Carbon Market Therapy. In last month’s column I started to address the proliferation of carbon and ecosystem services market opportunities to help provide perspective to our stakeholders on how to assess the opportunities, and to provide clarity on ESMC’s program and approach. To further elaborate, I will focus today on ESMC’s market approach, including at a high level, our focus on carbon offset markets and carbon “insets”, or supply chain accounting and reporting. ESMC’s innovative market design allows us to operate in both carbon offset and inset or supply chain mitigation programs.
Our theory of change is that a market mechanism is a scalable means to effect significant beneficial impacts from agriculture by focusing on providing the tools, support, and financial means to farmers and ranchers to enable their participation in these markets and programs in a way that works for them, and thus creates ‘supply’, while also meeting ‘demand’ side needs. Supply and demand are needed for viable markets. By paying, supporting, and recognizing farmers and ranchers for their contributions in a voluntary program that incentivizes their participation, and by creating the tools and opportunities for producers in a way that works for them and meets their needs, we can generate supply for these outcomes, thus meeting the demand by corporates, shareholders, stakeholders, and consumers for these societal benefits.
(Note: ESMC generates and stacks carbon and greenhouse gas (GHG) credits, as well as water quality and water quantity credits, and we’ve started work to generate biodiversity credits as well. In future columns I will address credits for services beyond carbon and GHG, but today’s column will focus on carbon and GHG.)
ESMC’s Ecosystem Program: Carbon and GHG Outcomes. ESMC and our members and funders are co-investing in a national infrastructure and technologically advanced tools and technologies to enable cost-effective outcomes in agricultural GHG reductions and increased carbon sequestration. Our market design allows us to operate and generate science-based and standards-based quantified, verified credits or claims and outcomes in multiple markets, including carbon offset markets. The main focus of ESMC’s program and efforts today is in generating outcomes to meet the needs of organizations seeking to reduce their agricultural supply chain footprints. Supply chain mitigation efforts (often referred to as carbon inset approaches) are not technically markets, but ESMC is applying a market mechanism to supply chain interventions within the agricultural sector to help scale outcomes cost-effectively, in a national scale, harmonized, and standardized approach.
ESMC’s programmatic and infrastructure investments are intended to reduce and prevent the need for redundant investments by others participating in these markets and programs. Our intent is to provide a seamless and cost-effective means to achieve quantified, verified carbon removals (increased carbon sequestration) and GHG reductions (reduced nitrous oxide, methane, and carbon dioxide) in supply chain reporting programs, as well as in carbon offset markets. Supply chain removals and reductions are the major focus of our activities at present, as well as the major focus of our participating members, particularly on the demand side.
Carbon Markets and Agriculture: Some historical perspective. Carbon offset markets started about 25 years ago and have moved from nascent stages to more mature stages today. Supply chain GHG mitigation efforts and commitments are far more recent and have different purposes than carbon offset markets. I will go into more depth next month in explaining the differences of each, respectively, but will start here at a high level to describe the evolution and purpose of these efforts and programs. Because carbon offset markets have been operating longer, there is greater familiarity with and more experience in them, and there are specialized carbon offset market actors and market participants whose roles have evolved and who contribute to market program functions and activities. These include national and international carbon market registries (such as Gold Standard, with whom ESMC is most closely working), project developers dedicated to bringing projects together to meet demand (such as ESMC member Native Energy, and other ESMC members such as Corteva and Nutrien who are now crafting similar roles in supply chain project development), and standard-setting and accounting bodies (I’ll provide more detail on those roles and organizations in the future).
The focus, demand, and potential role of agriculture within carbon offset markets has grown recently as the world’s scientists have indicated we no longer have the luxury to pick and choose GHG mitigation strategies or sectors to contribute to GHG mitigation. All sectors and all strategies are needed to curb climate change and the negative impacts we are seeing, including increased droughts, flooding and intense precipitation events, and increased storm intensities. These impacts are causing increased human suffering and negative impacts to nature and biodiversity. Agriculture offers a significant solution set, and one of those solution sets is ecosystem services markets. Markets are not a silver bullet but represent one potential solution set for the agricultural sector – albeit a promising and high-impact solution set.
ESMC as a Beneficial Change Agent for Agriculture. One of ESMC’s major focal points is to act as a change agent in carbon offset markets and supply chain programs to improve and tailor the participation and generation of agricultural credits or outcomes in these markets and programs. Carbon offset markets (and largely, by extension, supply chain intervention programs) were developed with a focus on sectors that generate point-source pollution that tend to be easier to quantify and monitor than impacts from biological systems like agriculture. Carbon offset market and program rules are thus tailored more to point-source pollution approaches. Agroecosystems are far more complex than point source pollution; they must literally be managed on a daily basis to account for different management and production systems, pests, weather, climate and on top of it all, increasing storm events. Regional and production system variability means there are no easy solutions or one-size fits-all approaches to manage or enhance agricultural production system outcomes.
Agricultural systems thus require flexibility and a systems-based approach are currently not well reflected in quantification and verification requirements in today’s carbon markets (and by extension, supply chain intervention programs). Also, agricultural market signals emphasize yield over other impacts and outcomes, and until market signals better value ecological outcomes, farmers and ranchers will focus necessarily on efficient means to maximize yield in order to survive as businesses in a highly competitive market with thin margins. Ecosystem services markets can create a new market signal if the value proposition is high enough to farmers and ranchers.
Systems-based Approaches. ESMC’s approach to carbon offset and supply chain intervention programs is to focus on agricultural systems – not practices – and beneficial stacked outcomes. This requires a mind-shift away from thinking about single practice-based and single impact approaches, and to thinking about how system changes can account for and stack multiple beneficial and desirable outcomes. Farmers and ranchers are, and can provide, not just food, feed, fuel, and fiber, but ecosystem services that are essential to human well-being and to nature and natural resource preservation.
The mind-shift will also require changes to how today’s programs – whether carbon markets or supply chain intervention programs – account for, quantify, and verify agricultural outcomes. That will take time to achieve, but ESMC and our members are working with accounting bodies and standard-setting organizations by demonstrating real-world examples of how this shift can benefit impacts and outcomes, at scale. While there is agreement across all these organizations, including ESMC and our members and the accounting and standard-setting bodies, that speed is of the essence, truthfully, not all these changes are happening at the necessary speed to achieve these outcomes now.
Change takes time, but I am confident that our collective voices and overlapping desires to achieve scale will move mountains once the mind-shift starts to happen. That is what is needed to help mitigate GHG emissions from all sectors, now, to prevent further anthropogenic interference and negative impacts to society. The agricultural sector and ESMC’s members and stakeholders have and are continuing to invest literally millions of dollars annually – both within our public-private consortium, but also individually and collectively outside of it – to scale beneficial GHG removals and reductions from agriculture. We look forward to advancing and recognizing agriculture’s role in this global race, and to using our collective voices and efforts to continue to achieve beneficial change.
Next month, I will more fully address the differences between carbon offset markets and supply chain intervention approaches, including differences in purpose and thus rules and rigor, and what that means in terms of differences in accounting, quantification, and verification. These are important distinctions for agricultural producers (suppliers) and corporates (buyers), policymakers, and consumers and other stakeholders to understand. I will also review the major actors, accounting and standard setting programs and bodies, and current international multi-stakeholder efforts to enhance and further align the growing demand on carbon offset markets and supply chain activities.
Feel free to reach out with any questions or suggestions, and let me know whether this carbon therapy is helpful, or how we at ESMC can assist in your journey.
ESMC is pleased to announce two new Legacy Partner members have joined our public-private partnership – PepsiCo and Trace Genomics. Details on each organization are included below. Welcome!
ESMC has a position open for a Business Development Director to lead ESMC’s Business Plan development for our 2022 market program launch. This position will be key to the success of our dynamic, fast-paced team environment where impact and sustainability is at the forefront of the mission. In addition to refining the Business Plan, this role will track, update, and inform current Cost of Goods and Services (COGS) models for completeness, identify targets for membership (i.e., # members, income generation from paid memberships), and estimate other income streams (e.g., from sale of credits). The position is a full-time contractor role. Click here for more information on the position and application information.