A look at the emerging opportunity to bring together farmers and finance, with Agoro Carbon Alliance

Among the challenges facing our warming planet is how to grow enough food, and grow it better. Most of the crops and livestock in the U.S. are produced using methods that deplete the soil, pollute the water and produce greenhouse gas emissions — some 10%-12% of total GHG emissions, according to the International Panel on Climate Change (IPCC). There is an urgent need, says a growing chorus of environmental  experts, to shift to production methods that restore crop and grazing lands and sequester or reduce greenhouse gas emissions. But the move to regenerative agriculture, or “regen ag,” requires upfront investment and takes time to establish — which for many farmers represents risk they are unwilling or unable to take on.

This is where companies like Agoro Carbon Alliance are beginning to make inroads, with the promise of carbon credits to help facilitate a conversion to “nature positive” farming. I sat down with Agoro’s commercial director Dylan Lubbe and communications manager Ashley Bruner recently to learn more about how it would work.

Lubbe: We are trying to scale regenerative agriculture by leveraging the carbon markets. Which means we are essentially a carbon project developer with a specific focus on regenerative agriculture. So, generating carbon credits via regenerative agriculture, and using carbon credits to finance that transition and scale it.

Since launching in July 2021, we have enrolled over 2 million acres, so that puts us on track to sequester just over 7 million tons of carbon over the next 10 years and we have intentions to continue scaling at that pace. That’s just our U.S. operations, and we have expanded into Brazil where we will adapt slightly but still use the same business model.

We don’t own the land. Rather, we enroll our project participants’ land into our regenerative agriculture programs.

Agoro Carbon’s financial proposition for participants, separate from the technical and agronomic support they receive when joining Agoro Carbon programs, is designed to incentivize sustainable practices, mitigate risks, and deliver tangible benefits. We provide growers with a dependable income, reducing financial uncertainties. Payments for carbon sequestration are directly disbursed to participants upon issuance. In addition, we are one of the few companies offering pre-payment contracts to our participants, aligning our interests with growers by addressing their financial obstacles and increasing their commitment to the program. Furthermore, our contracts present an avenue for potential upside, introducing the prospect of supplemental payments to participants based on market evolutions, thereby tying the success of farmers with that of the carbon projects in the dynamic market landscape. Agoro Carbon credits ultimately get sold onto the voluntary carbon market, in order to make this a sustainable business model so we can continue to scale climate impact and pay the farmers for these carbon outcomes.

Q: What does that look like on the ground?

Bruner: We work with farmers and ranchers across the United States and in Brazil. Practices in the United States include reducing or eliminating tillage on cropland, adding cover crops, and legume cover crops, which also fix nitrogen and help with that cycle as well. 

(Note: Nitrous oxide, N2O,  is one of the primary greenhouse gasses produced by conventional farming practices, along with methane and carbon dioxide.)

On the rancher side we do rotational grazing, adding biodiversity and then fertilization. A lot of American ranches have never been fertilized and so to promote that seeding, that biodiversity of new, different types of forages, that helps build the soil up, helps grow the ground cover, and all the soil health benefits that come with that, as well as the water infiltration which is a key issue especially in the western states.

Q: How is Agoro’s program being received by farmers? It’s an expensive and long-term transition right?

Bruner: Absolutely. It’s a new market and farmers and ranchers are inherently conservative about change, so there’s a lot of education that we’re doing — that everyone in this market is doing — about sustainable agriculture and its benefits. 

One of the things the farmers are most interested in is improved soil health and  keeping their topsoil on their own land, and improving their water quality as well. 

There is equipment cost and the cost of seeds, and so we have farmers and ranchers interested in that prefinancing. We have others who are betting on the future of the carbon market and are going to wait to see what soil sequestration looks like. They believe in the future of the market so are choosing carbon-based performance credits rather than prepayments for carbon credits. Agoro Carbon supports our farmers and ranchers with localized agronomic support throughout the contract period to ensure the success and permanence of the practice changes. 

We’ve seen interest from farmers and ranchers in future-proofing their own businesses by becoming more sustainable today, and they’re showing that they’re making these efforts as well by joining our programs.

Q: Do they want to test it before committing a lot of land? 

Bruner: Yes, I can say from personal experience. My own family is implementing some of these practices and they didn’t start with 500 acres; they started with 20 acres and then they did 80 and then they started transitioning more. Agoro Carbon’s program has a minimum acreage of 500 acres because of the cost to implement the program… and that’s actually a small acreage in terms of most American commodity and livestock farms and ranches. But there is skepticism and interest in starting smaller, seeing how it goes and then deciding what the next steps will be.

Q: What do you know about the demand for this type of carbon credit?

Lubbe: The demand side is always speculative. But the market is undergoing a transition and we feel that the transition is for the benefit of our program specifically because the main focus of the future carbon market is on high quality and integrity.

Q: The voluntary carbon market seems to be going through some real soul searching in the wake of carbon credit projects that generated bad press. What’s your take?

Lubbe: I think confronting the fact that this is a relatively nascent market that I think people need to understand has actually done a lot of good. There have been hiccups along the way, but that shouldn’t be the defining thing on all the good that this market has contributed. It is going through a transition but it’s a transition that is needed and that is ultimately good for all stakeholders involved.

A few specific initiatives are — on the supply side — the Integrity Council of the Voluntary Carbon Market (ICVCM). This is a stakeholder initiative that is trying to define what the quality criteria should be for carbon credits. They’ve developed what’s called the Core Carbon Principles. Then you have the Voluntary Markets Integrity InVCMI which is on the demand side — which is trying to make the demand side more cohesive in terms of what claims can be made in terms of carbon credit usage. 

So once we have improved robustness in quality and integrity on the supply side and we generate more comfort and trust on the demand side and how we communicate that then we have another two triggers that can scale this market to its full potential.

Q: You’re saying what Agoro is offering addresses doubts caused by the recent bad press?

Lubbe: One hundred percent. So the scandals that occurred in the last couple of years were mostly related to a very specific project type that has dominated the supply portion of the market — specifically, avoidance of emissions through deforestation. That credit type is very different to what Agoro Carbon generates. The issue there was around baselining and overcrediting — that really triggered the market in terms of addressing  what quality attributes a carbon credit should meet.

So our program is designed specifically to enhance the quality and integrity of a carbon credit. Because the power of the carbon credit as a financial mechanism to scale practice change or enhance sustainability will only achieve its full potential if the demand side believes in the  mechanism itself. So once we have comfort in the carbon credit because it is of high integrity and quality then the market can grow faster. The demand side will pick up more and the premiums for high-quality carbon credits can generate the value that they should. 

So our program is specifically designed to cover these quality attributes which are mainly around MRV — monitoring, reporting and verification. Specifically our projects are reinforced by a robust MRV framework underpinned by physical soil sample measurements for baselining and verification, and enhanced through precise modeling.

Additionality is another key quality attribute that we strive for. Essentially, this means that the Agoro Carbon program serves as the catalyst for growers to adopt regenerative agriculture practices.

Something that is also very key to our program are the cobenefits of our carbon credits. We are not just sequestering carbon from the atmosphere, but we are improving water conservation, soil health and we’re making agricultural operations more resilient to climate change and increasing biodiversity. These are all co-benefits that are achieved from the same mechanism that’s reducing carbon. So that’s a very unique value proposition. And specifically with the UN sustainability development goals (SDGs). Our program touches on many of those deliverables as well.

Q: So what progress can you report so far?

Lubbe: With agricultural carbon it takes a while for the actual soil to sequester carbon. It doesn’t happen overnight. Our programs are busy undergoing validation and our next milestone will be our first credit issuance

Q: What kind of conversations have you been having with potential carbon credit buyers?

Lubbe: They are from a number of different sectors, but for the main part they all have very robust sustainability goals. Some of them have strict carbon-neutral goals where they are trying to source high-quality carbon credits. Others are more SBTi (Science Based Targets Initiative) focused where they have an actual net-zero target and they have residual emissions that ultimately will require them to purchase carbon removal credits. So there’s a variety of clients that we have coming from all sectors — not just food and beverage either.

Q: Can you talk about the scalability of ag carbon?

Lubbe: The IPCC makes it very clear that among the mitigation options that are out there, regenerative agriculture or sequestering carbon through agriculture is one of the options that provides substantial potential. The benefit of regenerative agriculture is that it is a solution that exists today. From a scale perspective, nature-based solutions like regen ag can deliver climate action today, at scale and at affordable carbon pricing.

Bruner: I read estimates of how many acres in the U.S. have been enrolled in carbon programs like ours and it ranges from 3-5% is all that’s been enrolled to date. So I think that there are a lot of people who are not early adopters, who are going to wait and see how this goes. So there’s enormous potential and scalability, just in the U.S. and then of course around the world as well. There’s so much opportunity to scale this quickly and sequester a lot of carbon while improving the soils across the United States.

Q: What are the big food producers, like Cargills and big ag companies doing on this front?

Bruner: Everyone has some sort of sustainability program and a lot of those big companies are offering direct relationships with farmers — like, “I’m going to pay you to grow soybeans with this exact variety under these practices,” — and they are testing out their own pilot markets. Some are directly working in the voluntary carbon market. Everyone seems to be testing the waters.

Q: Do you think there will be a shift in types of projects – from forestry to other types?

Lubbe: No. I think the unique thing about a carbon credit is that it represents a unit of measurement — a CO2 equivalent, one ton of carbon dioxide equivalent. That is the output, but the input can come from a variety of different project types. Some that are scalable right now such as regenerative agriculture and forestry etc.— those are required because of the volume that they can bring to the market. So those will continue to exist and the quality will continue to be enhanced. And on the other side there needs to be continued innovation that can also contribute. So there’s not necessarily going to be a massive shift but a continuous contribution of new project types. 

Q: How does Agoro address the question of permanence — that is, account for how long the carbon sequestered will stay that way?

Lubbe: How we address this is through methodology — we put 20% of the carbon credits we generate in a buffer pool — essentially, an insurance policy for any reversals that occur we can tap into a buffer pool. Then there’s project design. A key part of regenerative agriculture is to ensure that the practices deployed will continue. So that’s why we have invested so heavily in our growers success team, so we can have a solid community-based relationship with our participants–answering questions, events etc. 

Once the tangible benefits start to be experienced by our growers, from soil improvement, lower costs, improved water management. These are aspects of the operation that ultimately lead to increased permanency… We’re not trying to convert people for a period of time but convert the way agriculture is done from here on out — forever. 

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• Source: https://www.ecosoul.io/carbon-credits-next-act-climate-friendly-agriculture/