99 Sam Schiller on why 100 dollars per tonne of CO2e stored is key to kick start regen ag and how to get there

Soil carbon models greatly underestimate the potential of regenerative agriculture. We discussed about it with Sam Schiller, founder and CEO of Carbon Yield.

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Carbon Yield helps farmers access new revenue streams in the carbon markets. How can 100 dollars per tonne of CO2e stored become the key to kick start regenerative agriculture? How can we get there? These are the exciting questions we asked to Sam Schiller.

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Transcript

SPEAKER_01: 0:00

Why we should pay at least$100 a ton of carbon stored by farmers in their soil and how our guest of today is planning to make that possible. Plus why current soil carbon models greatly underestimate the potential of regen ag and what to do about it. It's time to update the science and start paying, some people might say, a crazy amount for every ton they store.

UNKNOWN: 0:20

Music

SPEAKER_01: 0:21

Welcome to another episode of investors, big and small, and consumers start paying much more attention to the dirt slash soil underneath our feet. 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 investing region egg or find the link below. Thank you. Welcome to another episode today with Sam Schiller, founder and CEO of Carbon Yield. They help farmers access new revenue streams in the carbon markets and much more. Welcome, Sam.

SPEAKER_00: 1:34

Thanks so much. Great to be here.

SPEAKER_01: 1:36

So as always, the personal question, why did you end up working in region X soil and basically going deep, pun intended, on the carbon markets, soil carbon and everything that comes around to that? Sure.

SPEAKER_00: 1:50

Well, the 10 years prior to starting Carbon Yield, I spent collaborating in rural communities on environmental projects and often found myself forming deep partnerships with farmers and rural landowners who were often deeply skeptical that environmental markets would actually deliver them much value, oftentimes for a really great reason. And so I developed wind energy projects and had to really figure out how to cast environmental opportunities and wind energy as another crop and looking at it relative to other opportunities on the landscape. I developed projects, carbon offset projects in coal mine methane sector where we looked at landowners that were living on top of coal mines and figuring out how to handle some of the pollution that came from those mines and to deliver value back to those landowners for handling that pollution. And similarly, in the refrigeration industry, we developed projects that destroyed CFC refrigerants, basically the most egregious substances we've ever produced in terms of their climate impact, and figured out how carbon markets could add more value to a refrigerant business than kind of business as usual. So I've always found myself in these kind of translate roles of looking at market opportunities and being very mission focused on creating climate impact, but showing up on the ground, figuring out what people need, and really trying to make those markets work for folks. And so I spent about 10 years building great company and scaling that company. And my wife was at the time studying abroad in London. And so I was shuffling back and forth looking for the next project ahead of me and Tradewater, my former company was able to continue growing without me. So I got a chance to step back and be a house husband and really think about where else could I have an impact? Where did my experiences in rural communities, where could that be beneficial? Where were there opportunities that weren't happening that held really great climate potential? And so you can imagine me cooking recipes in a cookbook, listening to podcasts like this and others riding my bike on the wrong side of the street in London and thinking about where was there an opportunity that where this kind of translator role could be really useful, where carbon markets might be able to enable massive climate action And I soon really stumbled on soil as this really unique opportunity. I often say that if you told some venture capitalist that there was this new technology that used microbes and used fungi and leveraged solar power to create edible food to potentially sequester a quarter to a half of our annual emissions and to make us much more resilient and healthy, it would attract billions and billions of dollars. But the moment you say it actually already exists, we don't have to invent a new technology. It's soil. The checkbook, you know, closes. So, you know, soil is I've always had this kind of bias towards existing technologies. I think we have a lot of the skills that we need and that you learn a lot through deploying. They're actually trying to make something happen on the ground and thought soil was a really unique opportunity. And frankly, I feel like the boundaries between urban and rural communities, particularly in the United States, represent one of the most fundamental boundaries and differences in our country. And it's a political difference. divide. It is a cultural divide. And we need to be able to traverse it. And we need to figure out how to collaborate together and to create a meaningful value because farmers in this country and all over the world are really struggling. And if you can create deeper connections, I think, between consumers, between urban customers and rural food producers, I think you can solve a lot of problems simultaneously. So I started Carbon Yield kind of while I was abroad in London. I did some work with an organic food distributor, Pipeline Food. So I know it's been on the podcast to look at whether carbon markets could be beneficial to farmers, particularly farmers transitioning to organic. And the basis of this was that the only durable environmental compensation that farmers have been able to get are from the organic label, that you can go from being an operation that's losing money. Half of farms since 2013 in this country have lost money every year since 2013. And after a three-year transition, you can become an organic farm and make a substantial amount of money, make$200 or$300 in profit per acre per year. But the transition is really difficult as owner as it costs$400 upfront per acre to be able to make that transition. And we want to figure out, is there a way that carbon markets could actually subsidize that transition, whether that's unlocking transition loans and finance, or whether that is actually providing revenue, which I think often is even more meaningful to farmers than taking on more debt. So did some consulting work pipeline to kind of think that through and realize that there are may actually be a business here and form some partnerships and some project development activities that kind of have furthered that goal of really making carbon markets and carbon revenue a more meaningful value stream that can help farmers transition to a sustaining operation to be able to be prosperous into the future, to be able to stay on the land, to leave a legacy of environmental stewardship on their land, and ultimately to continue feeding us a very healthy food on healthy soil.

SPEAKER_01: 6:49

That's a very interesting, interesting journey. So Carbon Yield, we connected. I think a year ago or a bit less than a year ago. And a lot has happened in, first of all, the carbon markets. A lot has happened in region ag and food. But can you describe, now we're talking the end of November 2020, like where you're at with carbon yield? What are you busy with? What are, after the consultancy you have done with pipeline food, what are you busy with at the moment in terms of carbon markets for region ag and food?

SPEAKER_00: 7:19

One of our primary partnerships right now is with Hudson Carbon, which is a research institution that's situated on a 2000 acre regenerative organic farm in the Hudson Valley of New York. And they have, in my mind, probably the most rigorous of substantial research operation on, you know, examining a farm that's gone fully through the transition whole hog, not field by field, not bit by bit, test plot by test plot. But they said, we're going to take a conventional corn, soy, you know, chemical rotation and turn it into a super regenerative cover cropping, perennials, animal integration, cover cropping. compost, the ground cover, all of the check marks, and more. They do key line design. They really have implemented kind of whole hog this incredible operation. And then they've taken soil cores and eddy flux tower measurements and biomass measurements and done the really comprehensive research. What's the tower measurement? I didn't get that part. Eddy flux covariance towers. So these measure greenhouse gas flux. They look at carbon, they look at methane and nitrogen, and they're able to see, you know, minute by minute.

SPEAKER_01: 8:26

Basically how it's breathing. Is it a sort of, just to make it visual because we're on audio, how should I imagine that research happening or that piece happening?

SPEAKER_00: 8:34

It's, you know, in the middle of a field, they have a little bit of the crop sort of down. So there's enough space for this, probably like six foot high piece of instrumentation. It's got a weather station on it. So we can tell that there's precipitation, temperature, and it's just a little sensor with a little solar powered pack giving it power every day. And yeah, it's collecting all this data. And this is not the kind of data that most farmers would be able to collect on their own. I mean, these are$60,000,$70,000 pieces of equipment. This is really for the benefit of soil science and hopefully to carbon markets. And I think one of our key insights from working in the sector is that some of the science has not made it into carbon market infrastructure. What do you mean by that? So I think that because a lot of folks in carbon markets have wanted to get going quickly. They've wanted to use models. They've wanted to use tools that were widely available. But some of those use 30-year-old science and use data sets that are not really comparable to what is going on in regenerative agriculture.

SPEAKER_01: 9:39

So you're saying like this farm that is definitely on the cutting edge or applying all approaches you can possibly imagine in the upper Hudson Valley is potentially a better data set with all the science around it because they have the budget to buy these towers and to do all of this will give you a much more accurate potential, in this case of carbon, potentially methane, but let's say carbon, than a lot of the models a lot of people have used, like Comet, like others that are underpinning a lot of these markets. Like we need an update of the data because some of this stuff is 30 years old. That's correct. Which a lot of the regenerative approaches weren't scaled yet or weren't at least not mixed together as we see now in this case of Hudson Carbon.

SPEAKER_00: 10:17

Correct. And, you know, it's not to say that Comet is a bad model because I think it does a really good job of modeling a lot of conventional... approaches to agriculture. But a lot of the input data for Comet only reaches 10 centimeters into the ground. And so that works when you're looking at chemical applications and looking at immature root systems from corn and soy conventional operations. But when you're a regenerative farm and you might be planning a few years of perennials that are driving root systems a meter into the ground, that you're missing 10x of the soil profile where changes are happening. And in fact, what's really interesting is that through this research, they've found that a lot of biological activity is happening in those deeper layers and it's below the reach of tillage implements. So often the criticism of soil carbon and one of the criticisms of carbon projects in agriculture is that there's a permanence challenge. You know, if you till up the ground, you're losing all the biological benefit that you've created. But what they found is that a lot of that biological activity that penetrated below the reach of tillage implements has been increasing faster than some of the gains in shallower layers. And that's really interesting and potentially game-changing in the sector because the rates that they're calculating on their farms in some cases are three, four, five times of Comet Farm and others.

SPEAKER_01: 11:32

So what are the rates we're talking about just to get an understanding in terms of what is a ton per hectare or ton per acre, obviously? And what is the difference? I mean, three to five X is a lot. What are they seeing?

SPEAKER_00: 11:44

Farm-wide, they've seen a rate of, I believe it is seven tons per acre on their farm. They have some fields that are... Per year. Yeah, per year. So over the five years of their research project. Some fields have had a higher rate, have had 10, 11 tons per acre. Obviously, some of this has a confidence interval that you should apply and this should be replicated elsewhere. This is not published yet, but there's really good evidence relative to Comet, which says that they might, in some fields, be losing carbon, might have half a ton per acre. They're getting quite a more substantial impact and result. And Comet is what is used by most carbon markets to compensate farmers for the benefits that they're creating. And so if this is the case for most regenerative farms that they're getting undercompensated for the benefits they're creating, it's no wonder that carbon markets have not really enticed widespread change. And our goal as project developers... Yeah, so what are you doing about it? Now you know.

SPEAKER_01: 12:39

You cannot unknow. What's your plan of action to either update, I mean, or maybe all of it above, but update, comment, launch other versions of it, or what's the action plan to get farmers that are underpaid for the carbon they're storing, get them paid. Yeah.

SPEAKER_00: 13:45

So we have a couple ideas on this. One of which is we're developing a project through Nori. And Nori has created this really great invitation to farmers that have...

SPEAKER_01: 13:55

Yeah, we interviewed Paul a while back. I will link the interview below in the show notes.

SPEAKER_00: 14:00

Oh, fabulous. So they have said, we also agree that the models are imprecise and we're using what's available to us. But if farmers have better data sets, they're welcome to contribute them. And that can factor into the carbon credit quantification for a project. So that seemed like a perfect fit for us. And we've had a great partnership with Nori. And Nori is a customer of Soilmetrics, which is the private firm that helps Comet get into private context. If a carbon market wants to use Comet, Soilmetrics is the firm that's helping to license that. And we've had fabulous conversations with the soil scientists there that are just as eager to get their hands on some of this data and to learn about why the model might not be capturing what's going on. of regenerative agriculture. And so we've been just putting scientists in the same room and comparing Excel data files and, you know, want to be able to make sure that this research is beneficial, not just to the first project we're doing, but to modeling writ large. And we have a similar relationship with DNDC, which is a model developed by Bill Salas. And we see this as a benefit to all carbon marketplaces. We're not trying to invent our own sort of registry and model. We think that this should be open source and available to everyone and replicate And so as we've been recruiting other farmers to join some of our project development efforts, we've been focusing on folks that also have access to research data sets. So we have a great partnership with some researchers at the University of Michigan. We have partnerships with other growers that are working with Rodale to study their rotations. And we want to create this kind of return on science, this return on science investment, where the projects can benefit from their investment in these soil cores. And really, all of us can benefit from better agriculture. accounting for this data going forward in these models. We think this is also probably should be a federal priority in terms of increasing the number of soil sampling sites, making sure that they also account for some of these deep carbon impacts. But we think in the short term, we can start to collect this data to defray some of those costs of collecting soil cores by returning more value in terms of revenue, and eventually, hopefully, to have better process-based models so that farms that can't afford to do that upfront can submit their management data. And if They're implementing these kind of management practices that generate changes lower in the soil profile that they can benefit from it.

SPEAKER_01: 16:18

You know that probably they stored X amount of, yeah, because you have the deeper data. And so the revenue streams you touched upon, which is a great bridge, how are you helping to get more of that potential revenue if they stored so much more carbon because of the practices and approaches they used? How are you helping to get more of that money to the farm?

SPEAKER_00: 16:37

We believe that carbon in general is tremendously underpriced right now. And while long-term we hope to be able to improve process-based models and improve accounting for carbon, we think that the bigger impact that we can have is in increasing the price that farmers get for their carbon. And we think that carbon from agricultural projects is much more compelling of an offset than probably some of the projects that I used to develop in terms of preventing pollution at coal mines, landfill gas projects. I mean, I think a big mistake was looking at carbon and saying that this is a commodity, that this is something that is It's all the same. in activating climate action. And we think that farms have the potential to be much more transparent. You can actually see the changes on the ground. You can even visit the farm where it is. I think people are excited about connecting with their growers. And we want to create the kind of farmer's market experience of buying offsets and feeling like you are participating in this change-making process. So with our partners at Hudson Carbon, in addition to the research, we're launching a marketplace to market their carbon and to connect the carbon offsets that they've generated to specific parcels on their land. You can zoom in and pick your parcels. You can see drone footage. You can see the changes of land over time. You can see some of the data that they've collected. We make it a really interactive, immersive experience. Whereas I think a lot of carbon purchases are to far-flung places, to projects that are hard to understand, and it's hard to see the inherent environmental impacts that are being created. So we're hoping to launch the Hudson Carbon Marketplace either later this year or early next year to market the credits from this first 2,000 acre project. And we're also looking to integrate with brands in a more compelling way, in a way that actually discovers a higher price. And so I think oftentimes, again, looking at the kind of commodity model of marketing carbon offsets, folks try to bundle as many credits together as they can generate and get whatever price they could get for that. And we certainly did that in our work too. We might have 100,000 tons from our refrigerant work and you try and get the highest price for that, but it's not going to be there are only certain customers that have enough demand to buy 100,000 tons of credits. And they're going to want to, they're going to be very price sensitive. But there are a lot of products out there.

SPEAKER_01: 19:23

Because it's 100,000. Yeah, it's a lot.

SPEAKER_00: 19:25

It's 100,000 tons. That's a big check to write. But we have found that there are some emitters that have a much lower carbon footprint. You know, so we're partnering with Light Phone, which is a kind of an alternative cell phone company. They have a really great ethos about kind of disconnecting from technology. and just having a phone that is a phone, not one that does everything else that distracts us. And hopefully that links us more closely to our surroundings and gives us a better connection to place.

SPEAKER_01: 19:52

And they obviously are a bit more likely to be interested in nature, farming, agriculture, biodiversity, and everything that comes around. A hundred percent.

SPEAKER_00: 20:03

And so we said, let's look at our projects as an opportunity to connect your purchases, to create a climate positive purchase and connect your consumer to this really exceptional project. And we said we wanted to price carbon at a rate that reflected the actual cost of carbon, but also really reflected the opportunities that carbon creates for farmers. So what would it actually take for a farmer to transition to a system that prioritized carbon sequestration? What would be massive enough to really say, okay, actually, I should fundamentally change my operation. So we set this astronomical price of$100 per ton, which is 10x what a lot of markets are offering farmers. But when we translated the into how much it costs per phone that they were selling to make a product climate positive, the consumer was only$3. So it's like 60 kilograms per phone. And Light Phone said, we'll take half of that and we'll do the other half of the carbon cost to offer to our customers.

SPEAKER_01: 20:58

On a phone that costs...

SPEAKER_00: 21:00

A few hundred bucks, yeah.

SPEAKER_01: 21:01

Yeah, the$3 is nothing, almost nothing. Exactly.

SPEAKER_00: 21:06

But translating that back to what it means for a farmer in terms of revenue. I mean, you can imagine if you really were able to get... seven tons per acre at$100 per ton, that's massively motivating. Even if you're able to get a fraction of that per acre, that's

SPEAKER_01: 21:19

a hugely game-changing kind of calculation. Even if you just get the common outcome, yeah, it's still a lot.

SPEAKER_00: 21:25

Yeah, and we don't want to overpromise and we don't know how big that market will be and folks that will want to pay at that level. But we think as e-commerce becomes more dominant in our lives, as we feel a lot more sensitive about our consumption and many of us are stuck at home and really the only way we can consume is to have things shipped to us in boxes and to have this kind of environmental impact. And as we have kind of unsatisfying international and federal responses to climate change, we think this is an incredibly tangible way.

SPEAKER_01: 21:54

There must be a market out there for at least the beginning. And then, I mean, I hate to bring in the Tesla model. You begin with the high-end consumers or the high-end buyers or the high-end and slowly work your way down as science picks up, as more and more farmers, as more and more tools come available and it becomes cheaper and maybe 100 tons, also 50 is enough to push some or 60 or 70, or maybe the market picks up and we are implementing the Swedish model where I think there are 150 now, tons, and it just keeps rising. But if you can make it work with that for a while, you have a nice platform to build from there.

SPEAKER_00: 22:29

Exactly. And so we're launching this platform and giving growers some say in how we market the credits too. So if you have cash flow needs, you're moving through the transition, you need to sell carbon at more of a high volume to lower strike price, we can help broker that. We have great relationships with other brands and with other offtakers that want to buy carbon credits. But for those that want to take a risk, I mean, it's very much like how farmers market their grains, particularly regenerative farmers. If you have barley or malt or rye that could be potentially food grade, you might be able to market that to a brewer and get a significant premium for that. But sometimes it doesn't work out or sometimes you just need to send it for feed because you need cash to cover the price of seeds. We want to be responsive And frankly, I think that carbon markets have just expected that providing anything to farmers, you know, if it's$10, if it's$20 per acre, that will make this massive change. And it really fails to recognize the unique challenges of being a grower and how do you make these long-term decisions? You know, do you really want to invest the time in the paperwork and just the headache of being a part of a carbon market if the revenue is uncertain? So we really want to pride ourselves in being responsive developers, really analyzing where is Where can we maximize value for the risk tolerance, the risk appetite of the performer?

SPEAKER_01: 23:46

And looking at that$100 a ton, what do you feel or see or research the potential market now? Like, what do you feel? Okay, we don't know how big it's going to be in a couple of years, but how many acres can you touch in like a year, two years, three years? What do you feel comfortable in selling in terms of amount of tons for that price, which obviously sounds extremely high for many people listening?

SPEAKER_00: 24:08

Yeah, yeah. Well, we are looking to expand to another$100 acres over the next two years. And, you know, we are trying to be responsible and not say like, this is a broadcast solution yet. Over promise. Yeah. And I think that because a lot of folks are, have a high appetite for scale, you know, you might start off with 5 million acres and try and make it work. And so we're trying to move around gradually both because we want to move the science along, which we think takes time, but also so we can build these great brand partnerships. But we've seen projections that the estimated carbon market by 2050 is a$200 billion market. Certainly, Europe has taken a much bigger role in this in terms of creating carbon positive, carbon neutral companies. But we see even in the US, certainly with folks like Microsoft, that have said they want to offset the entire history of their company's emissions.

SPEAKER_01: 24:56

All their electricity they ever use and you booting up windows again is going to be,

SPEAKER_00: 25:00

yeah. Yeah.

SPEAKER_01: 25:01

Which is going to be interesting. Sure. That's a big amount.

SPEAKER_00: 25:03

And I'd love to see companies say we want to do 3x our historic impact, particularly if it's not changing the cost structure of their good. And I think it would be great if in the agricultural sector, we could sell grains for more money if they had these climate benefits. And we get this sort of imperfect premium from organic, which is not quite the same thing as the soil health benefits we're talking about. But there's really no other label that has emerged that says this is a climate positive benefit. And I think CPGs probably rightly are saying we don't want to take the risk of trying to increase our prices and get slammed in a really competitive market. So we've said, you know, are there other markets where... there is this real openness and this real excitement to create a climate positive product. And frankly, I think people are more often buying based on their values and abandoning brands that don't have those values.

SPEAKER_01: 25:52

It seems to be, I mean, companies like Microsoft, Stripe, Shopify have made very big commitments or very large commitments compared to sometimes their size. I mean, Stripe and Shopify, obviously Shopify is quite large. If you compare all the marketplaces on it, all the shops on it, Microsoft obviously is enormous. Apple has said similar things a number of cosmetic brands have said a lot of things and a number of very big food companies actually Danone and Nestle and some others I think Cargill just came out with another 10 million acre promise etc and Walmart want to become a regenerative company and so there's a lot of buzz now and now it's the question okay are you going to buy the cheapest offsets possible like EasyJet did in Europe making all the flights carbon neutral but buying I think 2 euros a ton or something or 2.10 like really really really low still better than nothing and still putting pressure on everybody else but let's raise the bar and let's see okay there obviously it would be a huge impact because it's such a carbon intensive industry but for many others it's really a margin somewhere like one two three percent that in terms of brand awareness in terms of marketing this space if you do it well could pay it back many many times over if you're one of the first which i think is a very exciting space we're in now yeah definitely

SPEAKER_00: 27:08

So I think it will be interesting to see as this becomes kind of a standard expectation of companies. Do they invest their own resources? Do they partner with consumers to make this work? Do they find compelling ways to make this part of their story and kind of integral to the way that their strategy as a company? Or does it become ancillary in a sort of commodity market? And I think that this is going to be multi, multi-billion dollar investment over the next couple of decades. And for me, I think there's this huge attraction to direct air capture or to other sort of industrial forms of carbon removal, which have a cost structure that needs more than a hundred dollars per ton to even start to become commercially viable. Yeah. But there you have Moore's law and

SPEAKER_01: 27:49

it's all going to be fine in a few years. Exactly. Yeah. But if you pitch it, like you said before, like to a VC, like we have this amazing technology that uses microbes and can capture and grows food all at the same time. And like, it's really, it's a, I tech is already there. And it's about scaling. It's about the tools. I'm not saying it's done and we just pump a lot of money in it and we're okay, but it's definitely much more approachable or much more closer to us than a container that sucks up CO2, which is great, but it requires a lot of resources. And I'm not saying even the money, I'm mainly saying the brainpower of people working on that, that we need actually in region ag and food. We need more, more people working on this in region ag and food, more scientists doing the research you mentioned, because these pieces are there. Like the solar panels are there because they're They're the plants. The battery is the soil and it's already there, has been time tested for the last few billion years. It's time we build some other tools and speed it up or take the 2 billion hectares of degraded land and start doing the same because the tools are there. It's about implementing and scaling it. And maybe it's less sexy than inventing a new genetically modified plant to absorb more solar or doing some vertical farming where I saw some interesting stats on the sense or nonsense of that. But this is about implementing scale And very much more tricky questions and okay, how do we implement this on 100,000 farms? How do you work with 100,000 farmers on this? How do we build markets around it on the product side, like you mentioned, like how do we compensate farmers for the nutrient density? How do we compensate farmers for the carbon for the water? And that's, I think, very exciting, but we need more people that focus on that and build companies because that's, at the end, we cannot all go and build direct carbon capture stuff and be very excited about it or electric airplanes, which are super important, but there's some other things to focus on. Sorry for the rant.

SPEAKER_00: 29:44

No, no, I mean, totally aligned on it, you know, and I think that to me, working in carbon offsets and sort of sectors that, you know, are on the decline and we're kind of a marginal part of our emissions going forward. To me, I wanted to work at, like, what are our fundamental economic activities? You know, agriculture is a massive part of our economies, a huge part of our future and food resilience. Is there a way to integrate these kind of practices into a massive industry like this? And that's a big part of the why, is to say, like, you know, can we make this one of the most compelling climate solutions to get this kind of investment? And in the process, can we attract a lot more people to practice regenerative agriculture, to moving back to rural communities, allowing communities to really thrive and become more resilient because of that investment. To me, to have just a project that sucks air down, it doesn't value that carbon is really this potential asset. It says, we just want to be rid of it. We want some technical solution to make us feel less guilty about what we've emitted. As opposed to recognizing that these are natural systems that we can restore balance to. And I think that this kind of investment opportunity makes that possible. It makes it really exciting to eat and to consume again, instead of to make it feel very good.

SPEAKER_01: 30:56

Which gets you back to the kitchen when you were a dad at home, cooking the ingredients and thinking about your next steps. I love putting the works of our guests to the ITN framework, which is importance, tractability and neglectiveness. And tractability in this case is not traceability, but how solvable is the problem, which we touched upon. There's a lot happening. There's a lot happening on measurement. Importance we hardly have to cover in this podcast because I hope everyone who is listening to this understands the importance of completely, I wouldn't say reinventing agriculture, but land use and sea use as well. I hope to do a series next year on regenerative aquaculture, which is going to be very interesting. But neglecting this is a thorny one. Are there many other people working on how to get the carbon price up basically to a level that is interesting for farmers? Do you see other people moving in that space? Are you very lonely? What's happening in the area of how to get 100 or maybe more Yeah, I

SPEAKER_00: 31:58

think that it is a bit of a white space and a bit neglected. to grow quite as quickly. I think that that allows us to be a little bit more patient with the science and to develop something that we think works for the premium side of the market first and really rewards best-in-class growers first, but in a way that hopefully has these kind of benefits that accrue to the rest of the sector. I don't think that everyone needs to be a regenerative organic farm and to go through the certification costs of that and to go through the challenges of it, but we want to make sure that it really works for our target market first and elicit some of these high prices that maybe shift the rest of the carbon conversation. And frankly, when you have higher carbon prices, it doesn't just mean that you're spending a lot on carbon. It also means that you might be thinking differently about what emissions you do have. And so hopefully it has a consequence in emitting industries too, to say like, oh, these prices are what's emerging. That's what your customers are willing to pay. We should also curtail, we should figure out, innovate and make those investments. I think the investment case is much stronger once you do that.

SPEAKER_01: 33:54

Yeah. Once your internal rate of carbon is high, you start, I know Microsoft, I I don't remember the internal rate they have, but... I think it was 15. Yeah, they look at projects with an internal rate, which already makes how you invest in data centers, et cetera, very different. I mean, 15, like you said, is absolutely not enough, but it is a start because it's more than zero. And you look at projects differently when you have an internal carbon rate. And if you're actually paying for that carbon, hundreds, suddenly the whole, hopefully the whole discussion internally starts shifting. Absolutely.

SPEAKER_00: 34:23

So I think that this is, I mean, while carbon markets, I think, have more... more excitement than ever, I think, particularly in ag. And there's a lot more activity, a lot more interest, even from big Fortune 500 companies. I think the desire to get going quickly, and I get it, there's a lot of urgency and we need to implement solutions quickly, I think it has meant that people have ignored some of these fundamental issues, both on the pricing side and on the quantity of credits and really counting precisely and more accurately and hopefully more substantially the benefits of regenerative approaches. So we think this is a kind of a unique contribution to the movement.

SPEAKER_01: 35:00

And what do you see or think smart investors should look out for? Like, let's imagine there's a room of smart impact investors, a full theater, obviously social distancing or zooming in, but let's imagine it's a virtual theater. So we're all there and we're all safe. Listening to this and seeing you on stage, they get it. They are deep into soil, read the books, listened to the podcast, saw the videos, visited the farms. What should they look out for when they want to make their first investments? Obviously without giving investment advice, but what would be some places you would start if you would be a new investor that has, let's say, done the homework to get started?

SPEAKER_00: 35:35

Yeah, I would take the time to think about what it would really take for a farmer to make a big fundamental transition. And

SPEAKER_01: 35:41

when you say that, do you mean go and sit down and spend time with a farmer or think about it theoretically? How do I figure that out from a city?

SPEAKER_00: 35:49

I mean, I think it's hard to have the perspective of a farmer if you don't talk to them, you know, and I certainly spend a lot of time talking to folks that were part of old wind projects and talking to farmer friends of mine and certainly speaking to folks. I'm on the board of the Delta Institute in Chicago, and they do a lot of incredible work in rural communities and getting perspectives of their staff and farmers. I think taking that time is critical to be able to design something that doesn't just look good on a spreadsheet, but actually resonates with what growers need. And so to me, I think that the best investments are in improving the kind of revenue position of farmers through that transition. So carbon is one of the options that they might have. Another is looking at the full rotation, looking at cover crops and alfalfa and saying, are there ways we can improve that product? I think Oatly was such an interesting new product, the new oat milk brand, because there's a cover crop that can make a really useful, great consumer product. Historically, Iowa and Nebraska farmers integrated quite a bit of oats into the rotation as our diet changed less so. If there were similar products that looked at rye and looked at barley and looked at clover and said hey farmers we'll give you a really nice price um for

SPEAKER_01: 37:04

for also if it's not the high-end food grade when it can go to a brewer but like when it's just below that or a bit below then you have an interesting product because you're not you're competing with feed industry which is a lot easier than than with the brewing industry exactly

SPEAKER_00: 37:17

so i think those kinds of investments are really interesting and i take a perspective that if there is a an investment opportunity that's really attractive and creates these kind of machine returns, it's going to have no trouble attracting capital. And I do think that there is a need for some of the concessionary capital to help bake out some of the risk in these initial ideas so that you can have something that flows, you know, billions of dollars of capital behind it. And that's been, you know, the kind of guiding light between a lot of our work is where we feel like we're investing our time at sort of a concessionary rate to make sure that these opportunities happen. You know, I think figuring out ways to get people back onto the land, I mean, I think regenerative approaches are more labor intensive, need a slightly different skill set potentially, and require just more of us to spend time in rural communities. And I think there's a real opportunity in this transition. Which is

SPEAKER_01: 38:09

a good thing.

SPEAKER_00: 38:09

Which is a great thing. And I think there's a real opportunity to think about reparative approaches in agriculture and saying, you know, there have been historic land injustice in indigenous communities and communities of color. And I think there's a real appetite to be able to return to the land in a way that creates a reparative impact and allows people to feel like there, creating a legacy on the land. And so if there are ways to use investors' balance sheets to ensure equipment loans, to potentially own land and lease it at lower rates to farmers, new farmers, to really think intentionally about coordinating investments around grain infrastructure so that farmers can be successful if they're adopting these practices, introducing new grains into the rotation, and figuring out ways to allow people to return to agriculture that want to do so and giving them the tools so that they're successful and hopefully not out to leverage and in debt and taking on more risk than they deserve to. I think those are really great potential deployments of capital.

SPEAKER_01: 39:04

Yeah, we had Chris Newman on the show of Sylvan Aqua Farms who are building an incredibly interesting collective of farmers basically taking the regen approach and really building quite a massive movement. I wouldn't be surprised if in a few years we look back and they raised a significant amount of money and put it to work in regenerating hundreds of thousands of hectares or acres in this case. That actually gets us it's a nice bridge to what if you would be in charge of a billion dollars investment portfolio you can invest it the way you like but invest it not grant it but it could be very long term very low interest rate could be any mix or form you would like what would you prioritize with this one billion dollar investment portfolio yeah

SPEAKER_00: 39:46

well I mean obviously regenerative agriculture in a broad sense

SPEAKER_01: 39:50

but I thought you were going to say VC and direct capture but no

SPEAKER_00: 39:54

oh

SPEAKER_01: 39:55

yeah

SPEAKER_00: 39:56

well I do think these reparative approaches are really important and could use an influx of capital. I think in order to make some of those investments even more attractive and bake out some of the risk, I do think that there should be more investment in the science and the mechanics of carbon projects. And I think the more that you can bake in compelling revenue streams for farmers that are taking this leap, whether they're new farmers or whether they're established farmers, I think the better. And so one of the gaps in terms of registering farmers into carbon markets. It's just the data issues of having to collect management data, sort of go back in time if there are gaps in that data and fill in some of those gaps. And we've been spending a lot of time looking at remote sensing technologies and looking at sensors, looking at other ways to be able to capture that information that don't require a huge headache from farmers. And, you know, at current carbon prices, I think that the biggest barrier to farmers participating in carbon market is they just don't want the headache. They think their time is better spent focusing on their operation. And probably you If you get a few dollars a

SPEAKER_01: 40:58

ton, it is.

SPEAKER_00: 41:00

Yeah, if you can get it up a little bit, if you can aggregate projects more effectively, which is something we're working on to spread some of the verification costs, all of that is really beneficial. But we're part of a coalition called the Climate Trace Coalition, which is a group started by Al Gore, actually, looking at remote sensing technologies and across different industries and figuring out are there independent ways to measure emissions that don't require self-reporting, which is fundamentally what we're talking about in agriculture is self-reporting of management practices and running it through some complicated model. And it would be really, it would be better to be able to have a direct way to measure that. And so we're working on that as coalition members with Hudson Park and also as a partner. So I think that's a really key area. And, you know, and if you're investing in this soil core research and really digging literally deeper to understand the benefits of certain management systems, I think you can calibrate those systems, those measurement approaches, those remote sensing approaches is much better. So I would love to invest in many more research sites that look both at conventional fields that look at maybe even untouched landscapes to understand the kind of carrying capacity of carbon and to look at really outstanding regenerative systems and be able to invite anyone that has a new sensor or has a new technology to be able to test it against those kind of direct measurements, which are the most accurate ways to understand, most accurate, most expensive ways to

SPEAKER_01: 42:25

estimate carbon sequestration. Of course, of course. It's always the case. And if you had a magic wand and you could change one thing overnight in the ag and food space, what would that be?

SPEAKER_00: 42:35

I think that there is a real opportunity for the public sector to put their resources behind these benefits. There's so many externalized benefits, not just in terms of carbon sequestration and climate mitigation, but also in resilience to extreme weather and to securing our food systems. And I think there's a real public investment opportunity. I think one of the great analogies that has worked for the renewable energy sector is the production tax credit, that there was this incentive that the Treasury Department allowed for that said for every kilowatt hour of renewable energy that you produced, you could collect a tax credit that would motivate other investors to get involved in the project and claim the benefits of those tax credits, and it flowed an enormous amount of capital. It would be really great if there was a similar incentive in agriculture, and it wouldn't necessarily have to be instead of a carbon credit. It could say, same way that a renewable energy project can claim both renewable energy credits and these production tax credits, you could have a carbon incentive from the government to actually put equipment in place, put a research operation to implement these practices, and then also to market carbon credits on top of that. And I don't think it would necessarily create additionality issues. And it would just jumpstart the market and it would create a whole lot more trust among growers to take this kind of plunge. And we already offer similar incentives to direct air capture facilities at$35 a ton. So you could potentially have an enormous benefit in directing those programs towards agriculture instead of these sort of industrial projects. That would be a big one. I think it would be really fun to think about government procurement programs. And we procure a lot of food for school lunches, for hospital systems, prisons. And I do think that food, if you have higher quality grains in your food, You're conveying nutritional benefits. If you could direct some of those programs through GSA or what have you to start thinking about putting together off-taker agreements with growers or with grain elevators and saying, we want these specific kinds of grains and really putting the word out to growers that if you commit to growing them for your rotation, you're going to have some price certainty to be able to do it.

SPEAKER_01: 44:48

We'll buy. No, it's very, I mean, the food one is fascinating. A previous guest on the show, Pierre Ville, which I will link below as well. They are starting in France, their first, I think it's the first research trial in what is the impact of diet on COVID patients, specifically mix of omega-3 and 6 ratios where they did already a lot of research and they see the impact on inflammatory diseases and also on patients at risk or people at risk of COVID, so elderly with certain type. And he said the surprising thing is, is the amount of money thrown at vaccines or the technical solution, the chemical solution, and not looking at the underlying or looking at the looking at this way less expensive solution of of diets of food food as medicine which or food as prevention in this case and partly maybe as medicine obviously it's not that we can go there immediately but there's a lot of research needed there to see what the impact is and he said honestly we were surprised we're the only one looking at this and starting to look at okay can we show because they've shown a lot of things like changing diet and within a month they could see a lot of changes in breast milk with breastfeeding they could see a lot of changes and just to In this case, I will link the interview below, but just changing the diet of the feed of the animals. So this is animal protein, changing the feed of the animal, and then the impact on the animal itself, obviously. But then actually the protein could be the milk, could be the meat, could be et cetera, et cetera, had a huge impact on us, the ones that were eating that protein. That was a month. They said, we believe we can see a lot in a lot of other diseases as well. And actually there's an enormous field in terms of diets, et cetera. And I heard somebody, one of the main investors in the space calling it, we're absolutely in the stone age. when it comes to nutrition agriculture and what we know in terms of of how that actually flows from healthy soils to healthy produce to healthy gut and healthy people but it's very exciting but very unvalued at the moment

SPEAKER_00: 46:38

yeah i think the idea of food as medicine prescribing food for different things makes a lot of sense i mean if you think about you know the majority of what we put into our bodies is you know food and liquid you

SPEAKER_01: 46:49

know it's funny that cosmetics is almost further ahead than food if you look at regenerative cosmetics brands that are really because it's such a big thing that you put on your skin but the food space is still very much in superfoods and some other things that are so specific and so taken out of context that it's we're doing we're trying to do more interviews on this space because it's such an important could be such an important consumer driver like if we finally can be able to show a lot of these things it could lead to hopefully first of all the high-end markets which could be the hospitals could be the people that really really really need better food and then slowly coming to more general public that maybe benefits but not tremendously from another food system. But let's start with the ones that really, really need it. And in this case, it's a lot of people in hospitals that absolutely need better food.

SPEAKER_00: 47:34

Well, I would be remiss also not to shout out on the cosmetic space and the therapeutic space. One of the partners in our group with Hudson Carbon is Hudson Hemp, which is a regenerative hemp operation. And they found that, I mean, they have fantastic CBD products and other cosmetic products. But what they found is that hemp is actually a really great way to, A, regenerate the land and and B, to potentially give growers the first experience with organic in that you can transition a pretty small acreage. You can transition four acres, 10 acres fields to hemp and get it certified. And there's a much better premium for organic hemp than conventional. Most buyers of hemp products and CBD products care about being organic and being natural. And it can be sort of a regenerative gateway crop.

SPEAKER_01: 48:22

A gateway drug. Yeah, like organic milk is for many new parents or I mean we need to start somewhere that's the I think also the summary of this interview we need to start somewhere with high prices of carbon and then work our way I wouldn't say down or up but through the value chain or through the value web to make sure it scales or broadens it and if people are willing to pay and there are there are because we have a global audience I mean there are people willing to pay and companies willing to insert this into their product because it does make a difference and it does make a difference in marketing and storytelling it's a start yeah

SPEAKER_00: 48:56

Yeah, I think that that's the real lesson is that I think we under invest always in the marketing and storytelling. And I think that this can be an incredibly compelling, immersive category of potential products and goods and investments. And I think because a lot of smart people are involved in it, they approach it from a very analytical place instead of an emotional place. And I think the idea of being able to transform places to transform our health, to transform our communities by making these kinds of investments is incredibly compelling. And we need we In our marketplace, we are making sure that there are profiles for each of the farmers. So you hear about their story, you see their faces, you see what they've had to go through to be able to get to this point where they can make these kind of meaningful benefits. And figuring out how to convey that within great products and kind of user-consumer experiences is so critical to making this mainstream.

SPEAKER_01: 49:47

I think it's a perfect ending of this interview. I want to thank you so much for your time, Sam. It's not going to be the last time I think we chat on this, and I wish you a lot of luck to launch the marketplace, hopefully end of this year, otherwise beginning of next year, and to see the first results of that. Absolutely. Thanks so much for having me. It's a pleasure. If you would like to learn more on how to put money to work in regenerative food and agriculture, find our video course on investinginregenerativeagriculture.com slash course. This course will teach you to understand the opportunities, to get to know the main players, to learn about the main trends and how to evaluate a new investment opportunity, like what kind of questions to ask. Find out more on investinginregenerativeagriculture.com slash course. If you found the Investing in Regenerative Agriculture and Food podcast valuable, there are a few simple ways you can use to support it. Number one, rate and review the podcast on your podcast app. That's the best way for other listeners to find the podcast and it only takes a few seconds. Number two, share this podcast on social media or email it to your friends and colleagues. Number three, if this podcast has been of value to you and if you have the means, please join Thank you so much and see you at the next podcast.