By Lisa von Rabenau
M.Sc. in Mechanical Engineering 2019
Climate and Forest Capital
US agriculture contributes to about 9% of U.S. emissions at 590 million tons of CO2 equivalent per year. Despite growing awareness around the impact of agriculture on climate change, as well as soil quality, clean water availability, and long-term productivity, the adoption of conservation practices has been low.
It is the mission of the investment and advising firm Climate and Forest Capital (CFC) to change this trend. We are looking for ways to make working lands conservation a more profitable and investible activity, thus unlocking private capital that can significantly scale and accelerate the adoption of sustainable land use practices.
One of our focus areas is to incentivize farmers to put a conservation easement on their range lands and adopt the new grasslands protocols. These protocols help landowners quantify, monitor, report, and verify GHG emission reductions associated with the avoided conversion of grassland to cropland. These measures aim to protect native grasslands, by preventing conversion to cropland, and only permitting activities such as grazing and haying. As undisturbed grasslands bind carbon, these avoided emissions can then be monetized as carbon credits.
With the support of a Natural Resource Conservation Service (NRCS) Conservation Innovation Grant (CIG), CFC can help finance easement costs, protocol compliance or carbon development costs, and in return receives an option to purchase a share of the generated carbon credits at a pre-determined price and date. While currently these credits are only accepted on voluntary markets, we are working to demonstrate that a pipeline for these projects exists, increasing the likelihood that they will be included in the California cap-and-trade, which provides higher prices. Furthermore, showcasing to private investors that such models can work will have a tremendous impact and subsequently attract private capital into working lands conservation, supporting farmers and protecting valuable native landscapes.
In order to make such a project happen, one of my priorities was reaching out to farmers to identify those that would be interested in our proposal. We spent many hours researching online and reaching out to a variety of land trusts, associations and NGOs – until just towards the end of my internship, we finally had a very successful call with a potential project owner in Colorado. The area in question, around 10 thousand hectares, already has an easement and has even registered under the grassland protocol. However, they are still struggling to finance the cost of becoming a project developer and verifying and registering credits – an area where CFC can provide assistance. The area in question consists of prime grasslands and is home to 850 plant and animal species, as well as several birds of conservation concern such as the long-billed curlew. Our whole team was very excited at this success, and the prospect of supporting the long-term conservation of this fascinating landscape.
Despite the recent success, our search also showed that since the financial returns through carbon credits are quite low on grasslands (around ~$5-20 / hectare, depending on the carbon prices), additional revenue streams are needed to incentivize landowners to transition to conservation practices. Thus, I embarked on another piece of work – digging through ~30 interviews from our partner, the Environmental Defense Fund, and a report from Encourage Capital, to identify additional measures that jointly can bring real financial benefits to farmers.
This research ended up being a very rich learning experience for me. I had not known about the details of no-till cropping, edge-of-farm bio reactors, slug invasions and the pros and cons of different kinds of cover crops (and when to turn them into mulch). Every page was full of learnings and insights. We then organized an in-depth brainstorming session with the whole team, to get everyone’s thoughts on the identified approaches, as promising or niche they may seem. We closed the session with a good list of select opportunities, that will now go into a second phase of research and interviews to get a sense of their potential. I am excited to hear from the team how our projects will progress over the next couple of months!
Altogether, this summer provided me with the opportunity to dive deep into innovative financial mechanisms, a field that is quite new to me, to foster the protection of our climate and natural resources, a topic that is very dear to me.
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