In an effort to address climate change, the U.S. Department of Agriculture is investing in new revenue streams and research for farmers and other agriculture producers who embrace practices to improve soils and mitigate carbon emissions.
The USDA’s $2.8 billion pilot program, Partnerships for Climate-Smart Commodities, selected 70 projects as part of its first round of funding in September. A second round will be announced later this year. USDA Secretary Tom Vilsack initially announced $1 billion for the program; that amount was nearly tripled based on the strength of the proposals received.
Pilot projects aim to reduce methane emissions, improve soil quality and sequester carbon, as well as to create market opportunities for beef and bison ranchers who use sustainable grazing and land management practices. There is also a financing initiative that looks to create incentives for “climate-smart” farmers who take steps to mitigate carbon in their practices, as well as to create a market for commodities produced this way.
The projects can run for up to five years, and funding amounts ranged from $5 million to $100 million.
Some 11% of U.S. greenhouse gas emissions in 2020 came from the agriculture sector, according to the U.S. Environmental Protection Agency. With greater investment and changes to production, agriculture could become a carbon sink, offsetting other carbon emissions, scientists say.
Agriculture companies, including equipment firms like John Deere
and irrigation firms such as Lindsay
and Valmont Industries
are already using precision technology to help farmers use fewer resources. But the aim of the pilot programs being funded by the USDA is to research practices that would allow agriculture to become a carbon sink — actually removing carbon dioxide from the atmosphere — rather than a carbon emitter.
Erin Fitzgerald, CEO of U.S. Farmers & Ranchers in Action, a coalition of farmers and others in the agriculture supply chain, says the USDA’s funding is a “huge step” to stimulate innovation in agriculture and build new markets. The coalition recently released a report about how investors focused on environmental, social and governance (ESG) criteria can think about public or private investments in agriculture as a way to mitigate climate change.
“The fact that the government has stepped up to create what I would call challenge grants to innovate and try to figure out how we build new markets that can get back to our farmers is a huge step,” Fitzgerald says.
MarketWatch spoke with Fitzgerald about the USDA program and climate change. This interview has been edited for length and clarity.
MarketWatch: Why is this funding so important?
Fitzgerald: Government support is what’s been missing [to encourage climate-focused programs in agriculture]. Quite often we hear, “The government should do this, the government should do that.” Well, now it’s happened. The fact that the government put this front and center now means it’s time for the private sector to really step up. We need the rest of the value chain to come in and help build those new business models.
MarketWatch: In this first funding round, the USDA announced 70 climate-smart projects. What are some of the key climate issues that agriculture needs to address, and how might this help?
Fitzgerald: Plants and animals are the only living machines that can sequester carbon — literally [take it] out of the atmosphere. It’s worth thinking about nature-based solutions as a key to fight climate change. We can do this on working lands. It’s thinking about the whole system and carbon cycle: How can I keep improving the soil base?
Manure can act as a soil amendment. There are microbes in that manure and there are microbes in that soil that help the plants. If you were to see the North American corn belt from space, you’d see it looks fluorescent pink. That’s because there’s photosynthesis happening, and photosynthesis is carbon-cycling,
In agriculture, we constantly deploy old technology and new technology on our farms, but what’s new is how to measure carbon cycles. This will unleash innovation. Now we need the mechanism to pay for it.
MarketWatch: In addition to the projects being done on farms, there’s a financing initiative to encourage farmers to use climate-smart practices and establish markets for commodities grown that way, along with other financing innovations. Why is that important?
Fitzgerald: Globally, of all the ESG investing, only 2% is going to nature-based solutions. Many of the financial institutions that take a portfolio approach to climate change are … [mostly] invested in renewable energy. We need to increase the amount of investment in agriculture. Agriculture is really the only way we can start recycling and [sequestering] carbon, [and it] needs to be seen as an ESG investment. There’s the environmental and social aspect: 10% of the American workforce is in food and agriculture. We know that the American public cares about food and agriculture. So how can we start making new forms of investment that really start supporting the future?
Farmers are often paid by the season, but the investments they make are 5 or 10 years out. In 8 of the last 10 harvest seasons, farmers have faced extreme and episodic weather events. This sector is most at risk of climate change, but one solution is to change the financial perspective and include farmers as part of the supply-chain financing.
With COVID, and with Russia and Ukraine, for the first time we’ve started to see agriculture talked about on a global stage. It’s [a topic at the U.N. General Assembly, and] this spring the World Economic Forum had agriculture front and center. We talk about trying to address climate change, [but] we have to address supporting people, and the only way you support people is through agriculture. It’s fundamental to how all economies work.