by Jean Brokish and Emily Heaton, with Shadi S. Atallah, Jonathan Coppess and Madhu Khanna

Last fall, a group of food, agriculture and finance leaders gathered in downtown Chicago for a Critical Conversation on Climate-Smart Agriculture. The issue was not whether agriculture is a sector essential to climate stabilization, but how to overcome the barriers, both real and perceived, preventing farmers from accessing the millions of dollars flowing in from private and public sectors for climate-smart agriculture.

After all, the federal government just awarded $3 billion in climate-smart commodity partnership grants to help farmers and businesses reduce greenhouse gas emissions from 92 crop and livestock commodities, ranging from peaches to pigs. Strangely enough though, farmers haven’t been overly eager to participate in market programs designed to pay them for generating climate benefits, and only a small share of consumers want to pay more for them to grow climate-smart food.

Maybe it’s because we are making this too complicated.

More resilience but delayed ROI

Today’s farmers are already dealing with major effects of climate change. The insurance support systems in place, though imperfect, are the safety net keeping sectors of the farm economy from disappearing in tough times. There is growing interest, and pressure, to implement climate-smart practices that stabilize yields and mitigate the negative impacts of drought and other climate-related disasters.

Most farmers are familiar with climate-smart practices like no-till and cover crops because they are the same practices that have been promoted by USDA’s conservation programs for decades to reduce soil erosion. Despite the benefits and available financial incentives, most farmers are not utilizing these climate-smart practices. Ask why and a majority say they need more clarity on the agronomic and economic risks posed to their operation.

Most Corn Belt farmers don’t see adequate return on investment for climate-smart practices, at least in the short term. One reason for this is that climate-smart practices often don’t directly increase the market value of grain, and currently don’t fully compensate for the increased input costs and management or land tenure considerations.

Because of this confusing “wild west” marketplace, the safe bet has been to stay within the boundaries of the status quo and the markets farmers are familiar with. 

Solutions should make things simpler

Through last fall’s Critical Conversation, we concluded that the most intuitive way to increase climate-smart practices would be to incorporate simple cost-benefit mechanisms into existing and commonly used systems. Here, we outline three examples that could accomplish this goal:

1. Operating loans that incentivize better nutrient management. Asking farmers to reduce nitrogen application below levels that sustain crop production is unreasonable; so is the overapplication of nitrogen, which can impair waterways and release nitrous oxide, one of the most potent greenhouse gasses.

The Regenerative Agriculture Financing program, a partnership between Farmers Business Network and the Environmental Defense Fund, rewards farmers who apply nitrogen within zones that are both agronomically productive and environmentally sound. Farmers managing nitrogen within the “safe zone” received a 0.5% rebate on the interest rate of operating loans. Of the participating farmers, 83% successfully met the requirements and saved money.

2. Farm policies that reflect lower risk of climate-smart farms. There was widespread agreement in the room that policy is a significant driver of on-farm decisions, and farm safety nets played a large role in this discussion. For example, while there were multiple opinions, most agreed that crop insurance premiums should be based on risk. Assuming climate-smart farms are more resilient and less risky, those farmers should pay lower premiums — just like good drivers pay less for car insurance.

Discounts on climate-smart practices already exist but could be expanded. Farmers in Iowa, Illinois, Indiana and Wisconsin rapidly subscribe to programs that offer discounts on crop insurance premiums, up to $5 per acre, on fields utilizing cover crops.

The USDA provided a similar rebate for the 2022 crop year through the Pandemic Cover Crop Program. The proposed Conservation Opportunity and Voluntary Environment Resilience Act would make the PCCP permanent by amending the Federal Crop Insurance Act and establishing a national program that rewards farmers who plant cover crops with a $5-per-acre discount on crop insurance. There was general agreement that such innovative concepts, while not perfect, are worthy of further evaluation.

3. Farmers receiving price premiums for climate-smart grain. Corporate climate pledges are commonplace, with 50 of the top 100 food and beverage companies setting goals to reduce greenhouse gas emissions within their supply chains. To achieve this, many corporations offer incentives to farmers to adopt climate-smart practices.

A recent publication from the Illinois Sustainable Ag Partnership summarizes 15 programs available to Illinois farmers, including ADM Regenerations, offering farmers cash to plant cover crops as well as a price premium on corn and soybeans delivered to ADM elevators. Price premiums range from 2 to 4 cents per bushel of corn and 5 to 7 cents per bushel of soybeans, based on the carbon intensity score.

Farmers utilizing climate-smart practices often have lower carbon intensity scores and are rewarded with higher prices at the elevator, a market-based model that makes dollars and sense. 

Solutions take work, but are worth it

At the end of the day, the group of farmers, ag industry and conservation professionals felt optimistic about the potential of climate-smart practices but were clear-eyed about the work and financial investments required to achieve it at a scale that will bear fruit. The farm community must continue to advocate for farm policy that preserves investments while fostering climate-smart innovations. All voices are needed in this critical conversation.

Brokish is Midwest deputy director for American Farmland Trust; Heaton is University of Illinois I-Regen director and crop sciences professor; Atallah is a U of I ag economist; Coppess is U of I Gardner Associate Professor in Agricultural Policy; and Khanna is chair and director of the U of I Institute for Sustainability, Energy and Environment.