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Hi there,

Today’s newsletter takes us back into the world of agriculture and livestock emissions and considers what happens when tech solutions aren’t market-ready as decarbonization targets come due. The long short is that this space lags others in climate tech and energy considerably. That needs to change.

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PRESENTED BY NUCOR

In case you missed it, earlier this month we published a deep dive in two parts on Nucor, one of the largest steel manufacturers in the U.S. and one of the largest steel manufacturers globally. Importantly, Nucor produces steel with a dramatically lower emissions footprint compared to global averages and other major steel producers (per World Steel). 

By using electric arc furnaces and recycled materials instead of conducting primary production in blast furnaces with coal, Nucor is positioned to lead a global shift towards greener steel production. Nor does the company’s sustainability story stop there. Catch up on the story here.

OPINION

Recent news out of the Netherlands crystallized a few things I’ve learned about the intersection of climate, agriculture, and business. The main takeaway isn’t just that this is an under-appreciated and under-invested-in area within climate mitigation work. Today, the takeaway is that the disparity in attention and funding for agriculture versus other sectors is bearing proverbial ‘fruit:’ the consequences of the innovation gap are coming home to roost.

The content: This month the European Commission approved a €700 million initiative from the Dutch government to pay farmers to voluntarily shut down livestock farming operations to help the country meet decarbonization targets.

The context: The Dutch government has targets to reduce emissions in the Netherlands 49% by 2030 compared to 1990 levels, and 95% by 2050 compared to 1990. Even the 49% goal, let alone the 95% goal, is basically untenable without emissions reductions in agriculture. It also has specific nitrous oxide emissions targets, which impact agriculture more than other sectors. 

The Netherlands has a storied and strong agricultural industry. Despite being smaller than the state of West Virginia, the Netherlands exports the second-highest amount of food by value (i.e., as measured in dollars), second only to the U.S. and more than Brazil. That’s a stat I can hardly wrap my head around; it’s staggering. Nye County, Nevada, is larger than the Netherlands.

It’s telling that one of the Netherlands’ strategies for meeting its decarbonization target is to incentivize a reduction in livestock farming in general. Reducing demand—whether for meat, cheese, or milk—is undoubtedly a great way to reduce emissions from livestock. Mind you, however, that this policy isn’t necessarily a response to an observed reduction in demand. Rather, it’s an attempt to reduce supply. That means that the source of supply to meet demand might just shift elsewhere. If Dutch buyers find themselves importing more, say, Brazilian beef, that could offset any global emissions reduction benefits from closing down Dutch farms. Emissions in Dutch jurisdictions may go down, but given beef in Brazil often comes at the expense of razing Amazonian rainforest, those Dutch emissions reductions might really just shift (and perhaps increase) to another zone (often called ‘leakage.’) Let it suffice that the Earth’s climate system cares little as to whether methane, nitrous oxide, carbon dioxide emissions come from the Northern or Southern Hemisphere.

The other main bucket of points this news crystallized for me is how desperately agriculture in general needs solutions that improve climate outcomes and are ready to commercialize. There’s no shortage of early-stage work being done across the spectrum of agricultural challenges and livestock operations. Some that come to mind include feed additives and vaccines to reduce methane emissions from cows, novel ways to produce, measure, and manage fertilizer use to reduce nitrous oxide and carbon dioxide emissions (not to mention water pollution), operational improvements to age-old practices like rice farming, and a whole gamut of other practice changes bucketed under regenerative agriculture. If you pressed me to write about the ones that are sufficiently robust to scale globally, however, I’d find it hard to offer a long list.

In some cases the solutions literally aren’t available at large-scale yet, given material constraints or that the factories to produce them en masse don’t yet exist. In other cases, solutions haven’t hurdled the burden of “proof” regarding their efficacy and safety on small-scales yet. In other cases there are questions about business models, about who will pay for what. You get the idea.

Of course, it’s also possible that some Dutch farmers won’t spring for the incentives they’re being offered by their government. Economics and incentives are one thing. Any number of human emotions at play—ranging from stubbornness to justifiable pride and a sense of heritage—could override what might be economically sound offers being made to livestock farmers to stop operating. For that reason among others, this is a story I’ll be keen to track. 

The risks

The Netherlands is a key innovator in more sustainable agriculture.  Since 2000, Dutch farmers have cut water usage for some crops by up to 90%, almost entirely eliminated chemical pesticide use in greenhouses and cut antibiotic use by 60%, all while sustaining output (source). The world will lose leadership if they throw in the towel and companies commercializing solutions for livestock will lose a great market. Because the Netherlands is so progressive in its focus on sustainable agriculture, it has the opportunity to serve as a proving ground and early market for innovations designed to reduce emissions, whether from cows or elsewhere. Not to say that the headline news we’re discussing means livestock farming in the Netherlands will go away outright, but if you’re an early-stage vaccine or feed additive developer, it’s not an ideal signal.  

Further, demand for food isn’t going anywhere, as the world’s population is projected to grow another 25% by 2050. While the world can and should shift its consumption habits to reduce emissions, ultimately, there’s no getting around the fact that we need to produce more food with the same amount or, ideally, less land. Enter into questions of agricultural policy, and there will always be risks of leakage, abandoned leadership, increases in food prices and, far enough downstream, hunger.

Fortunately, the world has gotten much more efficient with land use for agriculture in general. Some of that boom isn’t inherently ‘sustainable,’ insofar as it may still depend on overapplication of synthetic fertilizers. Still, on the whole, recognizing population growth globally and capitalist economic models aren’t going anywhere, the trends in output are ones that more or less need to continue, if nothing else so that less land use change is required to make room for farms at the expense of forests or other ecosystems.

The net-net

The Netherlands is a peerless leader in sustainable agriculture. However, it is not ‘bullish’ about sufficiently reducing emissions from its livestock operations. This stark admission underscores the need for better solutions to reduce emissions and other externalities from livestock production. Reducing demand for products from livestock works, too, but it requires broad-scale adoption to make a real difference.

We’ve all been witnessing growing tension between climate policy and agriculture, as manifest across the E.U. and in the Netherlands itself. What this latest news reveals more than anything else is that of all sectors, from transportation to the power sector and even heavier industry, agriculture may be one of the hardest to decarbonize and the least far along the curve of solution commercialization. I think a lot of people in climate circles are sleeping on that.

Chat soon,

— Nick