Financing Incentives for Mitigation

The conditions are ripe to accelerate soil carbon projects: soil science has come along way, companies have science based targets that include Scope 3 emissions, producers know how to implement different management practices that result in improved carbon mitigation and sequestration, but putting projects together remains slow. Jeff Bernicke from Native Energy and Tobias Bandal of Soil and More share two approaches that could help accelerate investment in soil carbon.

Jeff shared examples of Native Energy’s, “Help Build” approach from the wheat growing Palouse region of Idaho and grassland farming of Montana describing how it is possible to bundle incentives for practice change with verified impact. Native Energy assesses the carbon benefits of farmer/rancher practice change and the risks and builds from this, a single or multi-year expenditure to sell to corporate impact investors. The sale of impact credits helps cover costs for, and defray risks from farmer/rancher practice changes. Native Energy verifies and delivers the impacts to companies and impact investors.

Tobias shared examples of True Cost Accounting, or moving the water and climate risks to core business accounting and financial assessment methodologies. This approach can create financial motivation for carbon based incentives from the offsetting approach (where reductions are disconnected from emissions in a company’s supply chain), and insetting (where the reductions are taken within own supply chain). With offsets/insets there is still philanthropic dependency on a company’s willingness to pay. But with True Cost Accounting, those payments become part of the financial integrity of the company.

Soil and More has engaged in this new model of risk rating with Ernst and Young, discounting the future value of a company based on climate and soil and water risks. The approach uses the Cool Farm Tool for some of these metrics showing that in different scenarios, raw materials availability becomes a smaller or risk for the company thus impacting its future value. This could be a powerful tool for making the business case for investment in farming practices that mitigate and sequester carbon as it shows net benefits as well as risk management opportunities.

Participants in the room added that there is also a large gap in understanding how soil projects bring benefits to all the players along the chain. The benefits – more consistent yield year –to-year and higher quality. Investment will always be easier where there are stronger relationships with farmers and where a company has more influence to support the farmer to do more change.

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