WEBVTT - Sowing Seeds of Innovation with Agriculture Offsets 0:00:00.080 --> 0:00:02.719 Hi, this is Dana Perkins and you're listening to Switch 0:00:02.759 --> 0:00:05.200 It on the b n F podcast. Today's show is 0:00:05.200 --> 0:00:09.440 about agriculture carbon offsets. This is currently a very small 0:00:09.520 --> 0:00:12.080 part of the voluntary offsets market, but hang in with 0:00:12.119 --> 0:00:16.520 me here there is potential for growth and importantly innovation 0:00:16.600 --> 0:00:19.720 which could lead to changes to our agricultural food system 0:00:19.800 --> 0:00:23.280 that at scale could really have a meaningful impact. Direct 0:00:23.360 --> 0:00:27.240 emissions from the agriculture sector currently make up roughly eleven 0:00:27.240 --> 0:00:31.440 percent of global totals, with soil management and livestock related 0:00:31.480 --> 0:00:35.279 activities as the biggest parts. When thinking about solutions, it's 0:00:35.320 --> 0:00:38.000 going to be the farmers and their farming practices that 0:00:38.040 --> 0:00:42.720 will reduce emissions. So offsets give them a market and 0:00:43.080 --> 0:00:47.280 a bit of inspiration to spur this innovation. Today I 0:00:47.320 --> 0:00:50.520 get to speak with Kyle Harrison, who leads our sustainability 0:00:50.520 --> 0:00:53.360 research team at BENF and he spends a lot of 0:00:53.400 --> 0:00:56.680 time looking at carbon offsets of all kinds. As a 0:00:56.760 --> 0:01:00.440 quick reminder, b ANF does not provide investment or strategy advice, 0:01:00.560 --> 0:01:02.800 and we have a complete disclaimer at the end of 0:01:02.840 --> 0:01:05.960 the show. And now let's jump into our conversation with 0:01:06.040 --> 0:01:15.760 Kyle about agriculture carbon offsets. Kyle, thanks for coming on 0:01:15.800 --> 0:01:17.759 back to the show. Thanks for having me so our 0:01:17.800 --> 0:01:19.920 favorite topic that you and I discuss when we're on here, 0:01:20.040 --> 0:01:23.600 which is the wonderful world of offsets, And this time 0:01:23.640 --> 0:01:28.080 we're going to be talking about agriculture offsets. And so actually, 0:01:28.160 --> 0:01:32.200 let's just definitionally, Well, that's a mouthful jump right in. 0:01:32.360 --> 0:01:38.400 Can you explain what an agriculture specific offset actually is? Sure? 0:01:38.560 --> 0:01:41.600 And I think maybe taking one step back even further, right, 0:01:41.600 --> 0:01:44.479 when we talk about a carbon offset, we think about 0:01:44.520 --> 0:01:48.880 a verified emission reduction certificate or credit that can be 0:01:48.920 --> 0:01:52.120 bought and sold by various parties. So a corporation can 0:01:52.160 --> 0:01:55.320 buy one of these offsets and retire it or cancel 0:01:55.360 --> 0:01:57.800 it from the market, and then they can neutralize their 0:01:57.800 --> 0:02:00.840 own hard to abate emissions. And generally, when we talk 0:02:00.880 --> 0:02:04.560 about carbon offsets, we're looking at a couple of specific sectors, 0:02:04.600 --> 0:02:07.280 and these are the ones that get most of the love. Right, 0:02:07.360 --> 0:02:12.160 it's energy generation projects like clean energy, it's avoided deforestation 0:02:12.280 --> 0:02:15.600 and reforestation, and then there's all the other sectors like 0:02:15.720 --> 0:02:19.440 clean cookstoves for example. But when we talk about agriculture 0:02:19.480 --> 0:02:24.359 carbon offsets, we're thinking about avoiding or removing emissions from 0:02:24.440 --> 0:02:28.200 any sustainable practice in agriculture. So that can be something 0:02:28.280 --> 0:02:33.480 like more sustainable management of manure or feeding livestock different 0:02:33.520 --> 0:02:36.919 food so that their digestion process changes and they emit 0:02:37.040 --> 0:02:39.160 less methane. But it could also be the way that 0:02:39.200 --> 0:02:42.760 we change the water usage, for example, for rice cultivation. 0:02:43.120 --> 0:02:46.760 So there's a whole slew of potential subsectors within agriculture 0:02:47.200 --> 0:02:50.280 that can avoid or remove emissions and as a result, 0:02:50.280 --> 0:02:52.600 they can create these carbon offsets that can be bought 0:02:52.680 --> 0:02:55.440 by companies. And to further frame this, how much of 0:02:55.480 --> 0:02:58.880 direct emissions are actually coming from the agricultural sector now, 0:02:59.400 --> 0:03:01.920 So there's a lot of different estimates on this, and 0:03:01.960 --> 0:03:05.639 it depends on what subsectors you include, but generally you're 0:03:05.680 --> 0:03:09.440 looking at a range of around eleven to of global 0:03:09.480 --> 0:03:13.080 greenhouse gas emissions coming from agriculture, and so there's a 0:03:13.160 --> 0:03:17.360 huge role to play here by again employing sustainable practices 0:03:17.360 --> 0:03:20.800 to reduce those emissions. And we've talked about offsets here 0:03:20.840 --> 0:03:22.240 in the past, so if people want to go back 0:03:22.240 --> 0:03:25.440 to even more definitions the things that Kyle just let 0:03:25.520 --> 0:03:28.880 us into, you know what this voluntary offset space really is, 0:03:29.800 --> 0:03:34.000 how big is this agriculture offset space that we're going 0:03:34.040 --> 0:03:37.560 to talk about today in terms of the market, Is 0:03:37.600 --> 0:03:39.960 this an innovation or is this a big part of 0:03:40.000 --> 0:03:45.200 the voluntary offset market. It's essentially non existent or tiny today. 0:03:45.240 --> 0:03:47.440 And there there is an asterisk to that which i'll 0:03:47.520 --> 0:03:49.720 which i'll go into a little bit more. But when 0:03:49.720 --> 0:03:52.160 we talk about the offset markets today and we think 0:03:52.200 --> 0:03:56.480 about supply of carbon offsets, you're looking at between two 0:03:56.520 --> 0:04:00.560 and three hundred million carbon offsets being issued on on 0:04:00.600 --> 0:04:04.400 an annual basis. The record in terms of carbonof set 0:04:04.440 --> 0:04:08.160 issuance in the agriculture space to date was one point 0:04:08.200 --> 0:04:12.240 five million carbon offsets in twenty seventeen. That supply has 0:04:12.240 --> 0:04:16.720 actually dropped year on near since, so a very very 0:04:16.760 --> 0:04:21.760 tiny percent of the market on registry comes from agriculture today. However, 0:04:21.839 --> 0:04:24.480 there is this important part of the agriculture offs at 0:04:24.520 --> 0:04:27.320 market that makes it quite unique, and that is the 0:04:27.360 --> 0:04:29.760 fact that there is a thriving what we call off 0:04:29.920 --> 0:04:33.520 registry ecosystem. And so what that means is that when 0:04:33.520 --> 0:04:36.200 you buy a carbon offset today, a lot of projects 0:04:36.240 --> 0:04:40.240 are listed on a registry. The biggest ones are VERA, 0:04:40.320 --> 0:04:43.760 there's ones like gold Standard, and then the American Carbon Registry, 0:04:43.800 --> 0:04:47.000 for example, and there can be quite expensive fees for 0:04:47.120 --> 0:04:49.839 listing those projects on registry. So what you see in 0:04:49.839 --> 0:04:52.520 the agriculture spaces a lot of small farmers that are 0:04:52.920 --> 0:04:58.160 adopting sustainable agriculture practices, they'll sell their offsets on marketplaces 0:04:58.200 --> 0:05:00.880 that are off registry. So for example, they'll go through 0:05:00.920 --> 0:05:04.359 companies like Nori where they bypass that fee for listing 0:05:04.440 --> 0:05:07.320 their project and then they can sell those offsets directly 0:05:07.320 --> 0:05:10.200 to customers offer registry. So it's a little bit difficult 0:05:10.240 --> 0:05:13.919 to say just how big the overall market is. But 0:05:14.000 --> 0:05:15.880 with the data that we do have, the data that 0:05:15.920 --> 0:05:19.480 we can analyze is that on registry market and right 0:05:19.520 --> 0:05:22.360 now it is absolutely tiny, but we don't think it 0:05:22.360 --> 0:05:24.000 will be that way for long. And there's a number 0:05:24.000 --> 0:05:26.039 of different reasons for that. Well, and the reason I 0:05:26.040 --> 0:05:28.279 asked you to come on today isn't because this is 0:05:28.320 --> 0:05:32.119 a huge space that you know is unavoidable. It's more 0:05:32.279 --> 0:05:37.120 that this is part of the solution finding space within agriculture, 0:05:37.160 --> 0:05:41.919 which is complicated, super fragmented, and we at b NF 0:05:42.040 --> 0:05:43.840 do really like to think about, well, what are the 0:05:43.880 --> 0:05:47.440 potential solutions and what could scale. So you mentioned the 0:05:47.600 --> 0:05:51.800 off registry offset space being potentially really appealing to some 0:05:51.880 --> 0:05:54.400 of the smaller farmers out there. I guess then that 0:05:54.440 --> 0:05:56.359 makes a question what's in it for them? What's in 0:05:56.400 --> 0:05:59.400 it for a farmer to even be an on registry 0:05:59.560 --> 0:06:02.479 listing for an offset, and how lucrative is this for them. 0:06:02.640 --> 0:06:04.480 There's a few different ways to think about this, and 0:06:04.760 --> 0:06:08.720 one of them is kind of the classic corporate sustainability strategy, right, 0:06:08.760 --> 0:06:12.400 which is by adopting sustainable practices in a lot of cases, 0:06:12.720 --> 0:06:15.320 you're saving on resources. So maybe we can use that 0:06:15.360 --> 0:06:19.760 example of rice cultivation. Like I mentioned before, when someone 0:06:19.760 --> 0:06:22.800 cultivates rice or grows rice, typically they do that in 0:06:22.839 --> 0:06:24.720 a rice patty, and what they do is that they 0:06:24.839 --> 0:06:27.479 drown that patty and water in order to go ahead 0:06:27.480 --> 0:06:30.680 and produce that rice. For starters, that's using a ton 0:06:30.839 --> 0:06:33.280 of water resources, right, and that water needs to be 0:06:33.680 --> 0:06:37.360 pumped and transported from point A to point B. At 0:06:37.360 --> 0:06:39.360 the same time, though, what you're actually doing is you're 0:06:39.480 --> 0:06:42.680 drowning the crop and you're actually drowning the soil. And 0:06:42.720 --> 0:06:45.600 what that does is it creates special bacteria that emits 0:06:45.640 --> 0:06:48.480 things like methane and nitrous oxide. One of the ways 0:06:48.480 --> 0:06:50.720 that you can go ahead and mitigate some of these emissions, 0:06:51.120 --> 0:06:54.000 um is just by simply reducing your water usage, so 0:06:54.120 --> 0:06:58.080 using water much more strategically on rice patties. So again 0:06:58.120 --> 0:07:01.279 you're reducing your emissions because you're not drowning out those 0:07:01.320 --> 0:07:03.560 patties in the same way that you would, but you're 0:07:03.600 --> 0:07:06.360 also reducing your usage of water, right, So that saves 0:07:06.360 --> 0:07:09.640 a farmer purely from a natural resource standpoint, quite a 0:07:09.640 --> 0:07:11.960 bit of money. So there's that one angle to it. 0:07:12.720 --> 0:07:15.520 The other one, which we thought about a little bit 0:07:15.520 --> 0:07:18.160 when we were trying to estimate the long term cost 0:07:18.680 --> 0:07:21.840 of carbon offsets from this space is the opportunity to 0:07:22.000 --> 0:07:27.280 produce sustainable agriculture produced sustainable food and crops. So foods 0:07:27.320 --> 0:07:30.400 with an organic label, for example, typically sell for quite 0:07:30.400 --> 0:07:35.040 a large premium compared to traditional methods, so farmers as results, 0:07:35.040 --> 0:07:36.760 they can go ahead and sell their food for more 0:07:37.120 --> 0:07:39.560 and long term that can lead to a more revenue 0:07:39.600 --> 0:07:42.520 for a farmer. So there are definitely benefits to the farmer. 0:07:42.800 --> 0:07:45.640 Presumably there's innovation here and there are certain things that 0:07:45.680 --> 0:07:47.680 they need to do in order to be able to 0:07:48.120 --> 0:07:51.880 qualify for these on registry ones. But actually before we 0:07:51.920 --> 0:07:54.400 even get into that the off registry ones. There's this 0:07:54.520 --> 0:07:58.679 whole verification process that we have discussed in the past 0:07:58.720 --> 0:08:01.520 in other shows, and there's is kind of somewhat dubious 0:08:01.600 --> 0:08:05.840 world of non certified voluntary offsets and whether or not 0:08:05.880 --> 0:08:07.920 we can take them seriously and whether or not we 0:08:07.960 --> 0:08:10.600 can actually see those as additional Do you think that 0:08:10.640 --> 0:08:15.040 there's a risk for the off registry listings to potentially 0:08:15.080 --> 0:08:18.240 be something that people could exploit and you know, don't 0:08:18.360 --> 0:08:20.840 end up giving the benefit to the companies that are 0:08:20.840 --> 0:08:24.000 actually buying these offsets. It's a complicated topic, but I 0:08:24.040 --> 0:08:27.480 think it's absolutely something that any stakeholder in the sector 0:08:27.480 --> 0:08:31.160 should be asking themselves. When you think about the role 0:08:31.200 --> 0:08:33.839 of a registry, what it should be doing is it 0:08:33.880 --> 0:08:36.880 should be that kind of first line of defense in 0:08:37.120 --> 0:08:40.120 verifying the quality of a project. They should have that 0:08:40.320 --> 0:08:43.960 methodology laid out on the registry to go ahead and 0:08:44.000 --> 0:08:47.080 work with an independent third party to verify that a 0:08:47.080 --> 0:08:51.760 project actually is avoiding or removing emissions. But the issue is, 0:08:52.200 --> 0:08:55.080 and what we've seen even on Registry over the past 0:08:55.160 --> 0:08:57.559 few months and years, is that there's quite a few 0:08:57.600 --> 0:09:00.720 projects that do make that on registry cut that aren't 0:09:00.720 --> 0:09:03.640 considered high quality. So what you're seeing is is almost 0:09:03.640 --> 0:09:07.120 this eroding level of faith in the registries and the 0:09:07.200 --> 0:09:09.760 role that they're going to play in this market personally, 0:09:09.760 --> 0:09:13.400 and I think overall these registries will play an important role, 0:09:13.440 --> 0:09:16.319 and they are working with other third party groups to 0:09:16.600 --> 0:09:20.040 further verify quality. So there's a group that we've definitely 0:09:20.040 --> 0:09:23.680 mentioned previously on this podcast data it's called the Integrity 0:09:23.679 --> 0:09:27.199 Council on Voluntary Carbon Markets. They're creating what are called 0:09:27.240 --> 0:09:29.800 their Core Carbon Principles, and that is a set of 0:09:29.840 --> 0:09:33.000 thresholds that a project needs to meet to be considered 0:09:33.040 --> 0:09:35.960 high quality. And while that technically is separate from the 0:09:36.000 --> 0:09:38.240 work that the registries are doing, there was quite a 0:09:38.240 --> 0:09:41.400 bit of collaboration between those two parties, and the registries 0:09:41.400 --> 0:09:44.960 are actually intimately involved when the work that the Integrity 0:09:45.000 --> 0:09:48.480 Council is doing. So I do think that overall, moving forward, 0:09:48.920 --> 0:09:52.080 registries will play in very important part in this market. 0:09:52.240 --> 0:09:55.600 And so if you are operating off registry, you are 0:09:55.679 --> 0:09:58.880 kind of betting against the overall momentum of the market here. However, 0:09:58.920 --> 0:10:01.319 I do go back to the at financial issue that 0:10:01.360 --> 0:10:05.000 I talked about earlier. It's very expensive for a small 0:10:05.080 --> 0:10:08.480 farmer to go ahead and pay the fee to list 0:10:08.480 --> 0:10:10.920 a project on one of these registries. A lot of 0:10:10.920 --> 0:10:14.240 these farmers already operated at a loss, regardless of whether 0:10:14.320 --> 0:10:18.160 or not they're using sustainable practices or they're creating offsets. 0:10:18.200 --> 0:10:20.760 So if you remove that financial incentive or you give 0:10:20.800 --> 0:10:24.000 this huge financial fee, that's going to remove any incentive 0:10:24.040 --> 0:10:27.400 that a farmer would have to generate carbon offsets. And 0:10:27.440 --> 0:10:29.160 a lot of this supply that we would see in 0:10:29.200 --> 0:10:31.959 the market over the coming decades that we're very bullish 0:10:31.960 --> 0:10:34.360 on at b an EF that's going to evaporate. Right. 0:10:34.840 --> 0:10:37.840 So what this does, this off registry market is it 0:10:37.880 --> 0:10:40.240 does in many ways empower the small farmer and it 0:10:40.280 --> 0:10:43.600 gives them that option to monetize or create new revenue 0:10:43.640 --> 0:10:47.480 streams by adopting more sustainable practices. So it's it's a 0:10:47.480 --> 0:10:49.319 tough one. I know it didn't give you the perfect 0:10:49.320 --> 0:10:51.640 answer here, but I do think that there are some 0:10:51.720 --> 0:10:55.199 major risks with operating off registry. However, I do think 0:10:55.200 --> 0:10:57.720 that there's some you know, really important positives to that 0:10:57.760 --> 0:11:00.000 side of the market as well. So you just reference 0:11:00.160 --> 0:11:02.400 the farmers that are operating at a loss, and I 0:11:02.480 --> 0:11:05.640 know this is a space that you know, because food 0:11:05.840 --> 0:11:09.400 is so important to human beings, right, this is a 0:11:09.440 --> 0:11:13.359 space where policymakers have gotten very involved in who's producing 0:11:13.440 --> 0:11:17.000 and who receives subsidies to in some circumstances not produced. 0:11:17.360 --> 0:11:21.920 Are there countries and policy makers and governments that are 0:11:21.960 --> 0:11:25.360 looking at this offset space as a potential opportunity for them, 0:11:25.440 --> 0:11:28.760 not just in terms of driving down the emissions for 0:11:28.920 --> 0:11:32.000 maybe they're stated at zero goals as a country, but 0:11:32.200 --> 0:11:36.400 also as a way to potentially create other revenue streams 0:11:36.480 --> 0:11:40.160 for the farming sector. Absolutely will be found is that 0:11:40.200 --> 0:11:43.920 there's twenty seven countries now that have a specific carve 0:11:43.960 --> 0:11:47.640 out for soil in their nationally determined contribution, so that's 0:11:47.640 --> 0:11:51.000 their paras aligned climate goal. They are specifically going to 0:11:51.040 --> 0:11:54.760 be looking at abatement from soil carbon, so actually, you know, 0:11:55.080 --> 0:11:59.319 strengthening soil and using soil to further store carbon. There 0:11:59.360 --> 0:12:02.280 are a lot of count trees that are prioritizing this. However, 0:12:02.320 --> 0:12:04.320 I think as you think about it in terms of 0:12:04.320 --> 0:12:07.200 the offset market, there's definitely a way that you can 0:12:07.200 --> 0:12:10.840 think about this as potentially adversarial, right, and so what 0:12:10.920 --> 0:12:13.440 I mean by that is in general, when you think 0:12:13.440 --> 0:12:17.040 about the total amount of abatement that can come from 0:12:17.400 --> 0:12:22.439 soil carbon and from sustainable agriculture practices in general. Theoretically, 0:12:22.520 --> 0:12:25.480 each ton of that abatement should only be used for 0:12:25.520 --> 0:12:28.839 one thing. Right It's either used for abatement by a 0:12:28.920 --> 0:12:33.280 country to reach their nationally determined contribution, or it's being 0:12:33.320 --> 0:12:36.360 exported as a carbon offset, either to a company within 0:12:36.440 --> 0:12:40.320 that same country or two companies elsewhere in the world. Right. So, 0:12:40.360 --> 0:12:41.920 one of the challenges and one of the kind of 0:12:42.280 --> 0:12:45.000 exercises that we did when we did this long term outlook, 0:12:45.000 --> 0:12:47.360 as we said, well, let's look at the countries that 0:12:47.480 --> 0:12:51.400 are also prioritizing soil carbon in their climate goals, and 0:12:51.480 --> 0:12:53.679 let's see if they met a small portion of their 0:12:53.760 --> 0:12:57.960 nationally determined contribution with soil carbon, how much of the 0:12:58.040 --> 0:13:00.920 offset supply in the market would that into. And so 0:13:00.960 --> 0:13:03.120 we took an eleven percent figure, which is kind of 0:13:03.400 --> 0:13:06.400 goes back to what I mentioned earlier about how around 0:13:06.400 --> 0:13:09.960 eleven or a little bit more of global greenhouse gas 0:13:09.960 --> 0:13:13.760 emissions come from agriculture, and we assume that eleven percent 0:13:13.840 --> 0:13:17.040 of that country's emissions are met with abatement from agriculture, 0:13:17.280 --> 0:13:20.280 and what that potentially does is it wipes carbon offsets 0:13:20.280 --> 0:13:24.080 supply from some major agriculture companies entirely off the map. 0:13:24.480 --> 0:13:26.120 So what that means is that they no longer have 0:13:26.160 --> 0:13:29.360 any supply to export two companies elsewhere in the world, 0:13:29.559 --> 0:13:32.160 and they're using all of that supply for their own 0:13:32.240 --> 0:13:36.280 domestic abatement goal. And this is something that I think policymakers, 0:13:36.720 --> 0:13:41.240 but also anyone that's buying carbon offsets, traders, suppliers of 0:13:41.280 --> 0:13:43.800 carbon offsets, they all need to start thinking about this. 0:13:44.200 --> 0:13:47.400 And increasingly we're starting to see this from countries around 0:13:47.400 --> 0:13:50.319 the world. So India recently went ahead and they announced 0:13:50.679 --> 0:13:54.199 that they will not export any carbon offsets until they 0:13:54.320 --> 0:13:57.960 use the necessary abatement to meet their own climate targets. 0:13:58.480 --> 0:14:01.920 If you start to get major other agriculture societies, so 0:14:01.960 --> 0:14:05.040 I'm thinking about countries like the United States, like China, 0:14:05.200 --> 0:14:08.240 like Brazil, if they start to make similar types of pledges, 0:14:08.600 --> 0:14:11.600 that's going to eat into carbon offsets supply significantly. So 0:14:11.640 --> 0:14:13.960 as a buyer of a carbon offset, a lot of 0:14:13.960 --> 0:14:16.400 that potential supply that I would be tapping into in 0:14:16.400 --> 0:14:18.640 this market is going to evaporate, and I need to 0:14:18.640 --> 0:14:22.000 think of alternative routes to market as a result. That 0:14:22.200 --> 0:14:24.400 is a really interesting perspective in making sure that we're 0:14:24.400 --> 0:14:27.960 not double counting. So you mentioned the countries that are 0:14:27.960 --> 0:14:31.400 looking at this most kind of actively right now. How 0:14:31.400 --> 0:14:34.240 about companies. Is it the usual players in the agricultural 0:14:34.280 --> 0:14:37.240 supply chain or is it other companies looking at, you know, 0:14:37.280 --> 0:14:40.800 creative ways to offset their business activities. I think there's 0:14:40.800 --> 0:14:43.600 two points of the agriculture offset value chain that are 0:14:43.640 --> 0:14:46.640 worth highlighting here. And when we talk about any sector 0:14:46.640 --> 0:14:50.400 in carbon offsets, whether it is energy generation or forestry 0:14:50.440 --> 0:14:53.880 or cookstoves or agriculture, you do have kind of three 0:14:53.920 --> 0:14:56.320 main players that are involved in the space or ford 0:14:56.360 --> 0:14:58.800 depending on how you look at it. You have your developers, 0:14:58.960 --> 0:15:01.560 so you have the companies that are creating the carbon 0:15:01.600 --> 0:15:05.080 offset projects. You have the registries that these projects are 0:15:05.080 --> 0:15:08.160 getting listed on. Typically, then you have a broker, so 0:15:08.360 --> 0:15:12.200 typically a company that is an independent third party consultant 0:15:12.280 --> 0:15:15.320 that will either just advise a buyer on how they 0:15:15.360 --> 0:15:18.400 should purchase offsets or they'll actually be the one buying 0:15:18.400 --> 0:15:21.880 the offsets and then selling those onto a customer somewhere 0:15:21.880 --> 0:15:25.400 along the value chain. So brokers play very important role here. 0:15:26.040 --> 0:15:28.800 And then of course you have the buyers. What makes 0:15:28.880 --> 0:15:32.480 the agriculture offset value chain. Very unique is you also 0:15:32.520 --> 0:15:35.040 have a number of what we call aggregators that operate 0:15:35.080 --> 0:15:38.040 in this market. So I mentioned before the opportunities in 0:15:38.040 --> 0:15:40.960 this sector to empower the small farmer, to get them 0:15:41.000 --> 0:15:45.120 to start adopting sustainable practices and monetizing carbon offsets as 0:15:45.120 --> 0:15:47.800 a way to finance those activities. What you have in 0:15:47.800 --> 0:15:50.280 a lot of cases is companies playing the role of 0:15:50.280 --> 0:15:52.920 what we call an aggregator. And typically these are large 0:15:52.960 --> 0:15:57.960 agriculture companies like Kellogg for example, like Cargill, like General Mills. 0:15:58.560 --> 0:16:01.720 What they'll do is they'll work actually with small farmers, 0:16:02.160 --> 0:16:04.600 and as the name would imply, they will aggregate a 0:16:04.640 --> 0:16:08.120 bunch of carbon op set supply from those small farmers. 0:16:08.560 --> 0:16:11.360 They'll pay the fees, they'll handle all the technical aspects 0:16:11.360 --> 0:16:13.880 of developing that project, and then they'll actually be the 0:16:13.880 --> 0:16:16.840 ones to take ownership of those offsets in exchange for 0:16:16.880 --> 0:16:18.920 a small fee of the farmer. So a lot of 0:16:18.960 --> 0:16:21.840 the risks that would come with developing this project, both 0:16:21.880 --> 0:16:24.800 physically and financially, the small farmer no longer has to 0:16:24.800 --> 0:16:28.320 bear those The aggregator takes that type of responsibility. So 0:16:28.360 --> 0:16:31.400 I think that's a really unique kind of corporate player 0:16:31.600 --> 0:16:33.960 in the offset value chain. That's important to note. But 0:16:34.000 --> 0:16:36.440 then danta to your original question. In terms of buyers, 0:16:37.120 --> 0:16:40.040 it's a whole slew of buyers right, ranging from technology 0:16:40.040 --> 0:16:45.080 companies like Microsoft, two banks like Barclays and JP Morgan, 0:16:45.760 --> 0:16:48.960 all the way to e commerce companies like Shopify for example. 0:16:49.240 --> 0:16:51.000 There's a whole range of these companies that are getting 0:16:51.080 --> 0:16:54.200 very active in this space. And in general, we think 0:16:54.680 --> 0:16:57.960 the value of an agriculture offset, and we can definitely 0:16:58.000 --> 0:17:00.400 go into more detail on this mean is that it's 0:17:00.400 --> 0:17:03.560 going to be very desirable as a supply source for 0:17:03.680 --> 0:17:06.240 any type of corporate fire for ones that want to 0:17:06.240 --> 0:17:09.200 emphasize quality especially, they're all going to be looking towards 0:17:09.240 --> 0:17:12.679 agriculture offsets as a source of supply now for a 0:17:12.760 --> 0:17:19.200 very short break stay with us. So, of course there's 0:17:19.200 --> 0:17:21.520 the quality of the offset that the companies are looking at, 0:17:21.600 --> 0:17:26.480 but then there's price. So are these price competitive within 0:17:26.640 --> 0:17:30.400 the range of other voluntary carbon offsets. So in terms 0:17:30.400 --> 0:17:33.639 of how we actually went ahead and tried to estimate cost, 0:17:34.080 --> 0:17:35.959 I got into this a little bit earlier, but what 0:17:36.000 --> 0:17:39.160 we tried to think about is what is the premium 0:17:39.200 --> 0:17:42.400 that a form would be selling, for example, an organic 0:17:42.440 --> 0:17:45.320 product for compared to a regular version of that product, 0:17:46.040 --> 0:17:49.560 and can of carbon offset finance the gap in producing 0:17:49.560 --> 0:17:52.159 that organic product because again, in a lot of cases, 0:17:52.200 --> 0:17:55.680 it involves changing the way that you're producing these crops, 0:17:55.840 --> 0:17:57.920 and a lot of cases it involves an upfront cost. 0:17:58.240 --> 0:17:59.960 So what we said is can you use an office 0:18:00.200 --> 0:18:04.240 to finance those activities and in turn sell you know, 0:18:04.359 --> 0:18:07.120 higher quality food at a higher price or a premium. 0:18:07.320 --> 0:18:09.320 And in general, what we found as a result of 0:18:09.320 --> 0:18:12.120 that is that you have a huge range in terms 0:18:12.160 --> 0:18:15.040 of costs of these carbon offsets depending on the market 0:18:15.040 --> 0:18:18.440 that you operate in, but also depending on the type 0:18:18.440 --> 0:18:20.760 of crop that you're producing. And so what we found 0:18:20.800 --> 0:18:23.359 is that there's a slew of projects that can sell 0:18:23.440 --> 0:18:27.640 carbon offsets in the agriculture space for less than five 0:18:27.680 --> 0:18:31.440 dollars a ton. And there's some major agriculture countries that 0:18:31.480 --> 0:18:34.520 fall into this category. That is inexpensive, is it not, 0:18:34.960 --> 0:18:40.480 that's very inexpensive, that's too cheap. So, for example, there's 0:18:40.520 --> 0:18:44.080 countries like India and Canada and Kazakhstan that do have 0:18:44.240 --> 0:18:47.840 quite large agriculture industries that can sell a carbon ops 0:18:47.880 --> 0:18:51.480 that we estimate in from agriculture for less than five 0:18:51.480 --> 0:18:55.399 dollars ton. However, this is quite a steep supply curve 0:18:55.680 --> 0:18:58.320 and there are a number of countries that would be 0:18:58.400 --> 0:19:01.040 selling these agriculture opsets for a lot more expensive in 0:19:01.119 --> 0:19:03.560 the price. So we estimate that the US would be 0:19:03.600 --> 0:19:07.159 selling it around twenty two a ton, Brazil let around 0:19:07.160 --> 0:19:09.960 thirty dollars a ton, all the way up to Australia 0:19:10.080 --> 0:19:12.879 at around sixty dollars a ton. And again, what this 0:19:12.960 --> 0:19:15.800 comes down to is what is the major crop that 0:19:15.880 --> 0:19:18.880 these countries are producing, and then what is the premium 0:19:18.920 --> 0:19:20.760 that it would take for them to sell or the 0:19:20.800 --> 0:19:23.560 premium that they would charge to sell an organic version 0:19:23.600 --> 0:19:25.560 of that crop. Right, So, if you think about a 0:19:25.640 --> 0:19:28.840 market like Australia, for example, a lot of their agriculture 0:19:28.880 --> 0:19:32.520 industry is focused on beef production, so selling organic beef 0:19:32.880 --> 0:19:36.040 often goes for much higher a premium compared to traditional beef. 0:19:36.560 --> 0:19:38.920 But the practices that need to go into producing that, 0:19:39.320 --> 0:19:43.760 like feed additives, more sustainable livestock management, all that costs 0:19:43.800 --> 0:19:46.560 money upfront, right, and so the gap that you would need, 0:19:46.800 --> 0:19:48.840 the price that you need to sell those offsets at 0:19:49.119 --> 0:19:52.280 to bridge the gap between those two practices is a 0:19:52.320 --> 0:19:54.600 lot higher. In general, I think this does kind of 0:19:54.680 --> 0:19:58.159 match what we've seen with other offset sectors. If you 0:19:58.160 --> 0:20:03.280 look at other nature based solution like reforestation and avoidant deforestation, 0:20:03.320 --> 0:20:06.919 for example, we use a different methodology to estimate cost, 0:20:07.320 --> 0:20:09.280 So in those cases we look primarily at what we 0:20:09.359 --> 0:20:12.879 call opportunity cost, So how would that land be used 0:20:12.920 --> 0:20:16.280 otherwise if it wasn't for protecting those trees? And what 0:20:16.359 --> 0:20:19.240 we found with that exercise and analysis is that you 0:20:19.320 --> 0:20:22.000 also have a huge range in costs. So there's a 0:20:22.040 --> 0:20:25.480 lot of countries that can sell reforestation offsets for less 0:20:25.480 --> 0:20:28.359 than five dollars a ton, and then again there's countries 0:20:28.440 --> 0:20:31.560 like Australia that are selling them at much higher prices 0:20:31.560 --> 0:20:33.800 that over a hundred dollars a ton. So I think, 0:20:33.800 --> 0:20:36.000 in general, what we've seen with other sectors, and you know, 0:20:36.040 --> 0:20:38.240 if anything, it's actually kind of a middle ground. You 0:20:38.240 --> 0:20:41.280 don't have the highs of other sectors and the lows. 0:20:41.320 --> 0:20:43.440 You know, while they are similar, they might not be 0:20:43.600 --> 0:20:46.040 quite as pronounced. I mean, they seem to be cost 0:20:46.040 --> 0:20:48.600 competitive with the compliance markets like the EU E t 0:20:48.760 --> 0:20:52.200 S here in Europe. Long term, I think yes, right now, 0:20:52.240 --> 0:20:54.760 and this is a you know, We've talked about this before. 0:20:54.880 --> 0:20:57.520 This is an ongoing challenge with the voluntary market is 0:20:57.560 --> 0:21:00.000 that carbon offsets are are far too cheap right now. 0:21:00.040 --> 0:21:01.480 If you look at the e U e T s, 0:21:01.600 --> 0:21:03.760 right the cost of carbon to the price of carbon 0:21:03.880 --> 0:21:06.919 is covering in some cases at some periods around hundred 0:21:06.960 --> 0:21:08.800 euros a ton, and then you compare that to the 0:21:08.840 --> 0:21:11.760 voluntary space, it's far too cheap for an offset today. 0:21:11.880 --> 0:21:14.200 And what that means is that it doesn't incentivize any 0:21:14.320 --> 0:21:16.639 change within an actual company. So what that means is 0:21:16.680 --> 0:21:19.280 that they'll use carbon offsets is a blanket or band 0:21:19.280 --> 0:21:22.720 aid solution to achieving a net zero carbon neutral goal. 0:21:22.920 --> 0:21:26.000 They won't actually try to change their practices internally. And 0:21:26.040 --> 0:21:28.040 so what you need to see is there's more of 0:21:28.080 --> 0:21:31.639 those higher costs in order to incentivize change. Yeah, the 0:21:31.720 --> 0:21:35.679 higher costs than driving adoption of best available technologies. But 0:21:35.760 --> 0:21:39.199 then here within the agriculture space, if I had to 0:21:39.240 --> 0:21:41.520 really summarize it, what you're saying to me is what 0:21:41.560 --> 0:21:44.719