Organic Valley has inked its first agreements and distributed payments to compensate its dairy farmers for reducing their carbon footprint.

The cooperative’s carbon “insetting” program was two years in the making and was bolstered by a $25 million grant from USDA’s Partnerships for Climate-Smart Commodities in 2023.

“Carbon insetting is our strategy to reduce on-farm emissions. It’s our strategy to help our farmer members implement new practices that either reduce greenhouse gas emissions or sequester carbon,” said Nicole Rakobitsch, Organic Valley director of sustainability.

“It’s called carbon insetting because it all happens within our supply chain,” she said.

It could be called an alternative to carbon offsetting in which a company purchases carbon reductions or removals from projects outside their supply chain, she said.

Verification

Organic Valley is working with a third party to verify and validate the amount of carbon reduced or removed on an annual basis as a result of specific on-farm practices. The process ensures the program is scientifically valid and that Organic Valley is collecting all the right data to validate carbon claims.

The first batch of agreements involves about a dozen farms in the West and Midwest. The goal is to serve 500 farms in the first five years. The program compensates farmers for implementing four carbon-reducing practices – silviculture (planting trees), solar energy, improved manure management and enteric-reducing organic supplements.

There’s a separate agreement for each practice. If a farmer wants to implement more than one practice, he would have more than one agreement. The agreements are for five years with annual payments and are renewable.

“Ideally what we would love to see is that farmer maintains that practice for its lifetime so that there’s that continued … climate benefit of that practice,” she said.

Technical assistance

Organic Valley is using the USDA grant to provide technical assistance to plan and design the practice and cover some upfront costs of implementation. Annual compensation for carbon reductions is paid by Organic Valley to help keep the practices going.

“We’ve designed it to be competitive with the voluntary ag market for carbon,” she said.

Compensation will be reevaluated annually to ensure the program remains competitive “because we want our farmers to get a fair price for their carbon and … be incentivized to do practices,” she said.

The different practices have a different carbon benefit and payment. It’s practice- and farm-specific. For example, an on-farm solar project in the Midwest might be compensated $2,000 a year at the current rate.

“It’s not meant to cover the practice costs, it’s meant to be that added incentive to keep the practice going and to compensate for the carbon,” she said.

Net zero

Farmers can also be compensated for practices already in place if they meet Organic Valley’s protocol.

Organic Valley is aligned with U.S. Dairy Net Zero Initiative to be carbon neutral by 2050 and will use the farmers’ carbon credits to reduce its overall emissions.

Organic Valley farmers have always been interested in bettering the environment and on average produce 24% fewer greenhouse gas emissions than conventional dairies, she said.

The carbon insetting strategy is to help Organic Valley’s farmers rather than investing in projects that aren’t related to the cooperative’s supply chain, she said.