Could Blockchain Help Farmers Find Cash in Carbon?
Agriculture, including livestock, could play an essential role in reducing greenhouse gasses from the atmosphere.
Yes, I have heard the same stories you have about cow farts ruining our planet. But the truth is there are very few ways to capture carbon-based gasses from the atmosphere. One of them is by sequestering the carbon in the soil through regenerative agriculture.
Sequestering carbon refers to the ability to CO2 is removed from the atmosphere and held in either a solid or liquid state as organic matter in the soil. This serves the dual benefit of building healthier and more productive soils while reducing greenhouse gas concentrations.
In fact, farmers and ranchers could be doing a lot more of this carbon sequestration, if it was a good business decision.
Enter Nori, the company that wants to create the most “transparent, credible, and easy-to-use carbon removal marketplace”.
I had the chance to interview Nori’s Director of Carbon Economics, Aldyen Donnelly, for the “Future of Agriculture” Podcast.
Many large companies are pledging to offset their carbon emissions. In a cap-and-trade system, these companies are able to buy credits from other entities that are using less than their quota.
This sounds like a good idea, but these cap and trade systems don’t seem to work because the “caps” aren’t low enough to ever really reduce greenhouse gas concentrations. Also, the “credits” that are generated don’t represent the real value of carbon removed from the atmosphere because they are abundantly available. Instead, the just represent emissions someone else could have used but chose to sell instead.
What I mean by this is the government puts a price on how much carbon is worth that is artificially low compared to the true cost of if they had to actually sequester the carbon.
Aldyen provides a good example here:
“When most people are buying one of those certificates in say, the California market for $15, they think it’s costing $15 to reduce 1 ton of CO2 (or remove it from the atmosphere). But if the underlying certificate is really only worth 25% of a ton, they’re actually paying $60/ton. When you’re in those markets, projects that remove carbon from the atmosphere through regenerative practices in all of those markets generate certificates in which the underlying value of which is very close to 1 ton. So, right now in California, the problem you have is a farmer has to bear significant cost to generate one certificate and then trade it at par with a certificate that’s only worth 25% of the farmers certificate.”
So we find ourselves in the position we are in today: most carbon markets don’t work. Many have already failed.
So what’s different about Nori?
Nori uses blockchain technology to validate and trace each carbon certificate back to actual carbon being removed from the atmosphere. So, instead of the certificates just representing a quota imposed by the government, they represent real progress in lowering greenhouse gas concentrations.
This is not only more effective in decreasing greenhouse gas concentrations, but also could mean more incentives for farmers. Aldyen continues:
“We are putting in a process that enables us to go back and audit; and we are going to guarantee that every certificate that is sold over our platform has an underlying value of one ton. Therefore projects that list on our platform and go to sell carbon removal certificates on our platform…don’t have to compete with those certificates that are worth a fraction of a ton. Hopefully that means the price will go up faster on our platform because the certificate is whole. We are ensuring to keep that commitment so that if errors are made in measurement and verification, and we find that in post-audit, then in our business model we have to go out and buy more certificates to keep our commitment that any buyer who buys those certificates is really getting a ton of carbon removed from the atmosphere and stored in the soil.”
Nori is also working on making it more straightforward for farmers to understand how much carbon they are sequestering and eliminating some of the transaction costs so that producers ultimately capture more of the value. Here’s Aldyen one more time:
“We are preparing methodologies for estimating how much incremental carbon crop and livestock producers are storing by adopting regenerative practices. We are working with a number of entities, but mostly right now Colorado State University…to make the process for estimating and verifying carbon storage much more transparent and also less costly. Right now in traditional markets, if you are abiding by all the rules, third parties (accountants, lawyers, and registries) are eating up 40–60% of your revenues on your carbon certificate sales….we will be a fraction of that in terms of the overhead or transaction costs.”
This is an compelling example of how blockchain technology can bring more trust and transparency to a market. If successful, Nori could offer farmers real financial incentives to work towards a healthier planet.