114 Christian Shearer on selling 100.000 soil carbon credits to Microsoft on the blockchain

How did Regen Network sell 100,000 soil carbon credits to a giant company like Microsoft? Listen to Christian Shearer, CEO of Regen Network and the Co-Founder of Terra Genesis International.
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With Christian we discuss some of the blockchain solutions Regen Network is currently working on as well as the role of remote sensing and blockchains when it comes to selling ecosystem services.

More about this episode on https://investinginregenerativeagriculture.com/christian-shearer.

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Transcript

SPEAKER_01 0:00

How do you sell 100,000 soil carbon credits to a giant company like Microsoft? What's the role of remote sensing and blockchains in selling ecosystem services? And why did Regen Network decide not to build on top of Ethereum? Welcome to another episode of In March last year, we launched our membership community to make it easy for fans to support our work. And so many of you have joined as a member. We've launched different types of benefits, exclusive content, Q&A webinars with former guests, Ask Me Anything sessions, plus so much more to come in the future. For more information on the different tiers, benefits and how to become a member, check gumroad.com slash investingbridge Thank you. Welcome to another interview today with Christian Scheer, CEO of Regen Network, which aligns economics with ecology to drive regenerative land management. For instance, through the Regen Registry, which allows land stewards to sell their ecosystem services directly to buyers around the world. We had Gregory Landau on the podcast in July 2017, a long time ago, when we already discussed some of the blockchain solutions they were working on. And I'm extremely happy to have Christian for this long talk. long, long overdue interview to check in and to see how much has happened since then. Welcome, Christian. Thanks a lot. Thanks a lot for having me, Kun. I really appreciate it. And to start with a personal question, we always love to ask, why soil of all the things you could be doing with your precious time?

SPEAKER_00 2:00

Sure. Why soil? Wow. Such a beautiful topic. And I think there's actually two levels for me that I want to share around why I'm passionate about soil. One is ecology, and the other one is human society and living a fulfilled life. So first of all, in terms of ecological regeneration, soil is just like the foundation of ecological regeneration. If we're going to have healthy ecologies, healthy waterways, healthy food, healthy biodiversity, our soil is the place to start, basically in every ecological type. Starting with the soil will help jumpstart the ecological regeneration we're after. And the second reason is that I personally am really focused on human happiness and human fulfillment. And I've found that when humans engage with the soil, when they grow their own food and they create relationships with plants and the soil and they get dirt underneath their fingernails and breathe in that engagement, their lives become richer. And so I really want, I really invite more and more people to create a relationship with the soil, to learn what good soil is and what bad soil is and how they can be a player in the production of good soil and healthy ecosystems in general.

SPEAKER_01 3:13

It sounds like you had quite a profound soil experience, if we can call it like that. Do you remember when you saw that potential and when soil made you happy for the first time?

SPEAKER_00 3:24

Sure. I guess when I was 25, I started an ecological education center in northern Thailand with a bunch of friends. So I kind of brought a bunch of friends together and said, let's ditch the whole idea of having careers in our lives and let's just buy some land, build some bungalows, and just live the good life. And as At that time, I didn't realize I was going to be diving into permaculture and ecological agriculture. But the way things went, we started realizing we need to know how to grow our food and grow the mangoes and the passion fruit and the papayas. And we need to learn how to build our homes. And so we went through this huge learning curve. And during that process, we invited in volunteers and we invited in permaculture design teachers. And just a huge amount of passion and excitement was generated around around revitalizing the landscapes and lit something in me that wasn't there before. Big credit to Jeff Lawton, one of the first permaculture teachers that I had. He's just an incredible storyteller and an incredible, he brought so much inspiration to me to basically craft my life around the idea of permaculture design and the fact that I am the designer of my life and what happens around me. And soil has been an important part ever since the start.

SPEAKER_01 4:43

And you could have stayed between brackets and not to downplay that. And you could have become a permaculture designer and basically, well, I mean, there's enough work that for the next decades and decades and decades, but you didn't, you went into a very technology focused journey. How did that happen? And how did you end up on literally on the blockchain?

SPEAKER_00 5:04

Yeah, absolutely. Well, it started with permaculture design. So I first learned about permaculture. I became a permaculture design teacher. And then with a number of colleagues, including my co-founder of Regen Network, Gregory Landway, Ethan Soloviev, Eric Tonsmeier, one of the authors of Edible Forest Gardens and Carbon Farming Solution, and Mary Johnson, the five of us started a company called Terra Genesis International. And at first, we were kind of a traditional permaculture design firm that worked on broad-age permaculture applications, multi-enterprise agricultural systems. But at some point, we realized that we're doing a really good job here. We are working with literally thousands of acres and making some good impact. But the passion that the five of us have and the knowledge and the desire we have for transformation in the world, a few thousand acres a year is not even a drop in the bucket in terms of ecological change.

SPEAKER_01 6:03

Was there a moment that you realize that? Like, was there some realization like we're creating amazing pieces of land and we're transforming small pieces of paradise because even a few thousand acres is still small. But what triggered that? Oh, this is actually like this trajectory is not going to change enough in 10 or 20 or 50 years even. Like, was there a moment or was it a growing feeling?

SPEAKER_00 6:24

It was a growing experience. First of all, working with individual clients is an interesting learning curve in itself. Where we started was the idea that we could come in as kind of like experts, which we've never really thought of ourselves as experts, but we may know more than the client that's hiring us. And that we could then write a master plan for them, which then they could carry out and it would all be solved. And it turns out it never really works that way. You know, if the owner of the land and the manager of the landscape isn't personally invested into the master plan itself and isn't invested into the design process with themselves, then it's most likely that that master plan is going to end up on a shelf somewhere and be looked at occasionally to get inspiration but they're just going to do their own thing so in like re-evaluating that like how do we actually do this how do we actually work with these folks in such a way that grows their capacity to make their own decisions with what they're passionate about what they care about i think it was through that process that we realized like is this actually the node that we want to be engaging with you know and then what other nodes are there out there that we might engage with instead and with at terra genesis we decided, what if we could intervene in existing supply chains instead? Work with natural products companies, work with companies like General Mills and Nutiva and these other companies that have a deep desire to be engaging with regenerative agriculture. And some of the expertise and the background that we're bringing may be helpful to them. And so our company shifted in that direction. Now, to make a long story short, after some success in that realm and really like being the voice of regenerative agriculture in the natural product space for a number of years, we started to recognize that there was some critical infrastructure missing. So the way that I tell the story is a company like Mega Foods, who is one of our clients that really, really deeply cares about high quality food products and regenerative agriculture as a source for those products. They were literally investing hundreds of thousands of dollars into upgrading their farmers and their farmer practices in their system. Like a lot of deep care and engagement there. And then they could kind of share that to their customer base. Like we're working on growing soil. We're working on sequestering carbon. We're working on reestablishing biodiversity in our landscapes. And the brand down the road would simply hire a film crew for the day and go to a really cute farm somewhere and shoot a$5,000 video talking about how much they care about farmers. And from the consumer's perspective, it was really difficult to tell them apart. The region washing from the, yeah. Yeah, exactly. Which of these companies can we trust or can we trust either of them? And it was kind of from that seed that we recognized there is some really important core infrastructure that's missing. And that's where the idea of region network and an open distributed ledger of what's true and what's not true about ecological claims came to be. And so, yeah, region network was born in 2017 We mapped it all out on a big whiteboard and it's all gone from there.

SPEAKER_01 9:32

And how close is it to that big map on the whiteboard you drew in that summer of 2017?

SPEAKER_00 10:12

Yeah, well, the vision is a decentralized community of actors that participate in many, many different ways and bring in their different areas of value into a distributed community of activity that then is able to interoperate and intercommunicate in such a way that it uplifts all of them. And so where are we in that process? We are literally one month away from launching our main net of our blockchain.

SPEAKER_01 10:37

Which might be online as soon as this interview is online. So I will definitely link to that below. So it's a Very exciting time, very busy. Thank you for making the time now. Talk us through, especially for, let's say, non-blockchain natives, what that means and how it works.

SPEAKER_00 10:51

Yeah, absolutely. So the way that I describe our company, Regen Network Development Incorporated, and what's happening in Regen Network, which is the community effort around all this, is kind of two different levels of activity. The first level is the protocol level. So at the most base layer here is the ledger itself, the blockchain. and what we call the software development kit that goes along with that blockchain. It is a publicly accessible, open record of all the transactions that have ever happened on-chain. So what carbon credits have been issued? When were they issued? Where were they issued? Who owns them? Did they retire those credits or not? That is all publicly available on that blockchain, as well as many and many other types of transactions that could happen there. On that layer are protocols that relate to data interoperability. which is really important when we're thinking about the commons and the data commons related to ecology. The interoperability of various different data points is really important so that when someone in Russia is communicating to someone in the EU and they're communicating with someone in North America, we all can have a shared lexicon and shared understanding of what it is that we're actually talking about. That's all encoded into the layer one, into that layer one protocol. Now, that is built as public infrastructure. And we would love to have your participation. Now, that all sets up the groundwork for the application layer. So on top of the blockchain, many, many different applications can be built. The first one that Regen Network Development Incorporated has built is Regen Registry. Regen Registry is a carbon registry and ecosystem services registry, which brings in an MRV monitoring, reporting, and verification application. It brings in a credit issuance application so that credits can be issued to farmers and ranchers after they're verified to have created ecological impact on the landscapes. We should talk about that more, but just to say there's also many, many other applications that can and will be built.

SPEAKER_01 13:08

On top of that layer one.

SPEAKER_00 13:10

Green bond type applications, ecological financing applications, decentralized finance applications of all sorts, ecological currencies that are backed by ecological assets could be built on top of this chain, and many, many other different applications.

SPEAKER_01 13:25

And the chain is something you have developed for the commons something that was already there and you decided to use or where did it come from what's the origin of the chain

SPEAKER_00 13:37

so the region ledger our blockchain is a domain specific blockchain to the domain of ecological data and ecological agreements or contracts right it is a chain that our company has been developing we are developing it in coordination with cosmos so the cosmos blockchain i think right now is in the top 20 of blockchains in the world. They have their whole set of developers and everything they've been working on developing functionality for Cosmos. We've been integral in their development. And then also we are using and forking their chain for the development of RegenLedger. So it's built on the backs of really solid technology to begin with. And how did

SPEAKER_01 14:17

you choose that? Because you say it's in the top 20 now, but maybe it was, there are hundreds of different blockchains you could have picked to connect with and to build upon or to fork. How do you go about picking, because it's quite a fundamental decision. It's not something you can easily, five years from now, say, actually, it didn't really work. Let's go to X, Y, Z. How do you do DD there? Or how do you do your research?

SPEAKER_00 14:40

Yeah, there's a great blog post on Medium that we have that goes into depth. So I encourage people to read about this more. How to choose a blockchain? How did we choose ours? In this case, our CTO, Aaron Kralius, who is one of our early members in our company back in 2017, basically did an analysis of about 20 different blockchains. It was my assumption that we would be building on top of Ethereum because at the time, Ethereum was like the big shot. It's the change rule them all. Everything's going to be built on top of Ethereum. But there's a couple main things that led us away from Ethereum. One is that we wanted to have domain-specific governance. So the way that Ethereum works... even as they're switching to proof of stake, is that there is one governance for the entire network and that all sorts of different applications can be built on top of Ethereum and kind of bog the network down. For example, CryptoKitties, like this completely ridiculous application, caused the prices of transactions to go through the roof and really slowed down the entire network because it got really popular. We want a domain-specific blockchain that is focused only on ecological applications and ecological governance. Now, the governance part was an important part. In the Cosmos ecosystem, it's called the internet of blockchains. The idea is that rather than having one chain to rule them all, we're going to create really good interoperability between different chains. And so we're building our domain-specific blockchain. It'll be able to communicate really clearly to the Cosmos hub and to Terra and to Akash and to Iris and these other chains in the Cosmos community. And then there's bridges being built, so it can also communicate with Ethereum or with the blockchain. And with the Bitcoin chains as necessary. There's more to it than that. I encourage people to check out the blog.

SPEAKER_01 16:25

Yeah, I will link the Medium post below because I think for whoever wants to go deep on that, it's absolutely fascinating.

SPEAKER_00 16:31

And let me mention two more pieces that people always bring up. Environmental impact of blockchain. I mean, a lot of people know and have heard that Bitcoin uses the same amount of electricity as a country like Hungary or Venezuela. It's something like 2% of the world's power or something is powering Bitcoin, which is just crazy. It's absolutely ridiculous and unnecessary. First of all, a shift from proof of work, which is what Bitcoin is, to proof of stake, which is what Cosmos is running on, is orders of magnitude less power. And then in addition to that, we're going to be offsetting, obviously, as a company that runs a carbon registry, we'll be offsetting the impact of all the validators on our chain. And we hope to do the same for Cosmos as well. So both chains can be carbon neutral or even climate positive by the time that they're done. And the second part is the transactions. So So transaction fees on Ethereum now are crazy, you know, somewhere between$20 and sometimes it's$80 for a transaction. And if we're simply trying to have farmers log ecological data transactions on our chain and they're going to have to pay 20, that's just not going to fly. So having transaction fees on the order of magnitude of more like a penny to five penny to 10 cents is much more tenable for the whole world ecosystem services.

SPEAKER_01 17:50

It's essential, basically. And so... You've been building that for the last years, four years, actually, almost. And you, I wouldn't say recently got a big breakthrough because you have had many, many, but definitely a big one where suddenly the world or the rest of the world paid a lot of attention. You sold with partners to Microsoft a very, very interesting deal in terms of carbon credits and all of that around. Can you walk us through why that is so special and why suddenly everybody paid attention to that? I think I got from three or four different people, the article sent like, look what's happening there. And it's definitely inspiring. So can you walk us through that, how that happened and what it actually means?

SPEAKER_00 18:27

Yeah, absolutely. So high level, I can't give the exact details of the deal, but high level in the range of 100,000 tons of credits sold to Microsoft in the$10 to$20 range per ton. We partnered with an organization called Impact Ag Partners in Australia.

SPEAKER_01 18:45

We had Bert on it twice. I will definitely put his interviews in the show notes.

SPEAKER_00 18:49

Yeah, Bert is great. That whole organization is great. And they're working with some in land managers like through the Wilmot Cattle Company and other folks. Basically, Impact Ag Partners is a grasslands management firm in Australia. They work with individual landowners. We worked with three of their landowners who are practicing intensively managed grazing practices on their properties and having incredible outcomes. I haven't actually been there yet, which is I'm going to have to go for sure. But the photos and videos of Wilmot in particular are just an incredible beautiful landscape. It's obvious that the landscape is thriving. And from what we understand, the soil organic carbon on Wilmot has gone from 2% to over 4.5% over the time that they've been practicing intensively managed grazing. We worked with those three different groups, and they had already been collecting soil samples and geolocating those soil samples in the past. And so we were able to set a baseline of 2017 on those projects and issue credits for the changes in activity between 2000 2017 and 2020. Our science team developed a remote sensing methodology that minimizes the need for soil samples on the ground while using Sentinel-2 satellite imagery and data to basically take virtual samples across the entire landscape and have a very nuanced understanding of where the soil is, where the carbon is, and how that carbon has changed over time in the landscapes. So there's a couple really exciting things about this. One is the introduction of this new methodology which we believe brings higher accuracy and lower costs to the measurement of soil carbon in grazing systems. We've open sourced that methodology and are inviting others to use it.

SPEAKER_01 20:32

Yeah, I saw a webinar on it, I think of December last year, I think. I'll put it in the show notes as well. Absolutely fascinating how you use, and I would love to unpack that a bit, because a lot of people are saying remote sensing, and I don't think many people understand what it actually means. Like, how do you go from that, from satellite imagery that is public, because it's a actually selling credits to an organization like Microsoft. Like there's a big gap between that. And you had some soil samples. So can you walk us through that process and why it's an order of magnitude better and cheaper than basically doing soil samples on every different field on different places? And what kind of size, how would you do it normally? And why does remote sensing make so much sense in this case?

SPEAKER_00 21:14

Yeah, absolutely. So if Wilmot Cattle Company, for example, was to follow the AC which is the Australian Carpet Credit Unit's program and methodology, they would be asked to take somewhere between 200 and 300 soil samples across their landscape. And their landscape is about 2,000 hectares in size. So one every 10 hectares or so.

SPEAKER_01 21:38

Every year.

SPEAKER_00 21:38

They don't have to do it every year, but you have to set a baseline. And then whenever you want to measure the change in carbon, then you have to do it again. Right. So that, you know, those soil samples can cost anywhere from$200 to$300 a piece. And so we're talking about$40,000 to$60,000 just to set a baseline. And then again, to determine whether you've actually sequestered carbon or not.

SPEAKER_01 22:01

Because you have to do it in a, obviously a proper way, GPS it, send it to a lab, wait for the result, et cetera.

SPEAKER_00 22:07

Exactly. And so what you end up with as well is a static understanding, an average across the entire landscape. So if you were looking at a map that shows the value, the entire landscape would be the same color. It's like we have sequestered exactly, you know, however much it is. So that's very expensive. It basically means that only the largest landholders that are well capitalized can participate, and it excludes the vast majority of the world. And a lot of their earnings end up going towards fees rather than ending up as additional capital in the pockets of these land stewards. So it's always been our aim from the beginning to democratize access to these markets, to reduce the cost barrier to entry, and to make the verification of these things more accurate. So working with our lead scientists Dr. Giselle Buhmann, who's a remote sensing and ecology PhD out of Argentina, she developed the CarbonPlus methodology, which is publicly available on our website for anyone who wants to read into that. The way that it works is rather than taking 200 to 300 soil samples, we take between 20 and 30 soil samples. So that reduces it by an order of magnitude for the cost of the actual sampling. We take exact GPS locations of where those samples were taken, and then we use remote sensing, satellite data, to correlate the data and the figures we found on the ground with the data that's coming from remote sensing. So if you think about it numerically, there's a numerical figure for soil organic carbon coming off of each of those spots. And then there's a numerical figure from various different bands of the satellite imagery. And we were hoping to find, you know, maybe a 75% correlation between the remote sensing and the ground truth data. And we found a 91% correlation between a particular band. That then allowed us to say, okay, now we can extract extrapolate that correlation across the entire landscape and give a very nuanced view and understanding of where the soil carbon is and where it isn't, and then create maps that show a change in carbon over time, which is not only makes our measurements of soil organic carbon more accurate, but also is an incredibly valuable tool for these farmers because they can see, oh, wow, on that paddock, when I grazed the cattle in the spring, when the grass was really robust, I had more carbon sequestration than when I graze it over in that paddock in the fall. And so how can I, as a farmer, adjust my strategies, maybe to move them around more quickly or to whatever it might be, so that I can increase my solar organic carbon uptake over time?

SPEAKER_01 24:37

Yeah, I remember an image from the webinar where you basically had the slices. So you had the different colors and different bandwidth, but over time. So a bit like time machine in Mac that you could go back and you can go forward and you can basically see that happening. And does that mean you only need to do the soil sampling once or still you would like to sort of ground it again over time just to make sure that you don't go like with that 9% somewhere in a corner to the different angle and you want to make sure you keep as close to the 100 obviously which is impossible but the 100 as you possibly like how often do you need to reaccurate the model?

SPEAKER_00 25:13

Yeah so the way that CarbonPlus Grasslands methodology is written right now is that those soil samples are taken again every monitoring period so when we sign a up with a company like Wilmot Cattle Company and Impact Ag. They've signed a 10-year crediting period. And in that 10-year period, there are six monitoring events. So we don't need to do it every year. That would be kind of a waste of monitoring money. It's fine to just kind of do it every other year.

SPEAKER_01 25:39

And depends it on the time of the year, like do you need to do exactly the same day, the same hour, because we all hear that soil carbon is fluctuating and like you need to sort of capture it at that exact moment or what's the flexibility there?

SPEAKER_00 25:52

Sure. It does require the same type at the same time of year. The exact moment doesn't matter, you know, because ecology doesn't work that way anyway. But yes, in grazing systems, we take it in the fall when there is the least ground cover. So we have the most visible access to the soil itself. It gives us the most correlation between the soil organic carbon figures and the remote sensing data.

SPEAKER_01 26:13

Yeah, because the satellite needs to see something. Because what does the satellite see is not the right word, maybe, but measure or like if the ground is completely covered, which should be in return egg. It's full of, I don't know how many types of grasses for the cows to eat. How does it then understand the level of carbon or it's that correlation with the carbon probe basically that you have done?

SPEAKER_00 26:35

Yeah. And it would be best to have our lead scientists speak to this question, but basically it's the refractivity that that's measuring off of the ground. There's various different wavelengths of color that are coming back to the satellite. And each of those wavelengths of color are giving a numerical reading. And basically what our science team has done is gone through all of those different readings and seen if there's correlations to the amount of soil organic carbon on the ground. And they found a combination of a few of them that have given a 91% correlation, which is like incredible correlation. It's like lab style results. Feel very high sense of accuracy around it.

SPEAKER_01 27:12

And this is only the beginning. Where do you see this going in like five years or something? Like are the satellites getting better? The probes getting cheaper and better? Are there drones involved? Like what do you see like to get it up more or a lot cheaper, which both would be nice things to have. Where do you see, if we talk in four or five years again, hopefully earlier, but where do you see this moving? What are you excited about?

SPEAKER_00 27:34

Yeah, I mean, all of the above. I mean, first of all, the soil sampling and the measurement of soil organic carbon on site. I imagine that over time, there's going to be a device that is created where you can actually do the measurement on site, receive a digital reading and have that reading be able to sign a digital signature onto the chain itself. that this device has read this soil organic carbon reading at this moment and it timestamps it, right? I don't know where we're at with that hardware, but I imagine it's not that far off. Now, remote sensing satellite imagery technology is like on a very, very fast innovation curve right now. There's all sorts of really exciting stuff coming out from LIDAR to methane emission satellite imagery. And so that is also going to transform things. Without a doubt, the measurement of ecological state and change of ecological state in landscapes just needs to move towards satellite, basically as much as possible, real-time satellite data imagery about what's going on in landscapes. That's super exciting. Now, from a programmatic perspective, what's exciting here is that as we choose particular ecology types and regenerative agricultural management types, we can then aggregate these groups together. So let's say in New South Wales, Australia, high-intensity management of cattle We may be able to bring other projects on without actually having to take soil samples on their exact pieces of ground because we have enough information about that landscape and that soil. We can extrapolate it out to others, which for me is really exciting because then that means a family that's only managing five acres of rotational grazing, they maybe could come on and otherwise it would be inaccessible to them financially. And that's where we'd like to see all of this moving over time is that those five acres 500 million farmers around the planet that are managing one acre or three acres can be incentivized to be growing biodiversity and sequestering carbon.

SPEAKER_01 29:32

And so with this specific one, I can imagine it might have been a lot of, I wouldn't say handwork, but a lot of what then happened. So you have done the soil sampling or that was already done. You looked at the satellite data up to 2017 and the changes until now or last year. And then what concretely happened in terms of issuing these credits and then selling them for a price variance I mean, we don't need to know the exact price, but what happened then until Microsoft and other buyers bought them?

SPEAKER_00 29:57

Yeah, so our science team wrote up that methodology. We followed the monitoring practices as called out in that methodology. And we hired a third-party verifier, or I should say the landowner hired a third-party verifier as called out in the methodology. And so all the steps were followed. A full report was written for each of those projects. And those reports are publicly available on our website if anyone wants to go check them out. At that point, we were talking to buyers. I was having calls with, we have a list of 1,400 corporations around the world that have committed to going towards carbon neutrality or offsetting their ecological impact. And to be honest with you, many of these calls went really well in that the folks were like, wow, we love what you're doing. We love how you're innovating. This is really important for the space. And you're a young startup tech company that we've never heard of, so we're not going to buy from you. Call

SPEAKER_01 30:53

us back when, yeah.

SPEAKER_00 30:54

Yeah, call us back after you've made some sales and had some legitimacy. With Microsoft, they are in a position where they were able to hire their own internal staff to vet projects. So they put out a request for proposals. They got 189 responses of various different projects that had Carbon available for sale. And they ended up choosing 15 projects to go with, or 15 companies to source their Carbon from. And Regen Network was one of them. which is really amazing. And we've worked with them on walking through the intricacies of our methodology, helping them to understand how exactly it works. And one of the things that they're really excited about about our methodology is that it really is in situ measurement of the exact parcel itself. Whereas there are a lot of other methodologies out there that use models to model out, okay, you're using this farming practice. Okay, so put in that number. You're on this soil type. Okay, put in that number. You're not actually necessarily having to draw the exact data from that piece of ground. You're just making a model and an inference about what your carbon sequestration potential is, which they were really inspired and wanted to promote that. And so we were the only soil carbon credit that they purchased. The others were forestry credits and direct air capture credits.

SPEAKER_01 32:29

Which are very expensive, to say the least, and definitely not in the 10 to 20 range. But a very practical question, because I hear some complaints from people saying, Some of these models, especially only model until a certain depth. And a lot of the interesting stuff is happening way deeper. And I don't know the details of that, but until what depth are you selling carbon basically? And why that depth? And are you planning to change that over time?

SPEAKER_00 32:53

Yeah, that's a great question. And it's something that we really need to dive into more. At this point, our methodology only measures the top 15 centimeters of the soil, which as we all know, especially in grassland systems, there can be a huge amount of depth of soil organic carbon. So this is just... One of the ways in which our methodology is underestimating the total amount of soil carbon, which from one perspective is good. If we're going to underestimate or overestimate, we definitely want to underestimate. Of course. But then again, to be truly in service to these land stewards that are sequestering carbon out of the atmosphere and creating positive impact for all of us, it would be best if we could be even more accurate and measure to more depth.

SPEAKER_01 33:34

And what is needed for that? You need deeper probes or different satellite technology that looks way deeper?

SPEAKER_00 33:39

Unfortunately, with satellite technology, the correlation is most highly correlated to the top layers because that's all that the satellite is seeing. So the satellite really has no way of measuring, and not at this point anyway, of penetrating and measuring the soil carbon deeper. So if we were to measure deeper, it probably would have to revert back to some of those other methodologies where you're taking samples at depth and then averaging those samples across the landscape, which again gets into cost barriers.

SPEAKER_01 34:10

So the weight is scale it now is to go many hectares or many acres. And the depth is until we figure out other remote sensing technology to go deeper, that's going to be a difficult terrain to go beyond 15 centimeters.

SPEAKER_00 34:23

Right. Yeah. At least so far, that's what our methodologies have come up with. Again, we're excited for others to take our methodology and innovate on it. And if someone else can figure out a way to go deeper while maintaining the accuracy and the low cost, that would be of service to the world.

SPEAKER_01 34:38

And there's a lot of talk about ecosystems services. Horrible word, but covers it nicely until now. Biodiversity, water storage, carbon, obviously. And a lot of investors are getting excited. I think you notice that too, without giving investment advice, but like to investors listening to this podcast, let's imagine there's a theater full of them and they read the books, they read the media posts, they read the stuff like, what would be your advice to get their feet dirty and to start in the whole regenerative ag and food space? What would be first steps you would recommend them to take or where to learn more and how to become a to become real active instead of passive consumer of content.

SPEAKER_00 35:15

Right. So speaking from an impact perspective, my understanding is that what is most holding back regenerative egg from just going exponential? And it is going exponential. It just still hasn't hit that hockey stick curve yet.

SPEAKER_01 35:30

I've seen it in many decks, but yeah, I haven't seen the curve yet.

SPEAKER_00 35:33

Right. I haven't seen it out in the real world yet. It's going, it's going. That's right. Well, financing can help with that. I mean, I would say what is holding back regenerative agriculture the most. And it is the financing and the incentives for the farmers to say, yeah, that would be a good choice for me to switch towards regenerative ag strategies rather than the conventional ag strategies.

SPEAKER_01 35:53

So you're saying financing for farmers or financing in general.

SPEAKER_00 35:56

That's right. Financing for farmers. Yeah. Now there's a key piece and RegenNetwork has a part to play in this, which is that the financing for farmers to switch to regenerative ag is going to become a lot easier when those investors can bank on the fact literally bank on the fact that those farmers and ranchers are going to receive payments for ecosystem services down the road. So if you knew for sure that switching your grazing operation from conventional grazing strategies to regenerative ag strategies was going to produce carbon credits and other ecosystem services credits that could basically guarantee a particular amount of income, now you can make a case for impact investors getting involved and getting a reasonable return on investment. And we're starting to see that. I mean, my expectation is that soil carbon methodologies are going to become more and more of a focus. And we're seeing this with the Biden administration here in the United States with the USDA. We're seeing this with the purchase from Microsoft of our credits. And coupled with that, I very, very strongly suspect that the price of carbon is going to go up over time. So that return on investment for investing in to management strategies that return ecosystem services is going to go up over time. And those farmers are itching for that investment. Literally, these farmers, they don't want to be spraying chemicals on the land. It's just seems to be the most viable way to get a sure return at this moment.

SPEAKER_01 37:25

And insurance, crop insurance in many cases. And insured return, that's right. And that price in that range, how did that come about with Microsoft or with other buyers? Is there is no market yet or there's no market price, etc. Yet you're expecting it goes up. What's the negotiation with Yeah. I mean,

SPEAKER_00 37:46

we had a range of prices for our credits that we set after consulting with a number of experts and like looking at the markets. And just like you said, the voluntary carbon markets are very opaque. It's very difficult to find out what's being sold at what prices. And they literally range from like a dollar a ton or even a little bit less to$75 a ton. Stripe recently paid$75 a ton for some of their carbon. We found a range of between$10 and$25 a ton, depending on the volume and who was buying it and what their interest in that was. And then when Microsoft approached us, we talked with them about a volume discount and worked with them on a price that would work both for the land stewards. We basically brokered the deal between the land stewards and Microsoft and found a price that everyone felt good about.

SPEAKER_01 38:35

And since that news broke, have you seen a lot of other, like from that 1400 companies that you on your list that have, let's say, a climate positive pledge. Have you seen a lot of interest? Have you been busy brokering other deals? Hopefully, I hope at least. Has there been a few of them said, ah, now actually you're still a startup, but you actually have something to show for now. Let's talk. Have you seen some movement that is encouraging?

SPEAKER_00 38:58

Absolutely. So both on the land steward side and on the buyer's side, we've had a huge uptick of incoming requests for our services to be able to buy carbon credits for their offsetting purposes, as well as to be able to work with the farmers and ranchers on producing credits that represent their impact and we're excited if anyone out there is listening to this that's interested in certainly get a hold of us we'd like to work with you on either sides of that equation

SPEAKER_01 39:24

and beyond carbon there's a lot of talk or not a lot let's say there's a niche of talk around biodiversity and water storage and you've named this carbon plus i'm suspecting the plus stands for more than carbon

SPEAKER_00 39:37

that's correct

SPEAKER_01 39:37

what do you see there in those very nascent markets honestly like What's the interest? Is there interest from buyers? Is there, land sewers obviously are interested as well. What do you see in the beyond carbon market?

SPEAKER_00 39:48

Yeah, there's a lot of interest. So first of all, the CarbonPlus credit is, we created fairly simple methodologies to add on biodiversity, like ecosystem health index, soil health index beyond the carbon itself, and an animal welfare index, and just take that onto the credit itself. So Microsoft purchased the CarbonPlus credit. Of course, they were out to get carbon. carbon. You know, they liked that it had additional co-benefits associated with it, but I can't say that they necessarily like that was a big selling feature for them. But I do expect that having co-benefits associated with carbon in the markets is going to be a sought out feature and is going to demand a higher price over time. So we're excited about that. At Region Network, we certainly are not myopically focused on carbon. Carbon is not the problem with the world. The problem is a very holistic set of circumstances and carbon is one of the indicators, right? So yes, we need to sequester carbon, but perhaps even more importantly, we need to build soil and we need to build biodiversity and build habitat back into our landscapes. And so we really want to encourage that. Now, there already are really robust markets for water. Water is a huge market out there. We haven't yet gone into those markets as a company, but again, we're building a platform that invites the participation of many to many different applications. So if there are folks out there that have a deeper connection to those markets, let's work together. Let's figure out how you can build onto our platform and become interoperable with our systems. The biodiversity markets are really interesting. And then the kind of like wetlands mitigation type of projects where a development project that needs to offset the negative impact they're creating is basically purchasing credits in very similar bioremediation types in other landscapes is also another market that's pretty robust and growing fast. So all of those are on a roadmap and will come in due time.

SPEAKER_01 41:47

In due time. And just to shift gears a bit, let's say you are no longer running Region Network, but you are an impact investor with a fairly large portfolio, let's say a billion dollars. What would you focus your, and you could of course say, I would invest everything in Region Network and buy all the tokens that are coming on the market, et cetera. But if you would have complete freedom, it's an investment fund, which means at some point the money should come back plus a return. Yeah, absolutely. I wish I could say, oh,

SPEAKER_00 42:23

yeah, I've already got that. I'm already doing that. But we are already thinking about how to structure some sort of funds like this. And my interest is in impact investors getting involved, taking some sort of fractionalized ownership of the funds, and then the various different assets on the site. Have you spoke with the Propagate Venture guys?

SPEAKER_01 42:47

We had them at least twice, I think. Once in an intro and they were a part of a Q&A webinar a while ago, I think. Yeah.

SPEAKER_00 42:55

Yeah. Ethan and Harry and Jeremy from Propagate Ventures are doing some incredible work around the ecological financing related to regenerative ag. And so what I would love to see is a tokenization of basically the similar financing models that they're talking about so that investors can get involved up front and even own just a fractionalized piece of that whole system. You could own one tree or a portion of a tree in a regenerative ag project.

SPEAKER_01 43:24

And make it accessible for normal people and not just the 1%.

SPEAKER_00 43:28

Yeah, that's right. And so whether you have a billion dollars or you have$10, what we're trying to create is a decentralized finance system that could actually invest into ecological regeneration. And what that would look like is, like I mentioned, a some sort of fund that is making investments. Those investments are then having some sort of return that comes back to those token holders in the end in the form of, in the case of Propic Adventures, they're mostly focused on the actual agricultural output or timber output of their plantings. But we're going to be teaming up with them and also bringing the ecosystem services layer to that. So additional benefits for all of those investors would be the carbon and the ecosystem services outcomes that are associated with those projects. And we could literally very rapidly scale up the adoption of regenerative agriculture if those types of financing mechanisms were scaled.

SPEAKER_01 44:21

Yeah, we discussed that actually, I think, in the interview with them as well in solar and especially the lease markets and the finance markets on home solar or company solar just exploded solar around the world because the technology made sense and the application needed to be financed and it was a very stable or is a very stable return. And that means it's a finance question. It's no longer. And of course, with trees, it's slightly different because there are other risks. But the same, I mean, they need maintenance and they need, it's a similar question, not exactly the same, but something that finance can enable sort of time travel and get a lot of long-term interesting assets literally in the ground.

SPEAKER_00 44:58

That's right.

SPEAKER_01 44:59

So it's something that we need a lot more of.

SPEAKER_00 45:02

Now, if you combine that with what's happening in the decentralized finance space in the blockchain, you know, what's called DeFi in blockchain, where there's a huge amount of activity and money being made right now in things moving around. You move away from the centralized paper-based contracts version of all that. You move into a democratized and decentralized ability to have anyone participate, whether they have a billion dollars or$10. And now you have a system where you can create incentives for investors and give them the liquidity to exit their position at any time while taking in those fiat dollars, transferring them into tokens, giving the fiat to the landowners so they can actually implement the regeneration And we're off to some really incredible potential.

SPEAKER_01 45:45

Yeah, I think it's often that liquidity and because if you invest traditionally in trees, it's going to take a while before you can have any kind of even partly exit or partly your money is blocked for and locked for a long time, which means transaction fees are high, which means many people won't. It's very simple. They don't even have access to it, let alone if they could, they wouldn't for very good reasons. And making that much more liquid literally would be very, very, very interesting. It's a huge, it's something we need to explore actually more on the podcast to dive deeper into that. So be conscious of your time. And it's a question I always like to ask. We take away your fun. I'm very sorry. But you do have a magic wand. So you can change one thing in the egg and food space or generally, but let's say food and egg for the better. Only one. You cannot wish for more wishes. It's not Aladdin. What would you do?

SPEAKER_00 46:31

Well, I'm going to go back to one of the first things we talked about, which is the fact that one of the things that deeply drives me is human happiness. I want human beings to be deeply fulfilled. Oftentimes, I look around our world and see the amount of depression and refugees and war. It's so sad for me to see the state we're in. I really think that we could be so much more creative and be really thriving on this planet so much more. If I could use my magic wand for one thing, I would plant a seed in everyone about how wonderful it is to engage with ecological systems. Those ecological systems right outside their back door and start cultivating a little garden. Plant a little apple tree and prune that apple tree into a beautiful little producer for your family. And that connection to the soil and to the living systems will instigate in those people a desire to have more of that and a recognition that good food is something of real value and that our farmers are as important to us as our doctors and our lawyers in our society. And we should be holding them up and appreciating them in the same way. So that's what I want for people is to have that in their heart, intrinsic connection with natural systems.

SPEAKER_01 47:50

I think it's a perfect way to end this interview. Thank you, Christian, so much for your time, for sharing in your journey. And let's make sure it's not another four years before I check in again with Regen network because a lot is happening and a lot is going to happen over the next 12 months, 24 months, 36 months, etc.

SPEAKER_00 48:06

Yeah, great. Thanks a lot, Kun. It's been a pleasure.

SPEAKER_01 48:10

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