csll team 2 final presentation...
TRANSCRIPT
COVER CROP CREDITCLIMATE SOLUTIONS LIVING LAB
SPRING 2020
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The Team
2
Master in Design Engineering candidate
J.D. Candidate M.P.H. Candidate in Environmental
Health
Master in Public Policy candidate
Lily CohenNupur Gurjar Jessica SchiffJack Schnettler
J.D. Candidate S.M. Candidate in Environmental
Health
Scott Sanderson
Samantha Tracy
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https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinkandhttps://www.epa.gov/sites/production/files/2019-04/gases-by-n2o-2019-caption.jpgandv
N2O emissions are
6%of total US GHG
(CO2e).
79% of N2O emissions come
from agriculture.
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Field Visit
KEY TAKEAWAYS
● Suitability of cover crop cultivation
● Concerned about environmental impact
● Innovative
The team in conversation with Art Meinholz, a farmer at Wisconsin. (Feb 2020)
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Two challenges:
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Strained Farm Economy
Agriculture's Climate Impact
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Goals:
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Generate Revenue for
Farmers
Reduce Agricultural GHG
Emissions
Create a GHG Offset
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PLANTING & FERTILIZER APPLICATION
April May June July Aug Sept Oct Nov
HARVEST
OPPORTUNITY
Icon source: Google Images
CROP GROWTH
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Opportunity #1: Farmers Want to Plant Cover Crops
Build Soil Health
Protect FieldsPrevent Erosion
Suppress Weeds
Cover crops are plants cultivated outside of the prime growing season in order to:
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Cover crops also:
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Create Environmental
Co-benefits
Reduce Agricultural GHG Emissions
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. . . but few farmers plant cover crops.
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Why not?
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Financial Strain
Crop Insurance
Limited Funding
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Financial Strain
Thin Margins Variable PricesCapital
Requirements
Limited Liquidity
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Large Potential Losses
Correlated Risk
Farmers Need Insurance
Market-rate Insurance Would Be Expensive
No Private Insurance
Crop Insurance
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Crop Insurance
62% 38%
How many acres are insured?
Who pays premiums?
86%
Federal Crop Insurance Program:
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Crop Insurance
Terminate Cover Crop
. . . AND
Insure Cover Crop
Insure Cash Crop
OR
Cover Crop Rules:
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Risk & InsuranceLimited Funding
Environmental Quality Incentives Program ("EQIP")
Conservation Stewardship Program ("CSP")
Farm Bill Conservation Programs:
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Risk & Insurance
. . . but payments can be modest . . .
Limited Funding $5.96$6.01CSP
WISCONSIN IOWA
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Risk & Insurance
. . . and funding fails to meet farmers' demand.
Limited Funding
45%
EQIP
93,778 42,887
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Opportunity #2: Investors Want Emissions Offsets
FundingReduced GHG
EmissionsEnvironmental
Co-Benefits
Offsets compensate for GHG emissions in one place by reducing GHG emissions elsewhere:
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The SolutionCOVER CROP CREDIT
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Farmer Wins Investor Wins
$18/acrefor cover crop investment
Year 1 & 2
$8-9per ton CO2e
And
1
Slide 21
1 Important to note that $18/acre is only in the first two yearsJack Schnettler, 4/21/2020
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Farmer Wins Investor Wins
Larger Profits Healthy Soils
Reduced Erosion
Emissions Offset
Co-Benefits
Improved Health
And
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PROGRAM STRUCTURE
Farmer
MonitorInvestor
Plants cover crops for 5 years
Submits data
Determines emissions
Pays Farmer and Monitor
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5 year payment plan
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• Removes unnecessary transactional costs
• Decreases price of offset
• Allows for focus on emissions reductions
• Common practice for large entities such as Microsoft to increase efficiency
Expensive
Inaccurate
Cumbersome
Burdens Farmers
No Intermediary
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Project FinancingModel Farm: 1,000 acres with a corn and soy rotation
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~$45,000
Guaranteed Payments to the Farmer (~85%)
Administrative and Contingency Costs (~10%)
Marketing and Outreach (~5%)
Cost of Monitoring (~1%)
5 Years of Cover Cropping
4,700 - 5,200 Emission Credits (Metric Tons of CO2e)
$8 - $9 per Metric Ton CO2e
~300 Kilograms avoided N Runoff
+$13,000 NPV for the Farmers
BUSINESS PLAN & ECONOMICS
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Financial Analysis (Cover Crops w/o CCC)
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Costs$51/acre
- Seed - Planting - Termination
Savings (after 5 years)15-20% fertilizer savings
3-5% yield increase
Weed control
Erosion repair
Farmer's Financial Analysis
Year 1 2 3 4 5
Costs -$47,662 -$46,829 -$44,558 -$45,362 -$44,715
Savings + Yield
Impact$18,388 $31,005 $43,597 $47,949 $55,093
Annual Return
-$29,275 -$15,824 -$970 $2,588 $10,378
Net Return -$33,103
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Financial Analysis (Cover Crops with CCC)
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Costs$51/acre
- Seed - Planting - Termination
Savings (after 5 years)15-20% fertilizer savings
3-5% yield increase
Weed control
Erosion repair
Farmer's Financial Analysis
Year 1 2 3 4 5
Costs -$47,662 -$46,829 -$44,558 -$45,362 -$44,715
Savings + Yield
Impact$18,388 $31,005 $43,597 $47,949 $55,093
CCC Payments
$18,427 $18,427 $9,214 $0 $0
Annual Return
-$10,847 $2,603 $8,243 $2,588 $10,378
Net Return $12,965
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Financial Analysis – Investor’s Perspective
Cost of the Offset ($/Metric Ton CO2e)
Baseline Fertilizer Usage (lb/acre)Total Emission Credits (Metric Ton
CO2e) 5% 7%
195 lb 5,239 $ (8.72) $ (8.67)
175lb 4,949 $ (9.23) $ (9.18)
155lb 4,699 $ (9.75) $ (9.67)
$7.50 $9.00
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Why Use the De-Nitrification De-Composition (DNDC) Model?
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Cost Effective
Accurate
Manageable
Decreases Burden
MODELING &SIMULATION
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Effective Offset Quantification and Verification
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• Location • Soil Health• Crops• Current management
practices• Conservation
practices• Fertilization
application rates• Tillage
● GHG Emissions (CO2, N2O, CH4)
● Nitrogen Runoff● Soil Carbon● Crop Yield ● Estimates of excess
applied fertilizer
Farmers Contributions Analytical Results
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Model Simulation
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Nitrous Oxide Emissions Over 5 Years
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26% Reduction in N2O Emissions after 5 years
Cover Crop Baseline
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Total Emissions Reductions Over 5 Years
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Total Reduction of over 5 Tons CO2
Eq per Acre after 5 years
Baseline Cover Crop
For 1,000 Acre Farm: Over 5,000 tons CO2 Eq
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5,000 Tons CO2Eq = Taking 1,100 Cars off the road for 1 year
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Sources of Emission Reductions
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● 1.04 metric tons CO2e offset per acre annually
● Literature says… 0.22-3.0 metric tons CO2e per acre
Nitrogen 19%
Avoided Fertilizer Production 1%
Carbon80%
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HEALTH IMPACTS ASSESSMENT
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3 Main Pathways 3 Geographic Scales
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Pathway Mechanism
Impact Intervention
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Results
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Reducing N fertilizer by 70lbs per acre can save an
estimated $1,011,555 to $3,088,005 over a lifetime on
a 1,000 acre farm.
HEALTH IMPACTS ASSESSMENT
https://commons.wikimedia.org/wiki/File:Sustainable_Development_Goals.jpg
UN Sustainability Development Goals
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Farmers Earn$18.00per acre
Year 1 & 2
Investors Pay$8.00per ton
Promoting agricultural sustainability
Creating an affordable carbon offset
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Acknowledgements
● Molly Jahn, Jahn Research Group
● Bill Omeichin, Jahn Research Group
● Taryn Otto, Jahn Research Group
● Deanna Ranum, Premier Insurance Solutions, LLC
● Bill Salas, Dagan
● Jia Deng, DNDC Modeling
● Dan Truttman, The Truttman Dairy, Wisconsin
● Art and Lori Meinholz, Meinholz Farms, Wisonsin
● Troy Opsal, The Opsal Farm, Wisconsin
● Dorn Cox, Wolfe’s Neck Center
● Caroline Hamblen, Taliesin
● Gary Zimmer, Midwestern Bioag
● Dan Nocera, Dept. of Chemistry and Chemical Biology, Harvard
University
Climate Solutions Living Lab
● Prof. Wendy Jacobs, Clinical Professor and Director of
the Emmett Environmental Law and Policy Clinic
● Debra Stump, Fellow, Climate Solutions Living Lab
● Rebecca Stern● Dakota McCoy ● Drew Michanowicz● Jacqueline Calahong
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CSLL Team 2