Peter Weisberg, The Climate Trust
Weekly Policy and Finance Update – April 30, 2018

THE BOTTOM LINE.

Regenerative agriculture—with practices like cover cropping, conversion to organic, compost application and efficient fertilizer management—was front and center at this week’s Conservation Finance Practitioner’s Roundtable in Minneapolis at the McKnight Foundation. The Climate Trust has worked to integrate Regenerative agricultural practices into the carbon market, entering into the first transaction to purchase credits from efficient nitrogen fertilizer management, and working through biochar, avoided conversion of grasslands and other soil carbon offset protocols. Other than avoided conversion of grasslands, however, the offset protocols, pilot projects and buyer demand for soil carbon and nutrient management offsets haven’t matured to the point where we feel comfortable providing upfront capital to projects through our Climate Trust Capital investment fund.

The Roundtable raised alternative methods to enable soil carbon and nutrient management project types that may be essential groundwork before emission reductions are fungible in traditional carbon markets. Strong evidence was presented that Regenerative Practices will, in the long-term, increase farmer profitability by reducing input costs. Getting there, however, requires patience, as practices often reduce revenues in a three to five-year gap period. Food purchasers interested in promoting regenerative practices in their supply chain noted that their ability to enter long-term contracts with purchasers can often increase a producer’s patience and ability to think long-term. Long-term contracts, which potentially provide a premium in the short-term for regenerative practices, could bridge the revenue gap.

Purchasers, however, need a business case for paying this premium. Many of these food purchasers have announced greenhouse gas emission reduction goals in their supply chains. Enabling those producers paying a premium for regenerative products to claim emission reductions in their supply chain creates that financial incentive, while avoiding many of the complexities of soil carbon offset projects. Regenerative practices have also proven to increase supplier resilience; theoretically, farmers with regenerative practices reduce the risk of crop insurance providers, and therefore should pay a lower premium for insurance. New insurance products that reward regenerative practices therefore could create an additional incentive.

Supply chain accounting, crop insurance innovation, and eventually environmental markets will be key to growing the scale of regenerative agriculture.

Tops News Headlines

Recent Scorcher

Biodiversity and Meeting our Paris Goals Go Hand In Hand Kasey Krifka, April 23, 2018
Getting Climate Risk Right in Investment Portfolios Julius Pasay, April 16, 2018
Cross Laminated Timber Can Reduce Carbon Footprint of New Buildings Julius Pasay, April 9, 2018

Image credit: Flickr/Mark Jensen