成熟しつつある機会：炭素市場と農業の接点

エリック・クーパーシュトローム
マネージング・ディレクター
インパクト投資およびナチュラル・クライメート・ソリューション

キース・バルター
マネージング・ディレクター、エコノミック・リサーチ
ナチュラル・リソース・チーム

ダニエル・セルナ
アソシエート・ディレクター兼シニア・ポートフォリオ・マネージャー

【日本語抄訳】

ネットゼロ目標の達成には、温室効果ガスの排出削減に加え、カーボンクレジットの購入等の間接的な削減が必要とされ、下の3つのアクションが求められます。

1. 軽減：バリューチェーンにおける排出量削減
2. 中立化：サプライチェーン内での炭素除去
3. 補填：カーボンオフセット市場での購入

・農地投資には温室効果ガスの削減および土壌の炭素貯留を推進する潜在能力があります。農地管理手法の改善による温室効果ガス排出量の削減、土壌における炭素貯留量の増加を通じ、農業はこれらの目標に寄与することが可能です。気候に配慮した農地管理に移行することで、カーボンクレジットが農家にとり新たな収入源（＝インセンティブ）になると期待されます。

・国連PRIのシナリオ分析では、2030年までに二酸化炭素1トン当たり40-80米ドルに上昇すると予想されており、カーボンクレジットが農地の収益源として追加されれば、農地投資のパラダイムシフトを引き起こすと期待されます。

・土壌の炭素量の測定手法や市場の確立など解決すべきハードルは残るものの、米国においてカーボンクレジット活用に取り組む農地は1%未満と極めて限定的であり、拡大余地は大きいと考えています。

【英語原文】

Maturing opportunity: where carbon markets and agriculture meet

Agricultural practices demonstrate significant potential for reducing greenhouse gases and boosting the carbon stored in farmland soils. Our natural resources team explores the rapidly changing landscape of agricultural carbon solutions and their markets.

We believe agriculture investments have the potential to positively impact three of the greatest challenges facing our world over the next decade: climate change, rapidly declining biodiversity, and rising socioeconomic inequality. Farmland assets can act as a significant carbon sink, and sound management enables carbon sequestration to mitigate climate change. Further, with the global population expected to reach almost 10 billion in 2050¹, agriculture productivity and sustainability will be critical to providing the world with adequate food. In our view, investing in agriculture therefore allows investors to seek market-rate returns, create long term value and manage risk while putting their capital to work in a way that can generate a positive contribution to society​​​​​​​.

Increasing numbers of governments, corporations, and other organizations are making firm commitments to reduce their greenhouse gas (GHG) emissions to help mitigate the pace of future climate change. Some are specifically targeting net-zero emissions over the next 10 to 20 years; achieving these targets will first require reductions in both the direct and indirect output of GHG related to their own operations, in addition to funding activities that will either reduce GHG emissions or directly capture and store carbon from the atmosphere through the purchase of carbon credits or carbon insets activities.

The Science Based Targets initiative, a partnership between CDP, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature outlines the required actions:

• primary abatement (eliminating emissions in companies’ value chains), followed by

• neutralization (carbon removals within companies’ supply chains, or carbon insets) and

• compensation (purchasing carbon offsets)

The agricultural sector can contribute significantly to these neutralization and compensation actions to mitigate the effects of climate change through operational practices that reduce the level of GHG per unit of production and/or boost the amount of carbon stored in farmland soils.

Agriculture's carbon credit markets are evolving

Market structures are quickly evolving to allow the creation, accounting, verification, marketing, sale, and transfer of agricultural carbon credits. The development of robust markets for farmland-based carbon credits will directly connect organizations seeking natural climate solutions with the climate change-mitigating opportunities inherent in farming. Opening this new tier of climate-solution capital for farmland could help incentivize farmers to accelerate the shift to climate-positive operations and regenerative agricultural practices, potentially creating new revenue streams. 

“Soils contain about 75% of the carbon stored on land, more than three times the amount contained in plants and animals.”

The Intergovernmental Panel on Climate Change estimates that to hold global warming to 1.5 Celsius above preindustrial levels, the world will need to reach zero-net emissions by 2050² and remove about 1,000 billion metric tons of carbon dioxide from the atmosphere between 2020 and 2100.³ With global soil carbon estimated to be three times that of atmospheric carbon,⁴ modifying agriculture practices to preserve and build soil carbon are increasingly recognized as an important tool for achieving this global goal. 

Soils contain about 75% of the carbon stored on land, more than three times the amount contained in plants and animals.⁵ Studies estimate that globally, croplands have the potential to sequester 1 to 2 billion tons of carbon dioxide annually.⁶ In addition to the carbon storage potential of U.S. farmlands, U.S. agricultural operations contribute 10% of total annual GHG emissions,⁷ providing significant opportunities for the creation of carbon credits based on emission reductions. 

How agriculture can provide opportunities for carbon sequestration

Soil health is critical for long-term agricultural productivity and sustainable management of agriculture assets must include commitments to water conservation, regenerative agriculture, and carbon storage.

Regenerative agriculture practices that can reduce GHG emissions and increase the amount of carbon sequestration in farmland soil include conservation tillage, cover cropping, changes in crop diversity, and rotation⁸ and modifying fertilizer sources and application methods.⁹ These farming methods, often termed "climate-smart" agriculture, have been recognized by the UN Food and Agriculture Organization as furthering the UN Sustainable Development Goals.¹⁰

Soil carbon sequestration describes the removal of carbon dioxide from the atmosphere by plants and its storage as soil organic matter. The two most widely deployed regenerative agriculture practices, conservation tillage and cover cropping*, can boost the rate of carbon sequestration compared to traditional agricultural practices.⁸ Conservation tillage and cover cropping are already used on millions of acres of farmland across the United States and may have other, more direct, benefits for farmers outside of their carbon impacts. Depending on the location, conservation tillage has the potential to reduce soil erosion and runoff and can help retain soil moisture. Cover crops have the potential to prevent erosion, improve soil’s physical and biological resilience, supply nutrients, suppress weeds, and enhance soil water availability to primary crops, and this can boost crop yields while moderating input costs.¹¹

The Nature Conservancy estimates that each 1% of annual cropland in the United States that adopts reduced tillage, cover cropping and crop rotation, translates into US$226 million in societal value annually, realized in increased water holding capacity, reduced erosion and nutrient loss to the environment, and reduced GHG emissions.¹²

In the United States, conservation tillage is practiced on 202 million acres, or two-thirds of total cropland, while cover crops are used on just 5% of cropland (15 million acres).¹³ While potentially applicable to a wide range of both row and permanent crops, neither conservation tillage nor cover crops are appropriate for all farms. The suitability of either of these regenerative agricultural practices is dependent on a combination of factors, including soils, climate, and local growing conditions; however, the rate of adoption of climate-positive regenerative agricultural practices in the United States is expected to gain momentum with support from both the public and private sector. The USDA Natural Resources Conservation Service has programs that provide financial incentives to leave farmland fallow to protect sensitive lands, such as those with steep slopes or prone to flooding, and the Biden administration is expected to direct some of those payments toward producers practicing farming methods that retain and sequester carbon.¹⁴ Concurrently, corporations and other private organizations could participate in developing voluntary agricultural carbon markets as a viable option for successfully achieving their carbon-reduction goals. 

Private sector boost to voluntary carbon markets

Legislated, mandated programs to reduce GHG emissions, such as those in the European Union, California, and New Zealand, were key to establishing the parameters and structures of global carbon offset markets. However, recent momentum is increasingly being driven by voluntary initiatives from the private sector. Amid growing public awareness and sensitivity to climate change, numerous major corporations, organizations, and nonprofit entities in the United States, and globally, have announced voluntary commitments and plans to reduce their carbon footprints.

Major firms that have communicated bold ambitions to achieve decarbonization include Disney, Google parent Alphabet, Microsoft, and Shell.¹⁵ These corporate initiatives are closely aligned with the Paris Climate Agreement reached in 2015 and include the use of offset credits to meet targeted reductions in GHG emissions to accompany the key step of direct reductions in their emissions. Consequently, the funding of carbon offset projects, and purchase of carbon credits, are recognized as viable avenues for meeting voluntary carbon goals.

Since 2008, over 130 million voluntary offset credits have been issued and about 40 million have been retired^.16 ("Retired" carbon credits are taken off the market and not traded again.) The Climate Action Reserve provides protocols, guidelines, and tools to support the voluntary offset market, with 19 protocols currently adopted for use in the United States and over 400 offset projects registered. Climate Action Reserve’s Soil Enrichment Protocol, adopted in September 2020, provides guidance on how to quantify, monitor, verify, and report farming practices that enhance soil carbon levels.¹⁷

Participants in voluntary carbon markets aren’t bound to comply with the legislative requirements of the California or EU carbon emission compliance programs, but most organizations want their carbon offset projects to meet accepted standards and protocols. By adhering to the program requirements in compliance markets to certify and validate their carbon reduction efforts, and aligning their efforts with broader climate change mitigation efforts, participants in the voluntary carbon market will be more likely to trade their carbon credits and better able to manage their carbon credit portfolios. The operational infrastructure built to support California’s legislated effort to reduce carbon emissions provided an institutional template for trading voluntary carbon credits, facilitating the growth of the voluntary carbon offset market.

The growing private sector response to the potential negative impacts of climate change has contributed to increased demand in voluntary carbon credits markets, insets, and projects, and this increased activity has been reflected in the price of carbon. The price per ton of emission allowances within compliance markets in the EU, New Zealand, and California have all trended higher, rising from less than US$15 per ton in the mid-2010s to between US$15-US$30 per ton by 2020.

Carbon prices have moved upward since the Paris climate accord

US$ per ton of carbon

Source: International Carbon Action Partnership, March 11, 2021.

In a scenario analysis commissioned by the UN Principles for Responsible Investment (PRI), carbon pricing is projected to trend up from US$40 to US$80/tCO₂ by 2030, opening additional opportunities to invest in nature-based climate solutions such as farmland. To compensate for possible imprecision due to noncompliance, updates to soil carbon science, or calculation errors, only a fraction of the total credits procured by carbon credit companies are sold to buyers, moderating the potential income to the farmland owner.

“New carbon-based revenue streams could trigger a paradigm shift in farmland investments.”

Higher carbon prices, in combination with increasing acceptance of agricultural carbon credits, could provide added revenue to agriculture, offering greater optionality in the operation of farmland properties and potentially augmenting farmland values. These new carbon-based revenue streams could trigger a paradigm shift in farmland investments. The current emphasis on crop yield and financial crop return could broaden into new strategies focused on achieving the most cost-efficient capture and storage of carbon to meet investors’ environmental goals. 

Evolving markets for agricultural carbon: who's in?

Several companies are pioneering market mechanisms to link buyers of carbon credits to specific farmland properties that reduce GHG emissions and/or increase the retention of carbon in their soils. These companies are identifying and partnering with individual farm operations that agree to modify their practices in ways demonstrated to increase carbon capture, but the mechanics of payment, pricing, and contractual structure are still developing.

Major retail consumer food companies were the most prominent early entrants into the agricultural carbon space, proactively establishing their environmental credentials with broad public exposure. Danone and PepsiCo established initiatives in 2017 and 2018, respectively. Following in the footsteps of the consumer food companies have been agricultural input and tech suppliers (Bayer, Indigo, Nutrien) and more recent carbon-focused companies (Truterra, Nori, CIBO). 

Timeline of carbon and agriculture market expansion

Source: “Danone North America Expands the Most Comprehensive Regenerative Agriculture Program in the Dairy Industry,” Danone North America, December 21, 2020. PepsiCo Sustainability Overview, 2021. Indigo Ag, 2021. Nori Resources: frequently asked questions, Nori, January 22, 2021. ”Bayer takes steps to make carbon sequestration a farmer’s newest crop opportunity,” Bayer, July 21, 2020. CIBO: frequently asked questions, CIBO, February 24, 2021. Gradable Carbon, Gradable, February 23, 2021. Sustainable Ag, Nutrien Ag Solutions, March 2, 2021. “Land O’ Lakes Sustainability Business Truterra Launches TruCarbon^TM, the First Farmer-Owned Carbon Program,” Truterra, March 2, 2021. 

Danone North America has 82,000 acres enrolled in the United States and Canada, including row crops and almonds. The current scale of agricultural carbon market participants varies widely, as some having existing customer bases representing millions of acres. As agricultural carbon offset markets mature, consolidation is likely to occur, resulting in a smaller number of players. A combination of reliability of method and ease of transaction will be key drivers leading landowners, farmers, and carbon credit purchasers to gravitate around future market leaders. 

Selection of companies in the carbon and agriculture market, March 2021

Current business models

Consumer food companies’ motivation to create their own carbon sequestration programs has some clear drivers: help meet their net-zero goals, assure the environmental profile of the farmers in their supply chain, and improve their public image. For suppliers to the industry such as Bayer or Nutrien, the promotion of carbon-positive operations helps improve their public-facing corporate persona but also provides a service to the farmers who buy their goods and services by allowing them to more easily access the potential benefits of agricultural carbon credit markets. For example, a major rural land brokerage and management company, Peoples Company, is targeting 20,000 acres to be enrolled in 2021 as a value-added service to its clients.¹⁸

According to a series of farmers interviewed by the Wall Street Journal, agriculture carbon credit programs currently pay farmers about US$7 to US$40 per acre annually.¹⁴ However, based on rising carbon prices, the long-term economic opportunity for carbon is estimated to be about US$68 to US$90 per acre annually.¹⁹

Issues to navigate: how to quantify a carbon credit?

Key considerations for agricultural carbon credits include verification, third-party certification, additionality and leakage, and there is ongoing work to standardize progress in all areas:

• Verification of adherence to carbon credit practices and soil carbon levels can still be expensive and imprecise

• Certification of methods and results is conducted both internally and externally; carbon credit purchasers are currently sifting through multiple standards for evaluating the carbon impact of specific agriculture practices in distinct areas

• Another key hurdle in all carbon offset projects is additionality—whether the change in carbon was truly a change from business as usual; more farmers may be choosing cover crops to reduce soil erosion and enhance water retention, regardless of carbon payments

• Finally, guaranteeing the longevity of the carbon capture is another area companies are addressing. If farming practices change, causing carbon release, or the carbon credit company shuts down, the impact may not meet the goals and expectations of the carbon market

Companies are working to solve measurement and implementation challenges needed to provide verification of carbon sequestration in soil and reduction of emissions, and allow for third-party certification. Necessary elements include the need for multi-year legal commitments and long-term monitoring systems to ensure practices meet commitments. Careful farm management records prior to, and following, carbon credit initiation are critical. In addition, representative soil samples must be tested to establish the baseline carbon levels and audit compliance with agreements. These processes will be complicated by the variability in the amount of organic matter (carbon) in soils between different fields and locations within a given property. As legal and testing costs are sticky on a per-acre basis, higher carbon prices could possibly be necessary to offset the administration, transaction, and monitoring costs that will be required to build market confidence.

The carbon credit value chain in agriculture

While these programs represent a potential opportunity for farmers to capture financial and environmental benefits, they do represent multi-year encumbrances by limiting the optionality of the farming operation and land, requiring farmland owners to give up a portion of their real estate rights.  For the farmland owner, entering into carbon credit agreements has some of the trade-offs on a smaller and shorter scale, associated with a conservation easement. The costs and benefits are especially important to consider if the agricultural land has potential for conversion to a higher value, i.e. permanent planting, or nonfarm use. The agreements could affect the transferability and liquidity of the farmland if the owner or operator changes.

The quality of carbon credits is typically certified by GHG registration nonprofit programs such as Gold Standard,²⁰ Climate Action Reserve,²¹ and Verra,²² and soil science organizations such as the nonprofit Soil Health Institute.²³ The independent status of these organizations allows carbon market companies to quantify and certify the expected carbon impact of agricultural practices, measure baseline carbon levels, and monitor carbon levels and farm records to assure compliance. Citing the barriers that administrative costs and delays represent to smaller ag carbon providers, certain companies, such as Nori, have elected to operate with their own proprietary methodologies.

The soil carbon market is therefore still evolving in terms of its science and market structure and building confidence in soil carbon removal estimates will depend on rigorous measurement approaches; baseline sampling is critical to estimating sequestered carbon and reduction of GHG emissions.

A meaningful driver of value creation

While countries and companies are planning to reduce emissions by 1,000 billion tons by 2100 as part of their reduced-carbon future, carbon offsets are becoming a valuable tool. Agriculture, a natural resource solution, is likely to play a role in demand for sequestering carbon. And relative to today’s business-as-usual baseline, agriculture has the potential to sequester 1 to 2 billion tons of carbon annually.

The limited scale of today’s carbon programs, at only a few million acres (relative to 320 million acres of cropland and 580 million acres of pasture in the United States alone), anticipates room for significant growth.¹³ The forestry sector has successfully made carbon sequestration a meaningful driver of value creation; agricultural land, and operations implementing change management practices that sequester carbon and reduce GHG emissions, should also find ample buyers seeking to limit the magnitude of future global climate change. 

*Conservation tillage: a tillage and planting system covering 30% or more of the soil surface with crop residue after planting, to reduce soil erosion by water. Cover cropping: crops grown for the protection and enrichment of the soil, generally established between the harvest of a main crop and the sowing of the next. Cover crops are not harvested but returned to the soil.

1 World Population Prospects 2019: Highlights, UN Department of Economic and Social Affairs, June 2019. 2 “Mitigation pathways compatible with 1.5˚ in the context of sustainable development,” IPCC Special Report, 2018. 3 Global warming of 1.5°C, IPCC Special Report, 2018. 4 “A global agenda for collective action on soil carbon,” Nature Sustainability, January 10, 2019. 5 “Carbon sequestration in soils,” Ecological Society of America, 2000. 6 “Natural climate solutions, PNAS, October 31, 2017. 7 Sources of greenhouse gas emissions, ” U.S. Environmental Protection Agency, accessed January 19, 2021. 8 “COMET-Planner: Carbon and greenhouse evaluation for NRCS conservation practice planning,” NRCS, USDA, Colorado State University. accessed February 17, 2021. 9 GHG and carbon sequestration ranking tool, USDA NRCS, accessed Feburary 17, 2021. 10 “Climate-smart agriculture and the Sustainable Development Goals,” UN FAO, accessed 2/17/2021. 11 “Cover crops and soil health,” NRCS, USDA, accessed January 22, 2021. 12 “reThink soil: A roadmap to U.S. soil health,” The Nature Conservancy, accessed February 17, 2021. 13  USDA NASS 2017 Census of Agriculture, accessed January 22, 2021. 14 “Agriculture industry bets on carbon as a new cash crop,” Wall Street Journal, December 23, 2020. 15 Reuters, October 2019. 16 Climate Action Reserve Projects, October 2019. 17 Climate Action Reserve Soil Enrichment Protocol, accessed March 3, 2021. 18 “CIBO, Peoples Company partner for carbon credits on farmland,” Successful Farming, January 19, 2021. 19 “CarbonShot: Federal policy options for carbon removal in the United States,” World Resources Institute, 2020. 20 Gold Standard, March 2, 2021. 21  Climate Action Reserve, February 17, 2021. 22 Verra, February 17, 2021. 23 Soil Health Institute, February 17, 2021.