By Diana Olick
CNBC, Jul 11, 2022
Farmers make their living selling crops for cash, but some are starting to generate additional income from the carbon credit markets. One start-up, Boston-based Indigo Ag, is helping them do that.
Indigo Ag works with farmers on climate-friendly strategies to pull carbon dioxide into the soil and capture emissions. The firm funds its work by selling carbon credits to companies. Farmers get 75% of the proceeds and Indigo AG gets the rest.
Here’s how it works: Indigo Ag takes measurements to determine how many carbon credits each farm would produce, and therefore how much money the farmers would get. Then, it pre-pays the farmers an amount that is then verified by the Climate Action Reserve, a California-based environmental organization that monitors the North American carbon market to ensure integrity, transparency and financial value. The amounts differ depending on the farm and the current price in the carbon credit markets.
Indigo AG introduced its first tranche of farm soil carbon credits just a few weeks ago, with its program producing 20 thousand tonnes in credits, or emissions offsets. Buyers so far include JPMorgan Chase, The North Face and Barclays.
“What we really focus on is: How do we bring new revenue streams to the farmer as they make this journey to sustainability?” said Indigo Ag CEO Ron Hovsepian.
Farmers are encouraged to plant cover crops and reduce tillage to improve soil health, water quality and biodiversity. This can help make crops more resilient to global warming. Farming is not just one of the worst climate offenders, it is also at high risk from climate change.
Indiana family farmer Lance Unger was one of the company’s first clients. He said he made about $52,000 in the first year. He expects to make more going forward as carbon credit prices rise due to higher demand. He’s now reducing his tillage and planting cover crops after the normal harvest.
“We’ll go back in there and plant something to basically kind of help add organic matter and help the soil help out,” said Unger.
He’s also changing the way he tills the soil by using so-called minimal tills or vertical tillage that let the soil sit so residues break down and are released as nutrients into the ground faster.
“They’re not making any more land, so we’ve just got to try to produce more off the same type of land. If we can take and make our farm better, make our ground better and help out the environment and still get paid for it at the same time. I mean, it’s just something that’s an extra added benefit,” said Unger.
Indigo Ag started with a small pilot of 175 farmers but says it has now enrolled more than 2,000. The start-up, which has $1.2 billion in funding so far, is backed by Flagship Pioneering, Alaska Permanent Fund, Investment Corporation of Dubai and Baillie Gifford.
“That’s the win-win for everybody here that we see, and we get to grow a nice business with it,” added Hovsepian.