by Chris Clayton | February 21, 2018
The Oklahoma-based Noble Research Institute announced Wednesday that the group will work to create a new environmental services trading platform for agriculture to bring together both carbon-sequestration and water trading goals.
Noble has brought together a small cadre of conservationists that have been working on carbon trading or water-quality trading concepts over the last several years. The Noble Foundation challenged those conservationists to look at the various attempts at similar projects and develop a new platform that would allow for both carbon and water trading together, said Bruce Knight, a former USDA undersecretary for Marketing and Regulatory Programs under the last Bush administration.
“And that’s what makes this a little bit unique and also makes it quite bold, quite candidly,” said Knight, who is now consultant with the firm he founded, Strategic Conservation Solutions.
Noble sees the program as a way to provide market incentives for farmers and ranchers to improve soil health on working lands. As the institute stated, healthy soils can sequester carbon, improve water quality, control run-off and reduce water demand, all of which create a cleaner environment. Healthy soils also can improve crop yield and resilience while decreasing farmers’ and ranchers’ need for agricultural inputs, Noble stated.
“Farmers and ranchers are the unsung heroes of our world. Their hard work feeds and clothes us. Their dedication is the foundation for our society,” said Bill Buckner, Noble Research Institute CEO and president. “This market-based approach seeks to reward farmers and ranchers for the land stewardship they practice for the benefit of all of us. The focus will be on monetizing soil health to reward those farmers and ranchers who are actively adopting and improving practices that protect our environment. We see our work as a model from which the program can expand to capture additional environmental and ecosystem benefits for all participating agricultural producers.”
Later this week Noble will issue a request for proposals to develop a protocol and business platform. Ideally the project will be testing the protocols and strategies later in the summer. Each segment of a protocol needs quantification and verification. “These are not small tasks and things need to be done carefully and methodically to make them function in a way that willing buyers and sellers can come together for a transaction,” Knight said.
The soil activities in a carbon market and water-quality market are similar, so to get critical mass it seems logical to develop a joint market to achieve both goals. Carbon markets likely start as the baseline to develop a combined market because carbon offset markets are better established even though they largely trade at relatively nominal levels.
“Some of the folks who have developed markets for the last 15 or 20 years, they haven’t been robust because of complexity,” Knight said. “We need ecosystem-service trading to work as simple as No. 2 yellow corn. That, to me, is the litmus test. An ecosystem market has to be able to function with the level of clarity and simplicity that our grain and our cattle markets do.”
Too many of the ecosystem markets developed so far have been developed by too many well-meaning academicians and NGOs (non-governmental organizations) with no experience in business or markets, Knight said.
One of the challenges of developing a robust carbon-trading or water-quality market has been lack of buyers for the services. That may be changing as hundreds of companies have committed to goals such as reducing emissions within their company and their supply chains. The steering committee for the Noble project includes General Mills, the Soil Health Institute, Newtrient, National Association of Conservation Districts, Gordian Knot Strategies, DRD Associates, Strategic Conservation Solutions, and Oklahoma and Texas farming/ranching communities. The Natural Resources Conservation Service provides technical assistance on quantification tools and conservation practices.
“We have a number of companies at the table who are potential players in that community. So it’s early to say, because we have got to build out the protocol and do the market, but you’ve got a serious commitment by Noble to stand behind the development of the protocols and establish the business plan to build the markets,” Knight said.
According to the Intergovernmental Panel on Climate Change, the agriculture sector globally accounts for roughly a quarter of global greenhouse gas emissions. That is primarily due to lack of industrial development in underdeveloped countries. In the U.S., the Environmental Protection Agency calculates that agriculture accounts for about 10% of the country’s carbon emissions, which is split almost equally between livestock and crops.
With the support of ecosystem services markets, however, agriculture can mitigate up to 89% of its emissions by incentivizing farmers and ranchers to sequester carbon in the soil, Noble stated.
“The agriculture sector wants to participate more in the sequestering of carbon, but the economics need to be there to bridge the gap,” said Jerry Lynch, chief sustainability officer for General Mills. “We’re attempting to unleash the vast capabilities of the agriculture sector and the regenerative practices that so many farmers and ranchers use as the foundation of their operations.”
Markets also may be needed to expand conservation practices on working lands because he Trump administration now has requested in its budget over the past two years to eliminate the $1.5 billion Conservation Stewardship Program, USDA’s largest conservation program by acreage. The repeated requests by the administration to eliminate CSP come as Congress looks to create a new farm bill, and may well take money from conservation for other areas of USDA funding.
It likely will take more than a year before some pilots are started for these market protocols, Knight said. So it could be two years or more before this project is ready to roll out this platform to a larger set of farmers as a market.
“We’re not quite at the stage for farmer participation, but that’s certainly the target and the expectation,” Knight said.
“From the very first meeting to today, this entire process has been focused on the farmer and rancher,” said Jimmy Emmons, an Oklahoma rancher and a member of the steering committee that created the marketplace. “The program helps inspire soil health practices, which will only serve to improve the producer’s land while helping the environment. It’s the definition of a win-win.”