Perspective shift. Why "risk", not carbon markets, might fund a soil health renaissance.
There is widespread acknowledgement that the adoption of soil health practices (like cover cropping, low/no tillage, diverse crop rotations, etc.) increase soil carbon, which brings diverse social, economic and ecological benefits on farm and beyond. However, the questions around how to make a transition to these practices financially viable for producers has been elusive.
While much of the focus has been on emerging carbon markets, measuring and rewarding soil carbon sequestration has significant challenges. With some of the brightest minds in agriculture, agtech, and finance working on these challenges, we (like many others) are optimistic that carbon markets will ultimately yield results. In the meantime, Land Core’s work is offering a new way to bring farmers more immediate incentives; based not on quantifying carbon, but rather quantifying risk.
We have convened an extraordinary working group to build an actuarially sound model quantifying the risk-mitigating benefits of specific soil health practices that will be deployed as a tool for lenders and insurers. This will allow them to quantify the impact of practices in providing resilience to producers during flood, drought and other stress events, and therefore evaluate their own savings.
As Executive Director Aria McLauchlan shared recently with Agri-Pulse, “if a bank gives a farmer a 10-year loan, and the farmer has a management plan that includes good soil health practices…the farmer should be rewarded for that because (the bank's) risk is reduced…”
Indeed, a study led by risk model working group member Tim Bowles PhD, UC Berkeley, analyzing data from the USDA Agriculture Research Service and other long-term cropping system experiments across North America, found that crop rotation diversification alone mitigated yield losses by up to 90% in drought years.
The Land Core risk model will create the quantifiable, empirical connection between these practices and risk needed to direct significant institutional finance and insurance (both private and public) into funding the transition to soil health.
Unlike nascent carbon markets and other pay-for-performance incentives, risk mitigation is incentivized (by the institutions with the most to gain) prior to the outcomes, thus can be leveraged to put dollars in the pockets of farmers - through better deals on farm loans or discounted crop insurance rates - when they need it most.
The model will also bring benefits to farmers faster. “Carbon sequestration takes some years to start measuring,” McLauchlan says, “but a better loan rate, or flexible loan terms, based on a soil health practice management plan, is something that can be offered to a farmer up front.”