenerativefarmers,creatingapotentiallysubstantialrevenuesourceforsoils-basedcarbonremoval.“Wecallitclimate-smartagriculture—thinkingofcarbonremovallikeacrop,”saysChristopheJospe,aNorico-founder.

Approximately150operations,farmingmorethan500,000acresspanningtheMidwest,PacificNorthwest,andCalifornia,haveappliedtotakepartinNori’spilotprogram.ApplicantsuseaUSDA-backedsoilcarbondatacollectiontoolcalledCOMET-PlannertoestimatetheirCO2sequestrationlevels.Forsuccessfulapplicants,NoriisadministeringamoredetailedquantificationprocesstoverifytheirCO2andrelatedpaymentamounts.

Onthecarboncreditspurchasingside,someofNori’stargetedsectors—airlines,cruiselines,andeventproducers—havebeenamongtheindustrieshardesthitbytheCOVID-19pandemic.Butitstrajectorycontinuestomoveahead.Noriisworkingwithmultiplepartnersonboththesupplyanddemandside.“Rightnow,it’sactuallyablessingtobeinourpilotphaseandnothavemillionsofcreditsoutthere,”saysJospe.“We’rejustgoingtokeephunkering,building,andscaling.”

FARMERS SUBMIT DATA

Farmers implementing regenerative farming methods submit land

management and operation data to Nori’s platform.

CARBON REMOVALS QUANTIFIED

Carbon quantification tool (CQT) 3rd party

partner uses project input data to estimate CO2e removal and sends the

data output to Nori.

PROJECT DATA VERIFIED

Farmers hire an independent 3rd party to audit their data that was submitted to Nori and used by CQT to estimate the amount

of CO2e removal within the project.

CARBON REMOVALS ISSUED

Upon receipt of verification assurances, Nori issues Nori Carbon Removal Tonnes (NRTs)

based on the CQT results. One NRT represents one

ton of CO2e removed and stored.

NRTs PURCHASED AND RETIRED

Farmers sell their NRTs through Nori’s

marketplace to individuals and organizations. Nori charges a

transaction fee.

1 2 3 4 5

17 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

OPPORTUNITY NO. 4

BRIDGING THE PARTISAN DIVIDE BY LEVERAGING THE HEALTHY SOILS AND CLIMATE CONNECTION

Inthemidstofaninterwovensetofexpandingglobalemergencies—economicdevastation,apandemic,andanacceleratingclimatecrisis—farmersnowhaveanopportunitytoprovidegreaterprosperityandsecurityforthemselvesandforthecountry.Inthecontextofenormousanticipatedlossesfromclimatechange,agricultureispoisedforarenaissancethatcanbolsterfarmprofitsandperformancebyshiftingtocultivationpracticesthatlowerriskandinputcostsbysequesteringcarbonfromtheatmosphere.It’stimetosupportthetransitiontoregenerativeagriculturalpracticesthatcanhelpstrugglingfarmcommunitieswhilealsohelpingtoreducethecostsofclimatechangetotherestoftheeconomy.Byrebalancingourcurrentinvestmentsintheagriculturesector(approximately$20billionannuallythroughfederalFarmBillprograms),wecanpromotethistransitionwhileprotectingfarmers,growingeconomicopportunitiesandjobsinruralAmerica,andencouragingprivatesectorinnovationandjobcreation.

Commodity Programs($64.6B)

Conservation Programs($59.7B) [Soil Health Programs ($820 million)]

Crop Insurance Subsidies($77.9B)

Other($6.7B)

FIGURE 6: PROJECTED 10-YEAR FARM BILL SPENDING (IN BILLIONS)

STRATEGIC POLICY LEVERS TO ADVANCE REGENERATIVE AGRICULTURE

ThepreponderanceoflegislativeactivityonhealthysoilsandcarbonremovalinCongressshowsthatthisisaninitiativethatcancreatevalueforallstakeholdersandbridgethepartisandivideonclimatepolicy.

Forward-thinkingstateandfederalpolicymeasures,ifenacted,couldgreatlyadvancetheknowledge,innovation,andimplementationofregenerativefarmingpracticesforhealthiersoilsandcarbonremoval.

Amongthemare:

// Reform Federal Crop Insurance.OneofthelargestannualpublicexpendituresontheagriculturalsectoristheFederalCropInsuranceProgram,whichcoversaround90%ofU.S.croplandandcosts$7to$10billionannually.Despitebeingthelargestcomponentofthefarm“safetynet,”FederalCropInsuranceisnotcurrentlystructuredtoencouragefarmerstoadoptpracticesthatmitigateoneofthebiggestriskstoagriculture:climatechange.Cropinsuranceshouldberevisedtoprovideatrueriskmanagementtoolthathelpsfarmersreduceemissionsandsurviveinachangingclimate,incentivizingcovercropstoimproveresilienceandsequestercarbon.Thisisalreadyhappeningatthestatelevel,asseveralMidwesternstateshaveadoptedorareconsideringinvestingincovercropincentivesthataredeliveredthroughFederalCropInsurance.Thesetypesofprogramscouldbeenactedinanystate,andinvestmentfromthefederallevel(asrecommendedbytherecentHouseSelectCommitteeontheClimateCrisis)couldspurgreateradoption.

OF U.S. CROPLAND IS COVEREDBY FEDERAL CROP INSURANCE 90%

18 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

// Leverage public dollars to finance transitions to regenerative practices.Anycostssavingsfromsubsidyreformshouldbereinvestedbackintotheagriculturalcommunity,helpingtospurastrongresponsetoclimatechange.TheexistingCommodityCreditCorporation42providesapotentialframeworkforthisinvestment.Examplesincludelow-orno-interestloanstosupporttransitiontoregenerativeagriculture,andfinancinghigh-impactprojectssuchascompostinfrastructure,processingfacilitiesforgrainandlivestock,andhigh-costpracticessuchasagroforestry.Additionally,theCCCcouldbeusedtobolsteremergingcarbonmarkets,includingbysettingapricefloorforcarbon,capitalizingthecostofmeasurementandaccounting,andpotentiallyofferingabonusforcarbonsequestrationthatalsosecuressignificantco-benefits,suchaswaterqualityorbiodiversityprotection.43

// Increase funding and expand the scope of the Soil Health Demonstration Trial in the 2018 Farm Bill.Sinceitspassage,severalbillshavebeenintroducedintheSenateandHousethatbuildonandamplifythisbreakthroughprogram.ItincentivizesfarmersacrosstheU.S.throughgrantstoadoptregenerativepracticesandtracktheirresults,creatingavaluableknowledgebaseforfutureuseandinnovation.Withmajornewfunding,theprogramcanexpandtocovernewgeographicareasandawiderrangeoffarmsizesandcroppingsystems,speedthedevelopmentofsoilcarbondetectionandtrackingtechnologies,andqualifyfarmerstoparticipateincarbonmarkets.

// Increase investment in carbon removal projectsintheUSDA’sEnvironmentalQualityIncentivesProgram(EQIP).AlthoughEQIPawardsgrantsforawiderangeofregenerativepractices44thatincludecomposting,covercropping,anderosioncontrol,itseffectivenesscouldbeimprovedbyprioritizing“bundles”ofpracticesthattogetherleadtogreatercarbonsequestration.

// Invest in a rural restoration economy.Robuststateandfederalrestorationpolicies,modeledontheCivilianConservationCorpsestablishedaftertheGreatDepression,couldcreateawaveofgoodnewjobsinruralcommunities.Existingstateandfederalprogramsandpartnerships,suchasAmeriCorps,provideaframeworkforsuchaneffort;pendingfederallegislation,includingthebipartisanCORPSAct,woulddramaticallyincreaseinvestmentinpublicworksprojects.Effortstobolsterthesepublicworksprogramsshouldincludejobsimplementingregenerativeagriculturepractices.

// Increase accessibility to carbon credit marketplaces.Thenascentfieldofcarboncreditmarketplacescanbecomplexanddauntingforfarmersexploringthiseconomicopportunity.Therearenowbothfederalandstateinitiativestoenhanceandstandardizecarbonaccountingmethodstoqualifyproducerstoparticipateinbothprivateandpubliccarbonmarkets.Additionalfocusonpolicyinthisarenaisneededtoamplifyandmonetizeagriculturalcarbonremovalservicesandreducefossilemissions.Policiesshouldbedesignedtoensurefarmersofallsizescaneffectivelyparticipate,andcareshouldbetakentoavoidexacerbatingpollutioninvulnerablecommunities.

// Scale up certification.Existingfederalstandardsfororganicagriculturerequiremanyregenerativepractices,includingreducedchemicaluse,covercropping,croprotation,anduseofcompost,withthird-partyverification.However,thevalueofcarbonremovalresultingfromthesepracticesisnotapparenttoconsumersatthepointofsale,andisnottypicallyassociatedwithanorganiclabel.TheNationalOrganicProgramshouldbestrengthenedtoincludemorespecificsoilhealthrequirements,inparallelwitheffortstoenhanceconsumerawarenessandpreferenceforcarbon-negativeproducts.Additionalthird-partystandardsarealsobeingdeveloped,includingRegenerativeOrganicCertified(ROC)andLandtoMarketEcologicalOutcomeVerification(EOV),whichwouldexpandconsumeroptionsforclimatebeneficialfoodproducts.Newstandarddesignshouldtakecaretoensuremeaningfulverificationandavoidanceofduplicationinthefoodlabelsmarketplace.

// Develop markets for low carbon ag products.Inadditiontoclimate-beneficialfood,anotherexamplecouldbefeedstockfortransportationfuelthatearnscreditsunderaLowCarbonFuelStandard,basedonboththereductioninenergyinputsandthesequestrationofcarboninthesoilduringfeedstockproduction.Thefeedstockfarmerwouldbeeligibleforhighersalesvaluesduetotheirverifiedcontributiontothefuel’shighcreditgeneration.

19 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

A WIN-WIN-WIN

ArobustandequitableeconomicrecoveryinAmericamustincludeourfarmersandruralcommunities.Developingmarketsandincentivesforagriculturalcarbonremovalisastrategicpathwaytoachievemultiplebenefitsforagriculturalproducers,fortheclimate,andforahostofotherenvironmentalpriorities.

Policysupportfrommeasuressuchasthesewillhelpmovetheemergingsectorofland-basedcarbonremovalfrominnovationandinvestmenttowidespreadmainstreamadoption.Intheneartermthiswillleadtoimprovedprofitabilityinthehard-hitfarmingsector,driveruraljobcreationinthegrowingagtechfield,andprovideaplatformformuchneededbipartisancollaborationonagricultureandenvironmentalperformance.

Atscale,agriculturalcarbonremovalwillsignificantlymitigatethedestructiveimpactsofclimatechange.

Americaneconomicrecoverycannotmoveforwardwithoutourfarmers.Thecombinedforcesofstrategicfederalandstatepolicieswithprivatesectorprogramsfrombusinessesinandoutsideoftheagriculturesectorwillspeedthistransition,helpingAmericabuildbackitseconomyandweatherthechallengesahead.It’sawinacrosstheboard—forfarmers,fortheeconomy,andfortheenvironment.

©MattOdom

/The New

York Times/Redux

20 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

About E2

E2(EnvironmentalEntrepreneurs) isanational,nonpartisangroupofbusinessleaders,investors,andprofessionalsfromeverysectoroftheeconomywhoadvocateforsmartpoliciesthataregoodfortheeconomyandgoodfortheenvironment.E2membershavefoundedorfundedmorethan2,500companies,createdmorethan600,000jobs,andmanagemorethan$100billioninventureandprivateequitycapital.

ForadditionalinsightintoE2’sotherreports,visite2.org/reports.

ENDNOTES

1 https://agfax.com/2019/01/25/farming-weather-is-leading-cause-of-u-s-crop-loss-how-do-you-assess-the-risk/

2 https://www.fapri.missouri.edu/wp-content/uploads/2020/04/FAPRI-Report-02-20.pdf

3 https://www-forbes-com.cdn.ampproject.org/c/s/www.forbes.com/sites/briankateman/2020/07/20/carbon-labels-are-finally-coming-to-the-food-and-beverage-industry/amp/

4 https://time.com/5736789/small-american-farmers-debt-crisis-extinction/

5 https://time.com/5736789/small-american-farmers-debt-crisis-extinction/

6 https://www.fsa.usda.gov/news-room/news-releases/2019/report-farmers-prevented-from-planting-crops-on-more-than-19-million-acres

7 https://www.ksmu.org/post/missouri-ag-and-climate-change-farms-may-eventually-have-switch-soybeans-corn-cotton-stream/0

8 https://nca2018.globalchange.gov

9 https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

10 https://www.sciencedaily.com/releases/2019/06/190606183254.htm

11 https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/assets-debt-and-wealth/

12 https://www.nap.edu/catalog/25259/negative-emissions-technologies-and-reliable-sequestration-a-research-agenda

13 https://www.nacdnet.org/soil-health-research/

14 https://farmland.org/soil-health-case-studies-findings/

15 https://www.researchgate.net/publication/323400640_Regenerative_agriculture_Merging_farming_and_natural_resource_conservation_profitably

16 https://www.nass.usda.gov/Publications/Todays_Reports/reports/acrg0620.pdf

17 https://www.nrdc.org/resources/covering-crops-how-federal-crop-insurance-program-reforms-can-reduce-costs-empower-farmers

18 https://civileats.com/2019/10/29/big-food-is-betting-on-regenerative-agriculture-to-thwart-climate-change/

19 https://www.agweb.com/article/general-mills-sets-ambitious-goal-for-greenhouse-gas-cuts--NAA-associated-press

20 https://agfundernews.com/cargill-funds-project-with-iowa-soybean-association-to-pay-farmers-for-carbon-sequestration-and-water-quality.html

21 https://www.reuters.com/article/us-bayer-farming-climate-change/bayer-launches-carbon-capture-program-for-u-s-and-brazil-farmers-idUSKCN24M2CE

22 https://www.wholefoodsmarket.com/tips-and-ideas/top-food-trends

23 https://www.zerofoodprint.org

24 https://research.agfunder.com/2019/AgFunder-Agrifood-Tech-Investing-Report-2019.pdf

25 https://www.precisionag.com/digital-farming/how-technology-is-transforming-the-farming-workforce-and-why-it-matters-during-a-global-pandemic/

26 https://nifa.usda.gov/program/enhancing-agricultural-opportunities-military-veterans-agvets

27 https://www.precisionag.com/market-watch/top-20-two-year-colleges-for-precision-agriculture/-Tinsel/61696/1

28 https://research.agfunder.com/2019/AgFunder-Agrifood-Tech-Investing-Report-2019.pdf

29 https://www.ncbiotech.org/sites/default/files/inline-files/20-104_ASD%28NCAgtechecongrowthflyer%29FINAL.pdf

30 https://www.forbes.com/sites/iedcagtechplus/2020/02/12/secrets-to-success-how-next-gen-agtech-startups-are-building-a-more-sustainable-future/-77fb4fb4537f

21 // HEALTHY SOILS AND THE CLIMATE CONNECTION E2

31 https://www.forbes.com/sites/iedcagtechplus/2020/02/12/secrets-to-success-how-next-gen-agtech-startups-are-building-a-more-sustainable-future/-77fb4fb4537f

32 https://www.dairyfoods.com/articles/93819-dairy-farmers-of-america-seeking-startup-applicants-for-its-2020-accelerator-program

33 https://www.nature.com/articles/s41598-017-15794-8

34 https://soilhealthinstitute.org/esmc-press-release/4fe927c57885.html

35 https://ecosystemservicesmarket.org/2020/01/28/general-mills-kansas-department-of-health-and-environment-and-ecosystem-services-market-consortium-launch-farm-based-ecosystem-services-pilot/

36 https://www.indigoag.com/blog/celebrating-the-winner-of-the-carbon-cup?fbclid=IwAR3uNf2txP8Y9rFGrRcTvTopAU3NddNZMCSz9jeF372HlHacThhH2pT8__Y

37 https://www.mtpr.org/post/montana-ranchers-round-carbon-new-offset-program

38 https://www.soil-value-exchange.com

39 https://assets.naturalcapitalpartners.com/downloads/Deeds_Not_Words_-_The_Growth_Of_Climate_Action_In_The_Corporate_World.pdf

40 https://www.naturalcapitalpartners.com/news-resources/response-required

41 https://www.nrcs.usda.gov/wps/portal/nrcs/detail/national/programs/financial/cig/?cid=nrcseprd1512816

42 https://www.usda.gov/ccc

43 https://nicholasinstitute.duke.edu/sites/default/files/publications/Rural-Investment-Building-a-Natural-Climate-Solutions-Policy-Agenda.pdf

44 https://www.nrcs.usda.gov/wps/portal/nrcs/main/ma/programs/financial/eqip/