It Starts With A Survey...

Like it or not, farm reporting of greenhouse gas (GHG) emissions is here, and here to stay.

The data required for monetizing regenerative agriculture is basically the same for each of the programs offering farmer payments. Field passes, crop input application rates, other fuel use, biodiversity, water and soil health attributes all feed into various models in use today for:

1. Valuing carbon offsets for corporate brands trading in voluntary markets,

2. Quantifying carbon insets for achieving emissions-reduction commitments, and

3. Validating carbon intensity (CI) scores.

While the processes are looking very similar to certified organic reporting and auditing, thankfully they’re no longer paper-based and manual. Software exists to facilitate the data capture and automate feeding it into the scoring model chosen by the buyer.

There are government-backed models like GREET in the U.S. being used to create field-level scores, private platforms like the Cool Farm Tool for tracking Scope 3 emissions, and many others. The drive towards reporting is coming from from public corporations trading in markets where regulated supply chain emissions accounting required, and other new regulations.

In 2025, the U.S. will implement new 45(Z) tax credits as part of the Inflation Reduction Act (IRA). The portion of the 2024 crop that is manufactured by the U.S. renewable fuel sector in 2025 will qualify for tax credits in exchange for validated low CI scores, which is why farmers need to prepare right now to capture the data required in the coming growing season.

The precursor of 45(Z) is 40(B), the sustainable aviation fuel tax credit. Understanding how 40(B) affects processing margins, farm prices and commodity demand is a good starting point for traders affected by 45(Z) next year.

The timing of full carbon accounting happening at the farm level is unpredictable, but it’s closer than people realize. Especially in Canada where the regulatory environment is moving slowly compared to the U.S. and Europe, the agriculture industry appears dangerously unprepared.