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The coronavirus crisis has led to a big drop in greenhouse gas emissions as world economies have ground to a near halt.
Some analysts estimate that China’s CO2 emissions, for example, have fallen as much as 25% since the start of the crisis. (Ironically, China’s lockdown may have saved more lives through pollution reduction than were lost to the virus).
But if other global disasters are any guide, the eventual economic restart is likely to result in rebounding emissions and rising global temperatures.
Meanwhile, the flow of nitrogen and phosphorus from cities and farms continues to damage America’s lakes and rivers. These nutrients feed algal blooms that shut down drinking water systems in major Midwest cities, close beaches in Mississippi and create vast “dead zones” in the Gulf of Mexico, the Great Lakes and the Chesapeake Bay that wipe out productive fisheries and hurt local economies.
One of the most promising solutions to address these growing environmental problems lies in an unexpected place: America’s farms.
Modern farming practices developed over the past century have focused on maximizing short-term yield, often at the expense of soil health and water quality.
Intensive soil tillage releases carbon into the atmosphere, degrading the land and reducing its ability to retain water. The resulting soil compaction contributes to increased fertilizer run-off that pollutes rivers and lakes.
Farm soil in the U.S. is estimated to have lost up to 60% of its original carbon content. Experts estimate that nutrient runoff must be reduced by 45% to resolve the persistent algal bloom problem in the Gulf of Mexico and 40% for Lake Erie.
Read on Barron’s:Earth Day forecast: $1.2 trillion in global sustainable ETF assets by 2030
‘Agricultural ecosystem services’
Those methods are changing, however, as more farmers recognize the value of integrating practices like conservation tillage and cover crops that can improve soil quality and reduce operating costs. The challenge for farmers is that these benefits accrue over time but are costly to implement in the short term.
The emerging market for agricultural ecosystem services solves this problem and is a win-win for communities, farmers, businesses and the environment.
By connecting farmers with businesses that are willing to invest in carbon reduction to meet their internal sustainability targets and government payors for water quality outcomes, farmers get paid to implement conservation practices that capture carbon and reduce nutrient runoff. The existence of a market for their environmental benefits helps farmers cover the cost of making long-term investments in the health of their own soil.
The market for farm-based environmental outcomes is in its early days, but food industry companies like General Mills GIS, +0.68% and Danone DANOY, -1.39% have launched programs that pay farmers to improve the health and resilience of soil.
Global commodities firm Cargill recently announced an agreement to buy environmental outcomes from Iowa farmers that will prevent runoff of 100,000 pounds of nitrogen and 10,000 pounds of phosphorus this year and sequester 7,500 tons of carbon in soils. This investment, in particular, helps Cargill meet its public commitment to reduce greenhouse gas emissions across its own supply chains and to increase awareness of the risk that climate change poses to farming, ranching and our food supply.
New Farm Bill
The federal government is also moving to encourage this market-based solution. The most recent Farm Bill included, for the first time, funding for “innovative approaches” to conservation, including performance-based payments for farmers and “support for an environmental market(s).”
States are increasingly focused on nutrient reduction outcomes — recent commitments by Iowa and Ohio for water quality ($282 million and $172 million, respectively) are just two examples. Cities like Dubuque are moving to invest in farm-based nutrient outcomes to supplement their wastewater treatment capacity.
The positive environmental and economic impacts of this new market could be huge. Although soil carbon sequestration won’t solve climate change on its own, scientists say soils could realistically absorb six billion tons of carbon each year, about one-sixth of total global emissions.
The potential U.S. demand for credits to boost soil resilience, reduce carbon emissions and improve water quality has been estimated at $13.9 billion.
$10 billion boost to public value
The Nature Conservancy estimates that each 1% of cropland in the U.S. that adopts these practices generates an additional $226 million in societal value through increased water capacity, reduced erosion and carbon capture, in addition to $37 million of farm value through greater productivity.
With the growing market for farm-based carbon and water quality outcomes, it’s not a stretch to think that 25% to 50% of U.S. farmland could be using these practices compared to less than 6% today. Using The Nature Conservancy’s estimates, that could mean up to $10 billion in public value and almost $2 billion in enhanced farm productivity.
The transition to restorative farming practices is a massive task that still faces plenty of headwinds. For starters, it will require the cooperation and support of a diverse group of farmers, water utilities, environmental regulators, and agriculture policymakers, each of which can be slow to embrace change.
But the momentum is building for the next agricultural revolution, and this unlikely coalition of business, government, and farmers is leading the way.
Eric Letsinger is the founder and CEO of Quantified Ventures, and Mark Lambert is its director of agriculture. Quantified Ventures is working with Cargill on a project to compensate farmers for soil restoration in Iowa.
