During this ILSoyAdvisor Webinar, Adam Kiel will provide an overview of carbon markets and take a deep dive into the Soil and Water Outcomes Fund. The Outcomes Fund was developed in 2019 by the Iowa Soybean Association in partnership with Quantified Ventures, an impact investment advisory firm. Over the past year, the Outcomes Fund has experienced growth tenfold and now operates in 10 states, including Illinois. The Outcomes Fund provides new market opportunities and revenue streams for farmers by selling these environmental outcomes to the public and private customers. By stacking up the many positive environmental outcomes of on-farm conservation practices, the Outcomes Fund delivers substantial per-acre payments to farmers and extremely competitive environmental outcome pricing to our customers.

Presenter: Adam Kiel, Executive Vice President of AgOutcomes

Download Kiel’s PowerPoint Presentation.

• The Soil and Water Outcomes Fund provides financial incentives to farmers to implement new conservation practices and sell the resulting verified carbon and water quality environmental outcomes to public and private entities that benefit from them
  • Compensate farmers for carbon and water quality outcomes, which isn’t always included in other programs
  • In 2021, average farmer payment was about $31
• Carbon Programs/Markets
  • There are several players in this field currently
  • At this stage, there are very few carbon markets, mostly carbon programs
• Carbon Market Structure
  • Carbon programs interact with farmers who share data in exchange for credits
    • Farmer sells credits to credit purchaser in exchange for payment
  • More complex programs add third party verifiers to ensure farmers are doing the practices they say they are doing
    • Verifiers interact with registries who memorialize credits and make sure no double counting is occurring and correct procedures are being followed
    • Registries take the long-term view of credits and track them over time
  • Carbon programs typically exchange data and payments
    • The more carbon programs spend on verifiers and registries, the less payment there is at the end of the day for farmers
• What is a Carbon Credit?
  • Standard currency is 1 metric ton of carbon dioxide equivalent (CO2e) units
  • Reduction vs. removal carbon credits
    • Reductions are reducing emissions to produce a crop (higher value in today’s market)
    • Removal is “carbon farming” and getting CO2 into the soil through photosynthesis and keeping it there
      • A lot of opportunity here, but a lot of risk if practices are reversed
• Not all carbon credits are the same – Inset vs. Offset Credit
  • Inset is a credit secured through investment within the supply chain of an entity
    • Ex.: Pepsico using corn within their supply chain for high fructose corn syrup
  • Offset is generated outside of a country or company supply chain to compensate for the country’s or company’s emissions
    • Ex.: Carbon credits produced on farm but used by airlines to offset emissions
  • Agriculture companies will place more emphasis on inset credits
    • Soil and Water Outcomes Fund only works with inset credits
• Generating Carbon Credits
  • Number of ways to generate credits, such as:
    • Direct air capture – High value credits but at a high cost per credit
    • Anaerobic digestion of waste streams
    • Carbon farming and soil carbon storage
      • Most carbon programs are focused on carbon farming with sequestering carbon in soil
  • On farms
    • Reductions
      • Nitrogen use efficiency
      • Lower fuel usage
      • Digesters
    • Removals (Key is keeping carbon in the soil)
      • Cover crops
      • Diverse crop rotations
      • Reduced till
      • Continuous cover
• Corporate GHG Accounting
  • Corporations are setting ambitious GHG reduction goals and making commitments to sustainability due to corporate pressures and goods and services produced on farms
    • In some cases, over 80+% of company GHG emissions are tied to agricultural production and included in corporate GHG footprints
      • Corporations coming to farmers and asking them to participate in these programs to help reduce emissions
• Government Supporting Commitments and Oversight
  • USDA investing in climate-smart program and best practices
  • SEC to require public firms to reveal climate-related risks to hold them accountable on meeting goals
• Farmer Opportunities & Challenges
  • Additionality – Adding a practice from outside of what you are currently doing
  • Permanence
  • Price of CO2e relative to conservation practices necessary to achieve soil carbon sequestration or nitrous oxide
  • Monitoring, reporting and verification
  • Contract terms
  • Commodity markets, land tenure, government programs, etc.
  • Politics and climate change beliefs
• Carbon Forecast
  • Increased corporate and government focus on agriculture as a climate solution
  • Carbon insets will become a greater focus
  • More carbon programs will develop, but at some point, winners will rise to the top
  • Carbon price will increase due to growing demand and a limited supply
  • Farms with quality data will be benefit most
  • Demand for low carbon commodities will increase
  • Carbon may eventually be incorporated into the price of commodities
• Soil and Water Outcomes Fund
  • Illinois Enrollment 2022
    • Seeking up to 50,000 acres of enrollment
    • Payment up to $40 per acre for carbon and water quality
    • Carbon inset buyers include PepsiCo, Ingredion and Nutrien
    • Water quality outcomes supported by USDA-NRCS
    • Visit www.theoutcomesfund.com to begin the enrollment process