Carbon Think Tank

• The issue is complex, and complexity can put people off
  Understanding the issue and business relevance is an important first step for any company. Some examples for trying to simplify the message for carbon sequestration we discussed:
  • This is how we are removing carbon from the atmosphere.
  • Carbon reduction efforts are ways for growers to increase profitability and improve their soil.
• Jargon
  Jargon can be a barrier to engagement. It should be avoided or well-explained where it cannot be avoided. Some jargon demystified is at the end of this document.
• Support and trusted advisers
  It is important to build a support system for growers (and others) that lays out their opportunities and looks at how they can engage individually and/or collectively.
• The big picture
  Farmers are stewards of the land, and we must illustrate the full complement of benefits to making these changes. We have to talk about carbon not as singular thing, but as part of many benefits to sustainable farming practices and regenerative agriculture. We do this to improve soil health, and that yields many benefits beyond carbon credits. The opposite is true as well – we have to explain the downsides if we don’t engage.
• Marketing and greenwashing
  Marketers want the ability to make substantiated market claims so they can differentiate their products.

• Financial considerations
  • For growers, this comes back to finances.
  • Costs will be the key driver and will vary by operation.
  • Other revenue opportunities: Some type of product label to generate credit for producers. Investors to buy in. Corporate responsibility funds willing to invest.
  • Government programs like the California Healthy Soils Program or USDA’s EQIP program that have financial payments for growers.
  • Some crops have great sequestration potential, and we just don’t know all the details around that yet. We need to figure out how this makes money.
• Business case
  • The ability to survive increasingly erratic weather patterns.
  • The investment in land, which is a long-term advantage with few short-term motivations vis a vis costs.
  • We need to focus on regenerative ag. Carbon capture is just one benefit. One grower related the story of how his company embraced regenerative ag because it is a balanced production method that improves the soil and the environment. It also offers the opportunity to be more profitable and to differentiate the business. It helped that they got information from other growers. Farmers trust other farmers.
  • Saving money, e.g. recycled water, extracting CO2 from natural gas use. Another grower related that saving CO2 is saving his company money. He recycles water, recharges it and sends back out. He said that is great for the environment (not feeding the algae bloom) and a money-saver as he can reuse the lake water because it has no fertilizer in it.
  • Another example is a greenhouse operation that extracts the CO2 it generates from natural gas use and uses it for the crops that need it. In the past, they bought liquid CO2, so this is a savings for the company and the environment.
• Collaboration and shared risk
  An impact can be made with resources, partners, the ability to share the risk. Changing production methods is risky, and growers will not want to risk existing benefits (e.g. practices required to participate in existing government programs) with new methods unless the benefit is clear. PMA thinkTank 2021 7 Motivation Some approach carbon sequestration and other sustainability efforts as simply the right thing to do. Some see it as an economic opportunity. pma.com C 6
• Buyers
  Participants stressed the importance of the marketplace, buyer requirements, and consumer demands.
  • Buyers willing to work with producers to ensure future availability of particular products. Producers respond to buyers’ requests, provided they can still make a profit to stay in business.
  • We need to understand the consumer pull, which influences the retail pull; that will have an impact on growers’ willingness to change practices.
  • How can marketers/sellers communicate this in a sales presentation so the buyer gets it. They need to be able to talk about it – to retailers and to consumers. They will want them to understand that the company is working to reduce carbon in the atmosphere and improve the soil. They need a simple, powerful message so the buyer sees their company and their products as unique.
• Regulatory compliance or prevention
  Regulations vary by state, region, and country, and companies must cope with those, especially as they increase to address societal problems like water availability/access. Some believe that industry action around sustainability and climate change, including carbon sequestration, could prevent future, more-onerous government intrusion.
• Proof points
  We need to create quick wins and show results, showcase leaders. Others will follow when they see real-world examples of success. Companies need to see the value proposition up front.

• Production
  From patience to diversity, participants raised several considerations around the path forward for producers.
  • Produce and floral are not the same as row crops, not a monolith. There are different crops with different production needs/methods, different production areas that require adaptations, climate considerations that affect production methods, and varying local/ national rules.
  • Permanence of soil capture. How do we verify sequestration of carbon?
• Patience
  We must prepare for this to take a few years as growers will try these changes in a small area – pilots, trial plots. If they see the benefits over a couple of years, they’ll transition the new practices to greater acreage. They will also look to academia and industry organizations for data and results before making wholesale changes.
• Scale
  On any given acre there’s a finite amount of carbon sequestration, but when looking at the bigger acreage, it can add up. We need to get measurement cost and accuracy. No one has figured out how to implement these principles in produce production at scale. At the smallest scale and beyond, it can be very manual, one-acre farmers growing intense, diverse crops, labor-intense, hand-harvested. How do we scale that? We must scale to make a dent.
• Part of a bigger conversation
  • Part one: Carbon is an issue unto itself, but it’s also one part of broader issues companies address – sustainability, regenerative agriculture, climate change, etc. Carbon must be addressed in context.
  • Part two: The full supply chain is a missing piece of the conversation. And that splits into two conversations as well: any company’s own efforts to reduce carbon as well as their demands on suppliers. This requires collaboration and teamwork. Produce has more issues on the post-harvest side between farm and the market – distribution, transportation, storage, point-of-sale, even all the way to the consumer. There may be a lot of opportunities throughout the system/chain. Having a good life-cycle assessment (LCA) is important. PMA thinkTank 2021 9 Challenges & Opportunities Hidden within every challenge is an opportunity to address that challenge. Participants talked about factors that limit quick or widespread adoption of remediation – lack of data, uniqueness of the industry, supply chain implications, marketing, scale, and more. pma.com C 6
  • Part three: The issue of waste is part of this conversation as well. Supply chain mismatches can create waste (supply-demand issues). Perishability of both crops and markets, physical and economic. Not only do these products have a limited shelf life, there is also pricing volatility. Crops may not be harvested, or they may be lost in supply chain.
• Data, or lack thereof Data, and their implications, is essential, both from a macro perspective (by industry) and a micro perspective at the company or even field level. We need to understand the existing carbon footprint as an industry and as companies – where emissions come from, how to reduce them. There are many players in the data space, but produce is so diverse, and there’s a lack of trust. It’s easy to get row-crop data, but not so much for specialty crops. Plus there are different data needs for different programs. What is the burden on the producer when they look at the plethora of data-gathering, data-management, and data-analysis needs? So Carbon data must be considered in the bigger data management scheme for growers. Knowing what data will be needed is important. This goes beyond government or regulatory data needs; the marketplace – buyers and consumers – also require transparency around these issues.

Benefits to Produce Industry

• Carbon Financing: earn monetary compensation for sequestered carbon
• Soil Carbon Bills & Soil Health Programs: receive funding for the transition to sequestering carbon or other sustainable production methods
•  Sustainable Tax Credits: save money by following specific environmentally friendly criteria
• Green & Social Bonds: funding for projects that benefit the environment and minimize the environmental impact of agricultural production

Carbon Offset Registries

• 4 Voluntary Offset Project Registries that deal in ag, forest, and other land use credits through reduced/avoided emissions, and some sequestration via grasslands
  • Climate Action Reserve (CAR)
  • American Carbon Registry (ACR)
  • Verra
  • Gold Standard
• 12 newer ag-specific carbon markets that
  involve cropland soil carbon sequestration