Jason Fischbach, Agriculture Agent in Ashland and Bayfield Counties and Jerry Clark, Agriculture Agent in Chippewa County discuss carbon farming and everything carbon with Tim Baye, Professor of Business Development and State Energy specialist with the Division of Extension UW-Madison.
Cutting Edge: In Search of New Crops For Wisconsin
Episode 20: Carbon Farming
Recorded March 12, 2021
Jerry Clark, Tim Baye, JASON FISCHBACH
JASON FISCHBACH 00:00
This is a podcast about new crops, you’re gonna love it. Join us on the cutting edge, a podcast in search of new crops for Wisconsin. (music)
Tim Baye 00:11
So the challenge is is okay, if this is a new thing? How do I look at my operation? And are there pathways here for me to actually make money and enhance the viability of my farm.
Jerry Clark 00:45
Welcome to the cutting edge a podcast in search of new crops for Wisconsin. I’m your co host Jerry Clark with the Division of Extension with the University of Wisconsin Madison in Chippewa County, serving as an agricultural agent. Joining me as co host today is Jason Fischbach.
JASON FISCHBACH 01:02
Good morning, Jerry.
Jerry Clark 01:03
JASON FISCHBACH 01:05
So today’s topic is exciting, because I think it really represents the future of where agriculture is heading. And really farmers across the state need to start paying attention to what’s happening with carbon, and how it might affect their farm operation and opportunities that might come from emerging carbon markets. And who better than to come talk to us about what’s happening than Tim Baye who’s been working in the energy space here in Wisconsin for years and years and knows these things inside and out. So Tim, welcome. Thanks for joining us.
Tim Baye 01:35
Thanks, Jason. Thanks, Jerry. Good to be with you.
Jerry Clark 01:37
JASON FISCHBACH 01:38
Tim, could you just start maybe just a brief introduction of yourself and, and the work that you’ve been doing with respect to the carbon markets.
Tim Baye 01:47
Sure Jason, as Jason’s already said, I’m old. I’ve been at this game for a long time, I am a professor of business development in energy finance, and the State Energy specialist for University of Wisconsin Madison extension.
JASON FISCHBACH 02:03
Great. So Tim, when, you know, our, our podcast audience is farmers. And I think for the most part at this point, I would say when people think when farmers think of carbon markets, or Carbon Farming, they’re thinking about carbon credit programs, you know, convert my cornfield to hay, or grow trees, and I can get some carbon credits, get paid for it. But it’s not that simple anymore, right? Could you kind of give us an overview instead, of the context in which farms are now operating when it comes to carbon in terms of energy generation? And, yes, the carbon credits, but all the other things that are happening at the same time.
Tim Baye 02:41
Yeah you’re you’re right, Jason, it’s both complex. And it’s also kind of simple. Um, I started on this journey in 19. Specifically farm, and farm carbon issues in 1993 on our farm. I started doing switchgrass research under a series of contracts, research contracts, and it’s just morphed over that time. And the more that I learn, the more that I both understand. And the more questions that I’ve got. One of the one of the major trends in food and fiber is the carbon content, the materials, and that’s being really that’s being driven by the customers of those products, the food processors, the fiber processors, especially for large organizations, corporations, that file what are called environmental, social and governance reports. Those are basically known as sustainability reports. And this is being driven to a large part both by the customers of their products and by their shareholders and investors. There’s an increasing expectation that carbon content or consideration of carbon and what’s included in our food is important. It’s important to certain segments of our market. And we’re seeing over the last five, six years, where in the United States federal leadership wasn’t necessarily the driving force, it was corporate leadership, and local and regional initiatives. And as a result, the food chain from the producer to the processor to the distributor to the retailer, have all become, have a kind of heightened sense of awareness about this topic. So the challenge is okay, if this is a new thing, how do I look at my operation? And are there pathways here for me to actually make money, enhance the viability of my farm and so.
JASON FISCHBACH 05:03
And Tim, by carbon carbon content or carbon intensity, what you mean is greenhouse gas emissions associated with the production of products or say on the farm the production of beef or the production of corn, how much carbon or methane might be emitted in that process? Is that what you mean by carbon intensity?
Tim Baye 05:22
Yeah, to a large degree, you’re correct Jason, but it’s not exclusively tied to energy. It’s also tied to say nutrient use, and tillage practices, and cover crops. And if you are in animal agriculture, how you’re dealing with animal, you know, nutrients. Um, so it’s, it’s a bigger swath than just energy.
Jerry Clark 05:53
So, Tim, is to kind of get at that, that scale, or is there an index or something like that. So if I have this many beef, or this many acres, I am using this much carbon or producing this much.
JASON FISCHBACH 06:10
Yeah, carbon accounting, this is the carbon accounting.
Tim Baye 06:12
Let’s just crawl down this rabbit hole for just a second. All right. So there is an international set of standards called the greenhouse gas protocols. Now, these have been developed internationally over the last 20 years. In a nutshell, there are three types of carbon that are considered in the carbon accounting world, scope one, scope two and scope three, scope, one is what goes up your stack, what is directly connected to your operations. So on a firm basis, it’s what kind of emissions you’re generating at the farm level. And that may be from manure management, that may be from your tillage practices that may be in terms of your equipment and machinery. Scope 2, that is the carbon embedded in the power and fuels you buy, and use. Okay, so that’s your electricity, your natural gas, your propane, your diesel, those are all, that’s all scope two. Scope three, is what carbon is embedded in the inputs that you buy from your supply chain. Okay, so that’s the carbon footprint of your neighbor you buy forage from, or in the grain that you purchase. So those are the three levels at a high level of how carbon accounting is dealt with, in the most simplest sense, and you know, when you get the scientists involved and the advocates involved, they can come up with a gazillion different approaches, but I tend to gravitate to the more common one, and that is your total output divided by your total carbon use. And that’s your carbon footprint. A carbon footprint is not to be confused with the carbon offset. Okay, carbon footprint is a snapshot of how much carbon is embedded in 100 pounds of milk, or a tonne of grain, or a tonne of orange. A carbon offset is what practices you adopt to reduce the amount of carbon you emit. And that’s what’s kind of gained a bit of a traction in trade journals and by a number of producers and landowners is a carbon offset program. Okay, offset is a is a consequence of an action. And the most common forms in ag right now are land use based offset programs. So if you enroll your land, and agree to change your practices, and then go and verify those practices, you get paid. One of the one of the best examples right now is Land of Lakes entered into an agreement with Microsoft, and is providing their producers the option to enroll in their carbon offset program. I think they’re paying somewhere around $25 per ton per acre.
JASON FISCHBACH 09:20
So do I have this right that there’s sort of two different ways then that a farmer might be able to monetize or participate economically here in carbon markets, one would be sequestering somebody else’s carbon, making land use changes, that brings carbon out of the atmosphere and puts it in their soil or something. And then the second might be reducing the carbon footprint of their outputs, and then having someone pay a market premium for that less carbon intensive product.
Tim Baye 09:52
Well, essentially, you said the same thing of both. Both examples, Jason. So let me, let’s go back to that. The carbon offset is changing. Agronomic practices are your operational practices to actually reduce the amount of carbon your farm emits. So it may be in sequestering soil carbon. Or it may be in looking at a solid separator or a digester, instead of storing your manure in a lagoon and just land spreading it, right. The other option is looking at buying inputs that have a lower carbon content. So if you slap on a solar array behind your milk parlor, and produce your own power, that’s carbon free, well you’ve reduced your carbon footprint. If you have a neighbor who’s enrolled in a carbon offset program, and you buy their forage, you’ve reduced your carbon footprint. If you produce excess, now, we’re not there yet, but you sell you sell your offset to somebody else, that allows them to continue emitting carbon, and they’re offsetting their impact by having you do something different. That’s what you, that’s when in this trading of carbon offsets, that’s what that sort of means.
Jerry Clark 11:18
So Tim, with the market, then if there’s this, you know, these options to buy or, or, or sell or reduce your your input, does that price kind of fluctuate with energy prices? Or how does, I mean, is there again, a standard it kind of goes off of, or what sets that, that price that, you mentioned, like $25 per ton per acre, or whatever it is, how does that price get set?
Tim Baye 11:47
Alright, so that gets negotiated, because that’s a voluntary market, we don’t have a regulated carbon offset market in the United States yet. Um, in that example, Microsoft agree with Land of Lakes to buy carbon offsets from Land of Lakes and Land of Lakes producer network. So it was a negotiated deal. With almost all of the land trusts that are in this space, you’re going to have the same experience, you’re going to have a negotiated deal based on your changes and practices, the impact for a producer can be both direct if you contract directly with the farm, the farm trusts for these offset programs, and it can also be in terms of marketing, in terms of if you’re, if you’re selling your milk to a cheese producer, and your cheese producer, in turn, is selling it to a national restaurant chain, or maybe a pizza maker, and they have sustainability metrics, you’ve just enhanced your position with your cheese maker, in you’re customer groups, then you made their life very easy in reporting their carbon footprints to their people. That’s what that’s one of those areas that is, is growing in terms of attractiveness. And the net benefit for producers to consider going down this option is your strength and your relationship with your customer.
JASON FISCHBACH 13:26
Is that what might be referred to as a scope three price premium?
Tim Baye 13:31
Yes, the scope-3 price premium is you’re helping them do their supply chain accounting. Right.
JASON FISCHBACH 13:41
Okay. So that’s what I was getting at earlier. A farmer could make changes on their farm in order to sequester Microsoft’s carbon output. Yep. So you know, right. So then the other option is, again, you make changes on your farm, to that to make your outputs less carbon intensive, which makes your product more attractive to your buyers.
Tim Baye 14:06
Correct. And, you know, and at first glance, this may seem a bit esoteric. That said, every major banking institution in the United States is coming up with a sustainability program and an offset program. Almost every large scale private equity fund is coming out with their own investment strategy and sustainability metrics. So, while it may seem esoteric, and it’s something that, you know, why would I bother with. The trend is there.
JASON FISCHBACH 14:41
Do you think this is gonna stay essentially an unregulated carbon market with individual companies contracting with groups of producers or producers or will there be a regulated national carbon market?
Tim Baye 14:54
I wish I had that kind of crystal ball, Jason. I’m I’m a finance geek. Right, I latch on to things that are bankable. Right now the corporate and the investment community programs are bankable. California has a very vibrant carbon market. Reggie in the northwest, I mean, northeast has a not as viable, but it’s an active carbon market. These are statewide initiatives. Um, let me just give you a, for those, for those in our audience who aren’t familiar with the California experience. Let me let me zero when, specifically on the animal Ag and what’s happened in California, what’s called the low carbon fuel standard. All the ethanol companies in the United States participate in the renewable Renewable Fuel Standard program. Okay, so when you create an a gallon of ethanol, a batch of ethanol, there’s a RIN or renewable identification number tag to that. Petroleum companies, distribution companies have to demonstrate that they have so many RINs in their bucket by buying ethanol for compliance. Well, California took that one step further. Instead of having just kind of broad groups of biofuels, they actually adopted a model from the Argonne National Lab called the GREET model, and they calculate the carbon intensity of the fuel and offer an incentive to reduce that carbon intensity. What does that mean to Wisconsin based farmer? Well, there are a number of producers in the state that have digesters, and those producers that have digesters that that made the investment to clean the gas up and put it on the pipeline, and then contractually sell it into California, are making a very strong income stream from that biomass. A range, this is this is reality, okay, this is our state program, translated into cash flow directly for dairy farmers, is that the range is that gas, that renewable natural gas, chemically is identical to natural gas extracted out of an oil field, or gas field. The brown value or the fuel value of that natural gas is around $3, a decatherm, if you can successfully clean up your gas on your farm digester, put it in a pipeline and sell it into the California market. There’s a lot of complicated steps. But if you can do so, you’re getting a range of somewhere between$65 to $85, a decatherm. So the delta between the heat value of that gas, and what you’re selling it for can be $60 to $80 difference for the same product. That program isn’t likely to continue forever. But it has been amazingly successful in terms of recruiting and substituting especially for diesel operators, diesel fleets that have converted to cng, compressed natural gas. And that’s where the majority of the renewable natural gas or bio gas being sold to California is used. It’s being used for transportation purposes. That’s a long winded answer to your government question. But we’re in a state of flux. And the things that that I latch on to, in my research and programming, here are things that have a track record, look like they’re going to continue and the corporate buying is two of those areas. Yes.
JASON FISCHBACH 18:57
Okay. Maybe what we can do now is, is shift to some specific types of practices that farmers might consider right now. And you’ve outlaid these pretty outlined these pretty well in a in a document you’ve produced here, and maybe talk through the opportunities and challenges for each, and maybe related it to some of the policy work that might be happening in Wisconsin in the near future. So the four that I’ve listed right now, and you know, some of these are bigger topics, but the RNG around bio gas, solar, or I guess what I call decarbonized electrons. Instead of buying them from natural gas and fossil fuel plants, you make them on your own farm. I love a lot of these lower carbon farm practices under regenerative farming, try to use more perennials, less tillage, better nutrient cycling. So there’s that basically changing your land use practices. And then there’s the whole world of the composted solids and you know what effect that has in terms of nutrient cycling and Putting that carbon back in the ground. And then I guess I’d throw the other category out there purpose grown carbon sequestration.
Tim Baye 20:08
JASON FISCHBACH 20:09
Am I missing any major category there?
Tim Baye 20:12
Yeah, you are missing one that I’ll start with then that’s the simplest one. That’s the one that the practices that the land trusts that are enrolling carbon offset programs, they’re looking for things like tillage changes from conventional tilled to no-till. They’re looking at post harvest cover crops and green fertilizers. They’re looking at changes in manure management, nutrient management. And they’re looking at, you know, all the things that NRCS has been talking about forever. Or maybe those those practices.
JASON FISCHBACH 20:53
So conservation practices, which we might differentiate from regenerative farm practices that might involve a whole new suite of crops, like Kernza or perennial wheat, or things that are still in the pipeline?
Tim Baye 21:03
Well, let me let me crawl down a little bit of a rabbit hole on that one, in that, you know, In a grazing operation, you would think, would have a lot of opportunity in this space. Well, granted, they, a grazer is going to have a lower carbon footprint for its output, because it’s a grazing operation. But because of how manure is not collected and treated, but it’s land spread by the animal itself, there is less opportunity to generate an offset for a producer, that’s a grazer than there is for somebody who’s got a confined operation, and we’re good at it. Okay.
JASON FISCHBACH 21:52
Okay, so we’ve got our list, I think so let’s take let’s pick these off one at a time. So let’s maybe start on the bio gas sector in terms of for each of these, maybe where the where the industry is at right now on this? What are the main policy limitations or what’s holding it back and maybe a little bit of what the future is recognizing. We could spend hours on each of these, but maybe we start with the biogas side.
Tim Baye 22:14
So let’s look at if I may redirect the question a bit. Let’s talk about manure management. Okay. And there are two, basically two tranches of action actions that can encourage or reduce your carbon footprint. One is a mechanical system, doing solid separator and composting. I am then adopting more precision AG, precision application of the soil treatments. That will reduce your carbon footprint as compared to just just pumping out your lagoon and land spreading it. Option two is more technical, that’s the bio gas, that’s the digester option. The structural part, obstacle in biogas is that there’s not much of, if you put it in a generator, there’s not much of a market currently, right now, for that power. Solar and wind have pretty much sucked up the oxygen, so to speak, in that renewable space. So in order to optimize your cash flow, you got to find a way to find a buyer for the gas itself. And I was giving that example. The California example is one area, but not every dairy operation is on a pipeline. So one of the policy infrastructure issues that needs to be investigated, is how do you expand the reach of a gas collection system to reach more operators that have enough feedstock to justify economically installing a digester? So that’s, that’s one of those areas as policy areas and infrastructure that’s actively being investigated at the state level. And there’s a fair amount of interest at the federal level, we’ll make that happen. Pipelines, cooperators and, the developers then make those accommodations
JASON FISCHBACH 24:14
Is the value of that gas sufficient to more more digesters, assuming if that infrastructure was in place.
Tim Baye 24:22
That would be determined on a case by case basis Jason but in general, yes. Okay. You know, if there was say streamline permitting and easements for laying a gas collection pipeline, which is you know, like a three inch four inch PVC tube, along the highway, okay, it’s not really complicated technical, but as long as, if that were enabled, um, yes, it would put it would tremendously improve the number of operations that would have the have an option of putting gas on the pipeline.
JASON FISCHBACH 25:01
Tim Baye 25:03
Cleaning it, compressing it, and trucking it is not really economically feasible and technically is challenging. But it is being done, Dane County is doing it. There are some other areas that are doing it. But you’re touching a product a lot more times in that way, and that always increases the cost.
JASON FISCHBACH 25:27
Recognizing each situation is different. But if you can use that gas internally, let’s say you’ve got off take agreements with an adjoining greenhouse operation or you’ve got a big enough fleet to fuel with, with, with gas, does it work? Or is the price of natural gas to the farm or propane, still cheaper than your own source?
Tim Baye 25:47
That all depends on the interconnection agreement and the tolling agreement you have with the pipeline. Okay, because if it leaves your farm and goes five miles down the road to a cheese plant, okay, it’s being transported on that pipeline to get to that cheese plant, unless you’re pumping it and depositing it in there. And as a result, that’s a fairly complicated contract. And what we don’t have in the state of Wisconsin are standardized interconnection agreements. We don’t have standardized gas specification agreements. So there’s a lot of room for improvement in the space. And again, there’s initiative at the state level to begin that process.
JASON FISCHBACH 26:36
So let’s move to solar, my understanding is solar on the farm is it works if the tax credits are there, it works, if you can bring down your demand rate charges, it works if the net metering is beneficial, or if you can use it entirely behind the meter. So where are we? Where are we at on solar now?
Tim Baye 26:53
Yes, yes, yes, um, it depends on Well, first off, it depends on your load. And you have to understand your load, what your low profile is, what your peaking event is, it that means how much what what time of the day, what day of the month, do you typically have the highest level of demand for your for your power, and then how aggressive you want to be in providing your own and self supply. If you put, if you put a solar array behind your milking parlor, and you design it to match your load, then it’s the terms with your local utility, on what the true value of that power is. And every utility is different. And some of them have very favorable programs and others do not. What typically happens is you sell the power to the utility at a negotiated rate, up to a certain level of what your peak load is. And then you buy your power back from the utility. That’s what the physics of most of these cases involve. It’s the rate that your meter runs back at that makes the determination of what the financial return is.
JASON FISCHBACH 28:18
The changes are gonna go at the whim of the power companies. So to use the example in Bayfield County, which had one of the largest solar group buys in the state at the time. There was the net metering policy with Bayfield Electric that was in place at the time, and then based on concerns of board members, that net metering policy was changed. And the rate that the company was sort of was buying the power, you know, and then reselling it was changed. So that’s part of some ongoing policy discussions, right is maybe standardizing the net metering across the state is that say more about it. Or why that’s important.
Tim Baye 28:58
That is very important. I’ll give you my own. I’m sitting at my farm right now. And in 2019, I put in 8.3 kilowatts, which was about 16 panels, something like that, no take that back 22 panels. And when I signed the contract, it was pretty much Tim wanted to do this kind of investment. The numbers weren’t going to be super strong, based upon the net metering policies of my rural electrical co-op. Between the time that I signed that contract and the time that I actually flipped the switch and started sending power to the utility into my myself. The board of directors that my electric Co Op changed their net metering policy. And now they allow for 100% buyback at retail rate and full offset of my fixed charges. Well, last year I did not pay a power bill at my farm from end of April until November.
JASON FISCHBACH 30:09
And then right here on this call, we have two completely different policies, I have 24 panels, totally different rate structure and policy than you have. Yep.
Tim Baye 30:17
Yep. Yep. And so it’s the arbitrariness of and, and how the utilities interact with the regulatory commission, Public Service Commission. Um, and that’s one of those issues that makes it very challenging, right now, to fully benefit from making an investment, that’s going to reduce your carbon footprint and going to provide you a stable price for your electricity for 20 years. Okay, those are the benefits from doing it. Reliability and resiliency is also a benefit from doing it, especially if you if you can make the numbers work for a battery system. But policy at the local level, is what pays the bills today. What makes it justified today that and the federal investment tax credit, and if that can be streamlined and standardized, it will make installation of self supply solar and demand management, okay is you know, swapping out your single speed to a variable speed motors, okay. Scheduling when your fans run, how fast they run, how intense they run how many you run, improving your pumps, all those things that you can do to improve your energy efficiency. And when you use your power, or time of day, those are all things that farmers can do to manage their energy footprint. And in some cases, some farmers in some locations, if they take these steps, they make money.They reduce their costs significantly. In others, Case in point, Jason, where you are, regardless of what you do, because of the local policies, it’s hard to move the needle into the feasibility sector and say this is feasible versus not. Right? We’re looking to streamline that.
JASON FISCHBACH 32:24
Okay, so farm scale solar, you’re trying to match your your loads, what about in terms of you want to put in a solar farm, you know, a megawatt and you’re trying to sell power? Is that an option for farmers? What are the policy hurdles? Where are we at with that?
Tim Baye 32:39
Again, we’re at basically the discretion of the utility, whether or not they want to sign up what’s called a power purchase agreement for you or not. And that’s the process, you’ve got to approach them. If this is a large enough project, they may actually have to include it into their rate case, and submit it to the public service commission for an adjustment in their overall rate, so they can justify buying power from you, let’s let’s talk about these offset programs a little bit. So they’ve been in the background for probably five, six years. And, and the last six months, there’s been a whole lot of promotion of these offset programs, um, through, you know, webinars and outreach and articles, etc, etc, etc. And when you start peeling the onion back and getting to understand some of these Land Trust, investment trusts are very geographic specific. They may be targeted to pork producers, soybean producers, not just general Ag overall. And the verification This is one of the areas that I’m working on with a laser like focus is to reduce the cost of compliance of verifying the transaction costs, verifying that what you are doing, and reporting is actually happening on the land. And when you get to things like carbon offsets, bio gas verification, and carbon intensity, all this stuff, you have a situation where there’s a high degree of skepticism that these things are real. And so they go above and beyond and make it very arduous and costly. To fill out the paperwork and verify that what you’re planning on doing is actually happening. And as a result, a lot of people get soured on it, because they realize, oh my god, what we’re attempting to do with the state right now, starting next week, the assembly ag committee, and the assembly environmental committee is investigate ways of streamlining that process and making it a whole lot simpler. So instead of having all these different levels of verification involved, that we’ll have something that looks more like a NRCS crop survey, or Farm Service Agency survey. You know, two pager, simple. And hopefully that will improve, one the attractiveness to land owners and expedite a turnaround in a proposal. And hopefully, it will also winoow and sift which ones of these land trusts are for real, and actually deliver on what they’re promising versus those that are not.
JASON FISCHBACH 36:07
Just to clarify, so you’ve got sort of two steps in this process, you’ve got the verification, and let’s say the labeling is sort of the stamp of approval of verification that you’re doing what you’re saying you’re doing. And then there’s the in so you could as a, just like an organic certification. Now, it’s your responsibility to go and convert that into a market premium, or, you know, convert that into some value by finding buyers for your organic produce, for example, yes. But now, with carbon offset programs in some of these aggregators, they’re they’re actually doing the monetizing for you in in taking your verified carbon offsets, for example, and then selling those credits and taking their cut in order to cover their department.
Tim Baye 36:51
You’re actually negotiating a rate. And they’re taking the risk between what they’re paying you for the offset what they can sell it for. So they own that risk. Are, let me, let me modify that, that is the most common agreement. Okay, I know some will get cute, and some more sophisticated, and larger land managers will want a piece of that action as well. And they’re willing to take some of that risk for a lower guaranteed return. And just like any other investment, any other kind of commercial activity. Yeah, as these things mature, you’re likely to see more and more creative financial instruments behind them. derivatives in particular, puts options, yeah, just like every other commodity, because a carbon offset is a commodity. And if you if you approach it from that perspective, then most most producers, most people in ag can move along that learning curve rather quickly. As long as they just think of it as another commodity.
JASON FISCHBACH 37:59
Um, so we’ve covered solar bio gas. Let’s talk more about these conservation practices or other less capital intensive changes to the farm. These things are relatively minor changes, have relatively minor impact on carbon, you know, changing your tillage practices, yes, it has an impact on carbon cycle, but it’s relatively minor compared to some other practices. So but these are the easiest to implement, because it doesn’t require the same kind of capital. So do you want to talk more about the value of these and in how much? You know? Yeah, I guess, what the economic value is of some of these I would call sort of low tech changes. And maybe to that extent, to that end, is it yet worth it to, to actually plant trees or perennials to sequester carbon? Are those the values of that high enough to actually make that kind of substantial practice to your farm, as well?
Tim Baye 39:01
My approach on this Jason is all of the carbon management tools need to be justified on a cash flow basis or return on investment basis as a standalone investment standalone activity, and that the producers keep a realistic expectation that every one of these changes incrementally brings down their carbon footprint, which makes their final product that they sell to the marketplace more attractive, that there’s no silver bullet. There’s no one thing that’s going to get them over the hedge edge here, okay, that that it looked at as a plan with a number of investment and management opportunities that need to work in concert together. That effectively managing your carbon footprint with tools such as renewable energy or nutrient management, offsets or buying lower carbon input forages and grains, that changing your tillage practices and reducing the amount of diesel or harvest practice, reducing the amount of diesel that you use, that all of those combined together improve your bottom line. Okay, that there’s no one approach that’s going to save the farm and make you a whole lot of money. But combined, incrementally, they help manage your risk. They give you a more diversified income stream. They manage your, they’ll help you manage your cost structure. And you’re getting ahead of the game in terms of carbon labeling and carbon footprint that the markets are increasingly asking for.
JASON FISCHBACH 40:53
So what I’m hearing maybe is, the first step a farm maybe needs to take here is to actually do some carbon accounting on their farm, take stock of where they’re at, and find opportunities to reduce the carbon outputs. And that’s maybe the very first step and not just for an individual farmer, but the farm industry in general. And like, you’ve talked about, providing a state mechanism to streamline and make that process easier, because we don’t have any good way to do that, except if you contract with a carbon credit aggregator or something, am I right?
Tim Baye 41:27
Let me invert that, in order for the ag industry in general, to do this, it has to start at the farm level, at the individual farm level. And that the, at the producer level, at the kitchen table, there’s a discussion about the merits of doing this, and then a commitment to seeing it forward for your operation. At the same time, then being involved in the community, the community of other producers and your trade associations, with extension, with your vendors, with your bankers. And be clear with everybody that this is a strategic opportunity, and a strategy for your operation to improve its economic viability, all the sustainability factors that that will come out of this, these efforts will be there. But they’re you can’t add,in my opinion, my philosophy, you can’t add to the environment, unless you have a cash flowing, economically viable operation. And those things can exist. And then the message of today, I suppose is the environment for those to complement each other has probably never been better.
Jerry Clark 42:55
Yeah so Tim, treating it like a commodity, just like you said, I think farmers understand that. And all the things you talked about making it profitable on the agronomic side, the production side, with those little changes that we always talk about to make a farm profitable, it isn’t a silver bullet, there’s lots of little things you do that you can change. And it seems with that same line of thought that works with the carbon crediting and the value that can be created from that commodity.
Tim Baye 43:23
Correct. Right. So if you put a solar array in, you spend $30,000- $40,000 on a solar array, and it earns you a 15-20% return on investment, great. If you put in a solid separator and you drop off half a million dollars in a solid separator, you know big operation and and then a composting pat. Okay. And that reduces your nutrient use from the co op by 15-20%. Great. If you enroll 200 acres into a carbon offset program or 40 acres into carbon offset program, and it contributes an extra 10 grand or 20 or 40 grand to your bottom line. Great. None of, not any one of those is going to send your kids to college. Okay, but collectively, you’ve managed your risk, you can prove your bottom line. And along the way you’ve reduced your carbon footprint.
JASON FISCHBACH 44:27
Yeah, I guess, Tim, if you maybe wanted to say a little bit about the policy proposals that to play it out, or maybe.
Tim Baye 44:32
Yeah, let me be real brief. Okay, so I was asked by the chairman of the ag assembly, the assembly ag committee, Gary Tonkin, to submit a number of ideas for him to consider as the agenda for as a committee going forward. And as result next week, there will be the inaugural meeting of a study committee that will be investigating state carbon counting, state sanctioned carbon accounting program will be investigating ways of streamlining and enhancing the return on investment for on-farm Energy Solar Systems, uh battery systems combined heat and power bio gas systems, there will be a investigation of developing a rather substantial infrastructure program for expanding gas lines in the state of Wisconsin to reach more potential biogas generation facilities, and then there will be a two initiatives requested of that cap. One will be to do what Carl said earlier is to interview and sort of manage the flow of carbon offset providers into the state and assisting the landowners to winnnow and pick whichever ones are best suited, and to streamline those those contracts. The second is to then begin investigating a state sanctioned carbon labeling program for animal Ag in the state of Wisconsin. So there’s a lot of moving parts there. But it’s a fantastic study group. And I would say the interest in this and doing this is pretty darn high.
JASON FISCHBACH 46:32
Tim, thank you for your time. This has been great. we’ve all learned a lot We look forward to speaking with you again about this emerging topic. (Music) Brought to you by the University of Wisconsin Madison Division of Extension.