Decarbonization in Agriculture: Paving the Way for Net-Zero Emissions by 2050

The signatories of the Paris Climate Accord hope to limit average global temperature increases to between 1.5 to 2.0 C. degrees by 2050 in the decarbonization race to achieve net-zero carbon dioxide emissions. But if recent temperatures are any indication, we’re not off to a good start. The seven warmest years on record occurred from 2015 through 2021, according to the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information.

Fortunately, there are multiple ways to eventually achieve net zero emissions through decarbonization. Three proven methods include eliminating the use of carbon-emitting fossil fuels, reducing their use when elimination isn’t immediately possible, and removing carbon from the atmosphere with the help of carbon offset credits.

These are a few necessary answers if the world is to reach net-zero emissions by 2050.

What is Decarbonization?

Decarbonization is the reduction and eventual elimination of processes that produce and release carbon into the atmosphere and remove atmospheric carbon. Each component is essential to a future of net-zero emissions, but we’ll focus first on removal.

While scientists continue to work on ways to remove carbon from the atmosphere, they already know that the simple act of planting more trees may help slow global warming. Changing how we farm can also help, as practices that include reduced or no-tillage and green fertilizer can increase the amount of carbon the soil can store – its carbon capture.

One company in the vanguard of this area is Nori, which is building a blockchain-based marketplace for carbon removal. Here’s how it works. In phase 1, a company works with U.S. farmers that adopt regeneration practices, which increase their carbon capture potential. Nori then verifies the related carbon credit and then converts the credit into what it calls Nori carbon removal tonnes, or NRTs. One NRT equals one metric tonne of carbon dioxide sequestered in the soil for at least 10 years. After the NRT is independently verified, Nori generates a non-fungible token (NFT) on the blockchain. Once bought, the NFT is permanently retired. This step is crucial in ensuring the same credit is not passed around from one buyer to the next.

Companies must meet stringent criteria to prove their carbon offset creation. They need to adopt regenerative practices, such as reduced tillage, lower synthetic fertilizer use, cover cropping, and rotational grazing. Additionally, they must provide 30 years of historical data, forward-looking data until 2030, and evidence of adopting new regenerative practices after 2011. The contrast between old and new practices determines carbon credits, lasting 10 years as NRTs. Farmers establish NRT prices on Nori and can sell 85% of their NRTs in alternative marketplaces.

The financial aspect of this process can be volatile, but suppliers receive protection. NFTs, being cryptocurrencies, face the same volatility as other digital currencies. Farmers and landowners leasing to farmers can hedge against future price fluctuations by purchasing carbon at potentially lower costs today. Nori’s use of blockchain to retire each NFT and independent verifiers to guarantee buyer satisfaction sets the company apart from its competitors.

A Decarbonization Opportunity for Agriculture

Agriculture, a major carbon emitter, has the potential to lead climate change combat in the next 30 years. This industry offers investors significant environmental benefits and alternative investment opportunities, making it a crucial player in the fight against climate change.

According to McKinsey, it’s Net Zero 2050 scenario would require spending on physical assets of about $275 trillion between 2021 and 2050, or 7.5 percent of GDP, in the areas the organization analyzed. Because agriculture has so much need to reduce carbon dioxide released into the air and so much potential to address this challenge, in January 2022, Agrifood Conversations spoke with several movers and shakers, helping to move the world closer to net-zero emissions.

In addition to Nori, they included:

EarthOptics, which helps farmers use sustainable soil management practices, won the AGCO Innovation Challenge against more than 100 international agtech start-ups worldwide vying for the award.
Soil Carbon Co., which promotes microbial soil sequestration to help capture carbon and increase soil resilience.
Vence, is an autonomous livestock control and virtual fencing company using artificial intelligence to optimize rotational and strip grazing to maximize yield.

Watch the Replays on YouTube

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.