How we Invest in Soil Carbon

Soil carbon is attracting lots of attention. 

The US has allotted $20 billion in funding to the USDA to incentivise climate mitigation in agriculture. BCarbon has issued its first international soil carbon credits in the UK. The EU Sustainable Carbon Cycles initiative has outlined intent to prioritise carbon farming. Meanwhile more and more corporates in the food and ag industry are committing to decarbonise their supply chains.

In spite of all this, there is plenty of scepticism about soil carbon amongst the Carbon Removal (CDR) community and the foremost buyers of removals are tending not to invest. Soil carbon is out of scope for Frontier and NextGen, both of which prioritise CDR solutions with durability of 1000+ years.  

You might expect Carbon Removal investors like the Counteract team to de-emphasise soil too. But we firmly believe we can not afford to overlook this pathway. 

Soils are the largest terrestrial carbon sink. They store between 1500-2400 GtC. That is twice the amount in the atmosphere and three times that of all plant life. But, despite being huge carbon sinks, many soils are in carbon deficit. Cultivated soils are generally considered to be 30–50% depleted in carbon and so present an opportunity to build some back.

With soil carbon, we get to consider co-benefits rather than trade-offs. Carbon-rich soils build resilience in agricultural systems by improving the ability to withstand climate shocks such as flooding and drought. They produce more nutritious crops. And because they are better at trapping water and nutrients they can ease the dependence on chemical fertilisers and reduce leaching into surrounding waters. This feels particularly poignant today, on the backdrop of exorbitant fertiliser prices, heatwaves and wildfires across India and Europe, and Russia’s invasion of Ukraine, which has culminated in a global food crisis.

Soils are the durable store of photosynthetically fixed carbon. Most of the carbon that is fixed by plants eventually ends up in the soil, it can be as much as 44% in a plants lifetime. The carbon can remain in soils from days to millennia. Some of it is quickly returned into the air by respiration, but a significant amount is stabilised either physically through isolation in soil aggregates or deep soil, or chemically by adsorption onto minerals.

The common criticisms against soil carbon are not without foundation and we are looking for companies that directly address them.

Belowground ecosystems still have many unknowns. Our understanding of soil ecology and the microbes that govern below-ground carbon dynamics is evolving rapidly. Fixed carbon is transferred from plant roots to symbiotic microbes in exchange for essential minerals, disease protection and growth-promoting proteins. It is those microbes that help stabilise carbon in the soil; as much as ~80% stable carbon is trapped in dead microbes. 

As our knowledge continues to develop, there is the possibility to take advantage of plant-microbe interactions to store more carbon.

Trustworthy yet practical measurement is a work-in-progress: Measuring the carbon within soils with certainty is difficult. There is wide variation of soil carbon even within the same field, and soil carbon gains are often small and slow. This creates the statistical challenge of distinguishing signal from noise. Lab-based approaches provide higher accuracy although soil preparation and analysis is time-consuming and expensive. Field or remote sensing approaches are fast and cheap but lack robustness and are associated with large uncertainties. Remote sensing technologies, for example, only take shallow soil measurements. Yet, research has increasingly shown that deep measurements are required to understand the full soil carbon story. 

We need solutions that provide high-quality and transparent data tracking the impact of new practices on soil carbon. Trustworthy data can both obtain buyer confidence and be combined with remote-sensing data and models to improve the reliability and affordability of MRV. 

There’s not (yet) enough money in soil carbon Given that farmers are running on thin margins, the risk of transforming practices could be too great without sufficient incentive. Currently, the soil carbon price (at $10-40) is not enough to sustain high-quality practices, robust MRV, and registry fees, particularly for small scale farmers.  

Just as the biochar economy won’t stand up on carbon purchases alone — CORCs worth ~$150 tCO₂  do not always compensate for costs of feedstock acquisition, pyrolysis and transport and so other commercial avenues need to be explored for biochar profitability — so we need to recognise the broader value of soil carbon. Business models that find alternative value-generating mechanisms and hence are less reliant on carbon markets will help the adoption of more sustainable practices while MRV is being consolidated. In the thin-margin business of food production, creating upside for farmers may rest on persuading consumers to pay more. This is a big ask in the context of the current cost of living crisis

Broader challenges require coordination between policymakers, third-party certifiers, and carbon registries to  support sustainable scale-up.

Soil carbon relies on uncertain futures.  Although a portion of soil carbon can remain stable for millennia, it is vulnerable to reversal due to climate change and future changes in land management. Discontinuation of the practices that build and protect soil carbon is a major concern to permanence and farmers with uncertain land tenure might be reluctant to enter into long contracts.

Consensus has not yet been reached on how to best account for soil carbon. There are currently 17 different soil carbon verification protocols, each with varying standards for measurement (some require direct sampling others just use models), permanence and additionality (summarised by Carbonplan). As a result, soil carbon credits generated by different methodologies are not equivalent, and therefore are not ready for trading on voluntary carbon markets. 

In addition to investment, government-backed standards on measurement and accounting mechanisms are necessary to improve transparency and create equivalent soil carbon credits. In parallel, governments should implement safeguards to ensure any payments are shared equitably. Improved perception of soil carbon on voluntary markets will be crucial in providing value to farmers and incentivising practices of best possible quality.

We think there is a huge opportunity to catalyse change and look forward to supporting entrepreneurs working to address some of the barriers to responsible scale up. 

Our next blog will cover the systems-thinking approach to developing our soil carbon investment thesis. In the meantime, reach out if you have any solutions or ideas helping develop this space.