U.S. Dairy Farm GHG 101

U.S. DAIRY FARM GHG 101

INTRODUCTION U.S. dairy farmers have long been stewards of the land and its natural resources. Among agricultural commodities, the dairy industry was early to embrace the sustainability movement, when Dairy Management Inc. (DMI) convened the dairy supply chain for a sustainability summit in 2008. In 2021, the U.S. dairy industry continued its bold leadership in sustainability by establishing the Net Zero Initiative (NZI). Allied Milk Producers would like to help its members be on the leading edge of achieving NZI goals by fostering a deeper understanding of the greenhouse gas (GHG) emissions on dairy farms. To that end, the Context Network ® , an agricultural and food consulting firm, has leveraged its industry experience and the knowledge of subject matter experts to develop this report, which lays out the facts, opportunities, and challenges of reducing GHG emissions; sequestering carbon; and measuring, monitoring, reporting, and verification (MMRV) practices on dairy farms.

SUMMARY This report aims to provide Allied dairies with an introduction to the world of GHG emission reducing practices, technologies, and programs—and to help them make money from the implementation of practices and technologies that provide environmental benefits. The report provides a summary of the primary GHG emission categories on dairy farms and descriptions of the opportunities to reduce GHG emissions. The report also describes carbon credit and insetting programs in which dairies can participate, as well as basic information on MMRV and its importance to environmental programs. The report concludes with illustrative scenarios of GHG reduction opportunities and suggested next steps for dairies.

DAIRY FARM GHG 101 In 2012, the Innovation Center for U.S. Dairy completed a series of studies to improve its environmental performance. These studies determined that more than one-half of the GHG emissions from the fluid milk supply chain came from the production of milk (see Figure 1). Another 20 percent of emissions came from the production of animal feed supply for the dairy herd. A similar result was found in the cheese and whey supply chain, with 46.5 percent of GHG emissions coming from milk production and 22.4 percent from feed production. 1 Using peer-reviewed scientific data, several organizations have since developed calculators to quantify the GHG emissions associated with dairies. The two leading tools are the Farmers Assuring Responsible Management (FARM) Environmental Stewardship (ES) program developed by the National Milk Producers Federation 2 and the Cool Farm Tool developed by Unilever and maintained by the Cool Farm Alliance. 3

Both tools classify GHG emissions from dairies in the following four categories: 1. Feed and forage production: Approximately 20 percent of the GHG emissions on dairy farms comes from feed and forage production. The tools quantify these and identify opportunities for improving feed efficiency and productivity. Emissions related to tillage, planting, harvest, grain drying, and nutrient application, based on regional production practices, are calculated. 2. Manure: The storage and treatment of manure accounts for approximately 45 percent of the GHG emissions of dairy farms that handle wet manure. The tools quantify the emissions associated with the collection, transport, storage, treatment, and application of manure across the farm. The tools also calculate the impact of interventions and technologies that reduce emissions from manure management, including separation of solids, composting, and conversion from flush to scrape. 3. Enteric methane: Another third of GHG emissions from dairies comes from the generation of methane (CH4) from enteric fermentation. The tools account for the stage of production and ration makeup (including any grazing impact) to enteric fermentation. The most recent version of the Cool Farm Tool allows dairies to calculate the reduction in GHG emissions from the use of feed additives that can reduce CH4 emissions from enteric fermentation. 4. Energy: This is the smallest category of emissions, at less than five percent of the total. Both tools quantify GHG emissions from both electricity and fossil fuels used in dairy operations, such as electricity use for chillers and diesel use in tractors. The tools also calculate the reduction in emissions from the use of renewable energy, as some dairies are installing solar panels on their barns or property.

FIGURE 1

4.9% Consumer 6.5% Retail 7.7% Transport/Distribution

3.5% Packaging 5.7% Processing

51.5% Milk Production

20.3% Feed Production

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Feed and forage production

Soil carbon sequestration: Carbon sequestration is an expanding opportunity for the agriculture sector. The first soil carbon credits were issued in June 2022, and multiple companies are pursuing soil carbon projects. These projects pay farmers for implementing practices such as no or low tillage, cover crops, and precision fertilizer application. The challenge for soil carbon is that significant acreage is required to generate cost effective projects. Organizations with strong farmer relationships, such as crop advisors at crop input companies, are strategically positioned to help develop these projects. Diets: There are three key diet-related opportunities that maintain or increase milk production while reducing GHG emissions: ration formulation, forage management, and concentrate management. Ration formulation focuses on the basic concepts of rumen function and dairy cow nutrition requirements. Forage management centers on increasing productivity by feeding high-quality forage to promote feed intake and ration digestibility. Concentrate management addresses the needs for carbohydrates, proteins, lipids, and by-products. Improvements to diets include feed additives that inhibit CH4 generating pathways (see the Enteric Fermentation section for more detail on feed additives) . Manure Digester development: The U.S. Environmental Protection Agency (EPA) AgSTARLivestock Anaerobic Digester Database 4 provides key information on anaerobic digester projects on livestock farms in the U.S. The bulk of digester projects are on dairy farms because wet, scraped manure from freestall barns at ~10 percent total solids is ideal feedstock for making biogas in heated, mixed digesters or even in covered lagoons in warm places like the Central Valley of California. In the past few years,

GHG REDUCTION OPPORTUNITIES

Quantifying GHG emissions is just the first step on the sustainability journey for dairies. Once dairy farmers know their largest source(s) of emissions, they can identify and implement practices to reduce those emissions if they provide a payback. The following section of this report provides an overview of the key reduction opportunities.

there has been a “gold rush”-like fervor by project developers to sign up large dairy farms (>3,000 cows) near natural gas pipelines because of the profitability of projects that collect and scrub biogas and inject methane into the pipeline. The profitability driver is demand for low carbon intensity Renewable Natural Gas (RNG) to fuel commercial fleets that are converting from gas or diesel fuel to cleaner burning Compressed Natural Gas (CNG). Low carbon RNG is measured and rewarded through programs such as California’s Low Carbon Fuel Standard (LCFS) crediting program and the “stacking” of Federal Renewable Identification Numbers (RINs) assigned to the same volume of renewable fuel, courtesy of the Federal Renewable Fuel Standard (RFS) program. These environmental benefits are in addition to the price of natural gas which has been selling for $3 to $6/MMBtu. Both the state and federal government environmental markets require the sellers of transportation fuels to reduce the carbon intensity of the fuel they sell by varying amounts and time frames. This has resulted in impressive prices for LCFS credits and RINs because of the very low carbon intensity of RNG generated from cow manure. The California LCFS program has the highest price of all environmental programs. The price peaked at $199 per ton in 2020 and is currently at $65 per ton. The program is expected to be revised in 2023 to increase prices. However, there is legislation that could prohibit the sale of credits from dairy digesters into the California LCFS program, starting in 2024. At the same time, there is also the potential that these credits could be sold into the Oregon or Washington clean fuel programs that are in the early stages of development. Gross revenue from RNG projects on dairy farms has been as high as $2,300/cow/year, but farmers are typically receiving less than 10 percent of that amount because they aren’t the project developers and don’t contribute capital to the multimillion dollar projects. Farmers who are being courted by project developers are advised to work with experts to help them find and secure the best deal.

and digester development. Adding biochar, acids, and straw to lagoons can reduce CH4 emissions by 82.4 percent, 78.1 percent, and 47.7 percent, respectively. 5 However, these practices are not being widely adopted because their use adds cost with no payback potential. And most importantly, reducing CH4 emissions at dairy farms (outside of California), isn’t required by regulations and there is no incentive to do so because there is no revenue generation potential from creating carbon credits. Why? Because no approved protocol exists likely because the emissions reductions are very difficult to measure in commercial settings. Compost additives: Composting manure requires maintaining a carbon to nitrogen (C:N) ratio of about 30:1. Manure is high in nitrogen and low in carbon. To reach a C:N ratio of 30:1 requires the addition of bulking agents to increase the carbon and solids content. Typical additives include straw, sawdust, hay, and leaves. Composting is most appropriate for producers with dry manure handling systems or those using solid-liquid separation. Unfortunately, the composting of manure requires significant time, equipment, and costs that do not yield a return from the sale of the manure. Manure management: Several practices have been identified that can reduce emissions between 0.2 tons and almost six tons of GHG emissions per cow per year. Currently, California is the only state that financially rewards the implementation of these practices through state-funded programs. Other states, as well as supply chain companies, could leverage some of the tools and processes being used in California to provide incentives for dairies. The practices include:

— Alternative manure treatment and storage practices, such as the installation of composting facilities.

— Separation of manure solids prior to entry into a lagoon, settling pond, or settling basin by installing technology, such as a stationary screen, screw press, centrifuge, or roller drum.

Lagoon additives: Leading dairy scientists have found that additives to manure lagoons are an available method to reduce CH4 emissions compared to technology such as solids separation

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— Pasture-based management, including conversion of a non-pasture dairy or livestock operation to pasture- based management and/or increasing the amount of time livestock spend at pasture at an existing pasture operation. However, there are many reasons why this is impractical and creates a whole host of problems for modern, intensive dairies. Enteric methane Feed additives: There has been a lot of research and development of feed additives that can be easily mixed into total mixed rations (TMRs) to reduce enteric methane emissions. Decreasing enteric methane can have a sizable impact on decreasing the environmental footprint of milk production and meeting state regulations like California’s Short Lived Climate Pollutant strategy 6 requiring the dairy sector to decrease methane emissions 40 percent from 2013 levels by 2030. In addition, the U.S. is leading a multination effort called the Global Methane Pledge 7 which commits the U.S. to taking voluntary actions to contribute to a collective effort to reduce global methane emissions at least 30 percent from 2020 levels by 2030. Newtrient, in collaboration with the Innovation Center for U.S. Dairy, has reviewed emerging research and provided the following guidance for U.S. dairies on feed additive types (see Table 1). At the recent (November 16-17, 2022) Sustainable Ag Summit in Glendale, Arizona, DMI previewed an evaluation tool to help farmers decide which feed additive, if any, they should use. This useful and practical tool is focused on assigning points to the important decision factors of safety, efficacy, trade-offs, and benefits. This tool is not yet publicly available but is expected to be available in early 2023. The obvious questions dairy farmers have include: how well does the additive work, how much does it cost per cow/day, and is there any payback in terms of production efficiency?

Increasingly, dairy retailers like Nestle are working with dairy farms in their supply chain to provide a feed additive like Agolin so that Nestle can claim GHG emission reductions. USDA is also working with FDA to determine how to streamline the approval of additional additives for use by U.S. dairies.

TABLE 1

Can I use _________ to reduce enteric methane from dairy cows in the United States today? ADDITIVE REPLY MAIN REASON/CONSIDERATIONS

Not available in commercial quantities. Conditions of use not yet established. Unknown animal, food, and environmental safety risks. Known risks on animal nutrition above maximum inclusion level. Limited mitigation in diets with high lipid content. Usually requires diet reformulation. Not registered. The manufacturer is pursuing approval through the New Animal Drug Application (NADA) process requiring Food and Drug Administration (FDA review. Known risks on animal nutrition and health with increasing intake to achieve effective mitigation doses. Condition of use not clearly established. Requires diet reformulation. Low confidence (wide range) on expected mitigation response. Known risk on animal health with increasing intake from water, forages, and the additive to achieve effective doses. Risk of overfeeding can lead to animal death. Low confidence on expected mitigation response due to limited evidence on mode of action and efficacy.

Seaweed

No

Lipids

Yes

3NOP

No

Tannis

Yes

Nitrate

Yes

Agolin

Yes

Other potential solutions being researched: Vaccines: In 2018, the genome sequencing of rumen methanogens was completed, and this could lead to the development of vaccines that would decrease methanogens. Pasture-based systems have been the target of vaccine research because feed additives don’t work for grazing cattle. Current research in New Zealand has successfully generated antibodies studies in cows, but changes in the rumen have been minimal. 8

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Genetic selection: A literature review published in 2022 analyzed 17 papers published between 2015 and 2021 and found 40 heritability estimates and 32 genetic correlations for CH4 emissions from dairy cows. These genetic traits could be selected in future genetic selection plans to identify cows that generate less CH4 from enteric fermentation. Headgear: A UK-based company, Zelp, 9 launched a product in April 2022 that uses oxidation technology to capture and destroy the CH4 generated by cows. The company signed a partnership agreement with Cargill in June 2021. Zelp’s product is fitted onto a cow’s head and purports to capture approximately 95 percent of the CH4 emissions from the cow’s nose and mouth. It appears to be in limited release in UK, Ireland, Argentina, and the Netherlands. Energy Solar: Over the past decade, dairies have increased the installation of solar panels to supply some of their required energy, including water pumping and irrigation, ventilation, lighting, milkers and milk cooling. Solar panel costs have decreased approximately 60 percent over the past decade 10 and are expected to continue to decrease through 2025. 11 However, over the past year solar panel prices have increased around 20 percent due to supply chain disruptions, the war in Ukraine, and Chinese tariffs. 12 This uptick in prices is expected to subside as domestic supply improves in the coming years. Transportation: While vehicles on farms have been historically exempted and are a small source of GHG emissions in agricultural operations, the regulation of tractors continues to be a threat. Fortunately, the next generation of tractors is expected to be all electric and to incorporate automation and artificial intelligence. While several companies have developed electric tractors, the models that are currently available are designed for applications such as hauling, mowing, tilling, and jobs that do not require large tractors. 13 An example is an upcoming autonomous tractor built by Monarch Tractor. The company’s fully electric tractor is estimated to save the average farmer $45 a day in fuel. It can operate for 10 hours 14 and uses real-time, field-based alerts to reduce the time farmers need to scout their fields. 15 California is front and center for dairy GHG emissions reduction strategies in the U.S. A recent report, Meeting the Call, published in December 2022 by California Dairy Research Foundation (CDRF) outlines California’s plan to achieve significant reductions in GHG emissions in the dairy sector. CDRF is a non-profit public research management corporation leading research and science-based educational programs supporting an innovative and sustainable California and U.S. dairy industry. To date, the state of California has employed a comprehensive four-part strategy: efficiency and attrition, methane avoidance, methane capture and utilization, and enteric methane reduction driven by policy and fueled by significant investment. 16

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Over approximately the past 25 years, a market has been created to quantify and sell GHG reductions from agricultural practices. The commodity created through this process is called a carbon credit. A carbon credit is a metric ton of carbon dioxide equivalent in avoided GHG emissions or sequestered into the soil. An expanding array of carbon credit standards or protocols has been developed for agriculture. These protocols—which define the requirements for earning credits—currently exist for soil organic carbon, fertilizer management, anaerobic digesters, and enteric fermentation. The protocols that apply to dairies are listed below in the order of the greatest to least opportunity to generate credits for dairy producers. In an effort to bring credibility to the voluntary carbon market registries were formed. These registries created their own governance mechanisms and protocols and registered (tracked carbon credit tonnage generated from approved projects), and importantly, retired carbon credits when purchased by an entity (to prevent double counting). The registries operating in the U.S., some for over 20 years, are Verra, Climate Action Reserve, American Carbon Registry and the Gold Standard. Protocols applicable to U.S dairies are: Climate Action Reserve U.S. Livestock: This protocol was first available in 2007 and is currently on version 4, which was completed in 2013. It credits GHG emission reductions associated with the installation of a biogas control system for manure management on dairy cattle and swine farms. It has generated more than three million tons of credits for the voluntary carbon market from 72 projects. There is also a version of the protocol for the California Cap-and-Trade program, which has generated an additional 5.6 million tons from 78 projects in 18 states. Climate Action Reserve Soil Enrichment: This protocol was completed in 2020 and updated in 2021. It credits practices which reduce emissions and enhance soil carbon sequestration on agricultural lands through the adoption of sustainable agricultural land management activities. It has generated 22,225 tons of credits from one project. Verra Methodology for Improved Agricultural Land Management: This protocol was adopted in 2020 and is similar

CARBON CREDIT PROTOCOLS

Verra Quantifying N2O Emissions Reductions in Agricultural Crops through Nitrogen Fertilizer Rate Reduction: This protocol was completed in March 2013 and updated in September 2013. It quantifies GHG emissions reductions of nitrous oxide from agriculture in the U.S., as brought about by reductions in the rate of synthetic and organic nitrogen fertilizer applied to cropland. No credits have been generated using this protocol. According to the State of the Voluntary Carbon Markets 2022 Q3 Insights Brief, 493.1 million metric tons (MtCO2e) of carbon credits were transacted in 2021, totaling more than $1.98 billion in value. The market had a 143 percent increase in volume, 60 percent increase in average price, and 284 percent increase in value over 2020. 17 U.S. carbon market prices currently range from about $4 for low value credits like landfill gas capture to as high as $50 per ton for soil carbon sequestration projects. Most agricultural carbon projects receive between $9 and $15 per ton. The research company Bloomberg New Energy Finance forecasts that the price of carbon credits could be as high as $120 or as low as $47 per ton in 2050, depending on the types of credits that are available and accepted by voluntary and compliance carbon markets. The picture is even more optimistic in 2030, with prices as high as $250 per ton, driven by corporate demand of one billion tons per year. 18 The reason for the short-term peak in prices is the expected high demand for projects as newer protocols are adopted and scale up, as well as corporate buyers’ preference for nature-based solutions.

to the Climate Action Reserve Soil Enrichment protocol. It credits GHG emission reductions and removals resulting from the adoption of improved agricultural land management practices focused on increasing soil organic carbon storage. No credits have been generated under this protocol, but several organizations have expressed interest in using it to develop projects. Verra Methodology for the Reduction of Enteric Methane Emissions from Ruminants through the Use of Feed Ingredients: The first version of this protocol was completed in 2019 and updated in 2021. It credits GHG emission reductions generated from the suppression or inhibition of methanogenesis, achieved by the introduction of a feed ingredient into ruminant diets. No credits have been generated using this protocol though several projects have been registered. Gold Standard Reducing Methane Emissions from Enteric Fermentation in Dairy Cows Through Application of Feed Supplements: This protocol was adopted for piloting in December 2018. Its aim is to quantify reduction of CH4 emissions from enteric fermentation in dairy cows, as well as to quantify the impacts on emissions from manure handling. The methodology focuses on application of feed supplements to directly inhibit methanogenesis. No credits have been generated using this protocol. A project developer could use either this protocol from Gold Standard or the Verra protocol to generate carbon credits from the use of feed additives that reduce enteric methane emissions. Verra seems to be the preferred protocol based on the recent update to the protocol and number of projects registered. Climate Action Reserve Nitrogen Management: This protocol was first adopted in 2012 and updated in 2018 and 2021. It credits GHG emission reductions associated with the implementation of cropland nitrogen management best practices. As of October 2022, three tons have been generated by one project under this protocol.

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Food companies are under increasing pressure to reduce the environmental footprint of their supply chain, which is frequently referred to as insetting. The objective of insetting is to reduce the GHG emissions from a company’s supply chain and customers. 19 Four programs have been developed to credit GHG reductions from the food supply chain: the International Platform for Insetting (IPI), Science Based Targets initiative (SBTi), Walmart’s Project Gigaton, and the Gold Standard’s Value Change Initiative (VCI). These programs are described below. International Platform for Insetting (IPI): In 2013, the IPI was founded and was officially launched in November 2015 during the international climate talks in Paris. There are currently nine companies using the IPI: H&M Group, Kering, L’Oréal, Pur Project, South Pole, Native, Ecosphere+, Climate Partner, and Conservation International. IPI’s definition of insetting goes beyond GHG reductions and includes the improvement of livelihoods and preservation of biodiversity. 20 Based on recent conversations with food and agriculture companies, at least one additional well-known international food company is currently evaluating joining IPI. In March 2022, IPI published a Practical Guide to Insetting , a 37-page document that “provides clear steps for corporate action on climate change and nature loss.” 21 The Guide provides general information to help corporations develop an insetting program. For example, in the chapter about internal insetting journeys, lesson four discusses developing systems that can track and consolidate the benefits of insetting. Among the tools referenced to collect data and quantify the climate benefits of projects is the Cool Farm Tool. The chapter on monitoring and reporting recommends projects look at the GHG Protocol on Removals and Land Use and SBTi’s for Nature framework. 22

SUPPLY CHAIN INSETTING PROGRAMS

The program requires Walmart’s largest suppliers to set a GHG reduction goal and annually report their progress toward their goal. Walmart provides resources, such as emissions calculators, to assist suppliers in setting realistic goals that are in line with limiting global warming to 2°C. 26 Suppliers that make significant reductions are recognized by Walmart through public events and press releases, as well as being featured on the Walmart Sustainability Hub Supplier Recognition page. 27 More than 2,500 companies reported their targets and progress through Project Gigaton in 2021. 28 Value Change Initiative (VCI): VCI works “across sectors with a specific focus on how to account for Scope 3 emissions.” 29 VCI is motivated by the idea that “with more clarity on how to account and report on impacts achieved up and down value chains, companies can set and meet more ambitious targets and gain recognition for this leadership, providing more incentives for action and investment.” One of the current challenges with Scope 3 emissions is that they can be claimed by multiple organizations. For example, the reduction in GHG emissions from the production of a gallon of milk could be legitimately claimed by the food processing plant, the transportation company, and a national food brand. VCI plans to address this challenge by creating a centralized location for all supply chain data to be collected and reported. This approach would allow for each stage of the supply chain to pay for the reduction in emissions. Each step in the chain would be able to pay less per ton for the reductions, while the producer would receive more income through the aggregation of supply chain payments.

Science Based Targets Initiative (SBTi): The aim of the SBTi is to show businesses the steps they need to take to limit the increase in global temperatures to 1.5°C of warming. SBTi requires that all companies using its framework set goals to reach net-zero emissions no later than 2050. To officially partner with SBTi, companies must either set goals to reach a net-zero emissions or set goals that align with the requirements to limit global warming to 2°C or 1.5°C. 23 In September 2022, SBTi launched guidance to enable the food, agriculture, and forest sectors to set science-based targets. 24 The guidance provides food companies information on how to set a target and how to account for different types of emissions from the food sector, including land use changes and use of crops for bioenergy. It also provides guidance on how to validate and communicate targets. Almost 200 food and agriculture companies from around the world participate in SBTi, including ADM, Bunge, Cargill, Dairy Farmers of America, Danone, Mars, Nestle, Starbucks, and Walmart. Because of its broad adoption and aggressive goals, SBTi is expected to have a significant impact on U.S. dairies. As these companies implement their SBTi goals, increasing pressure will be placed on dairies to measure, report, verify, and reduce their emissions. Walmart Insetting Program: One of the most prominent insetting programs is Project Gigaton launched by Walmart in 2017. The objective of the program is to prevent one billion metric tons (a gigaton) of GHG emissions from being emitted throughout Walmart’s global value chain by 2030. As of 2021, more than 574 MtCO2e of emissions have been reduced or avoided. 25

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Measuring, Reporting and Verification (MRV) is a core component of all sustainability programs, from insetting to carbon crediting. The rigor of MRV programs is driven by how the GHG benefits are claimed. For individual dairy or general industry reporting, the rigor does not need to be that high. For participation in insetting programs, the rigor is moderate. For the generation of carbon credits, the rigor is higher. And for use in compliance markets, the rigor is the highest. Measuring or Monitoring is the practice of collecting data and information on actions and quantifying the impact or mitigation of those actions.

Reporting is the format a program uses to make the monitoring and reporting data accessible to stakeholders.

Verification is the review of the report with the measurement and reporting data. This is typically performed by an independent third party to ensure accuracy and conformance with the program’s procedures. Carbon credit programs each have their own, specific MRV requirements detailed in their protocols. To generate credits, these requirements must be followed. Because insetting programs are still evolving, the MRV requirements are in development. In September 2022, the GHG Protocol, the leading organization for GHG reporting for corporations, published five draft MRV guidance documents for companies to report GHG emissions associated with agriculture. 30 Some programs, such as SBTi, already state their preference for using this guidance. One of the guidance documents lists 104 different calculation resources that can be used to quantify GHG emissions from the land sector. The two tools mentioned at the beginning of this report—FARM ES and the Cool Farm Tool—are included in the list. 31 The Cool Farm Tool is also specifically referenced in IPI’s program. Both of these tools are expected to be accepted by insetting programs.

MEASURING, REPORTING, and VERIFICATION

Climate Smart Ag Grant Info

In February 2022, USDA announced the Partnerships for Climate-Smart Commodities, a program to finance partnerships supporting the production and marketing of climate-smart commodities through pilot projects lasting one to five years. On September 14, 2022, USDA announced the selection of 70 projects, with grants ranging from $5 million to $100 million. Nearly 1,000 partners are participating in the first 70 projects, and USDA is investing $2.8 billion in those projects. Another set of smaller projects targeting historically underserved producers is expected to be announced by the end of 2022. Dairies are participating in 17 first round of projects and will receive more than $765 million in funding. Texas dairies are participating in five projects and Pennsylvania dairies are participating in seven projects. These projects include partnerships organized by Land O’Lakes called Climate SMART (Scaling Mechanisms for Agriculture’s Regenerative Transformation), Carbon A List called Transforming the Farmer- to-Consumer Supply Chain with Climate-Smart Agriculture Partnerships, and Dairy Farmers of America called Scaling Methane Emissions Reductions and Soil Carbon Sequestration - A Value-Added Commodities Approach for United States Dairy. All of the dairy projects in Texas and Pennsylvania will be looking for additional producers to participate in their pilots.

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The following demonstrate four illustrative scenarios of

opportunities for dairies to monetize the implementation of new practices.

Scenario 1 Generate carbon credits using Verra Methodology for the Reduction of Enteric Methane Emissions from Ruminants through the Use of Feed Ingredients. In this scenario, the dairy feeds its lactating herd the feed additive Agolin, an essential oil compound that reduces CH4 emissions from enteric fermentation and also claims to improve feed efficiency. The dairy tracks the number of cows fed Agolin, the number of days the feed was provided, and the gross energy intake per animal. An emission factor from published research is then used to quantify the emissions reductions. This data is then assembled in a report and verified by an independent third party. Once approved, these credits could be sold to a company seeking to reduce its emissions.

SCENARIOS (IMPLEMENTATION / MONETIZATION)

Scenario 2 Generate insets for a food company participating in SBTi. In this scenario, the dairy feeds red seaweed (Brominata) to its lactating herd. The dairy then tracks the percent of the herd fed the seaweed product, the number of days the seaweed was fed, and the dose per pound of dry matter. This data is entered into the Cool Farm Tool, along with the other emission sources associated with the dairy, such as the amount of milk produced, the feed components for the herd, how manure is handled, what energy is used, and the transportation of inputs. This data would then be provided through

Allied to a food company. Prior to providing the data to the food company, an agreement would be reached about the compensation the dairy would receive for feeding seaweed to the cows.

Scenario 4 Generate LCFS credits for sale into the California LCFS program.

In this scenario, a Pennsylvania dairy installs an anaerobic digester and after “scrubbing,” injects the CH4 captured by the system into a natural gas pipeline. The digester operator collects all the data associated with the operation of the digester, including the number of cows, volatile solids content of manure, monthly average temperature, collection efficiency of the digester, quantity of CH4 metered into the pipeline, and days that CH4 was vented from the digester. This data is collated in a report. The report is verified by an independent third party. Once approved, these credits could be sold to a fuel company in California that needs to meet its compliance requirements under the state’s LCFS program.

Scenario 3 Generate carbon credits using the Climate Action Reserve U.S. Livestock protocol. In this scenario, a Texas dairy installs an anaerobic digester and flares the CH4 captured by the system. The digester operator collects all the data associated with the operation of the digester, including the population of cows, volatile solids content of manure, monthly average temperature, collection efficiency of the digester, quantity of CH4 metered to the flare, and days that CH4 was vented from the digester. This data is used to quantify the amount of CH4 destroyed by the flare and is collated in a report. The report is verified by an independent third party. Once approved, these credits could be sold to a company seeking to reduce its emissions.

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Regardless of the program(s) that a dairy farmer chooses to participate in, the farmer needs to clearly understand how their data will be managed. For regulatory driven programs, such as the LCFS, the data from the dairy could be made available through a public records request. For all of the offset programs described in this report, the MRV documents generated by the project are publicly available through the registry on which the project is issued. Some data can be redacted depending on the protocol and practices, but significant portions of the information is publicly available. For insetting programs, most of the data can be anonymized. However, the tools used by some of the programs might require the dairy to provide more data. For example, in the seaweed feeding example above, if the insetting company uses the Cool Farm Tool, the dairy operation would be required to report information from its entire operation in order to quantify and report its results to the food company.

DATA USE

CONCLUSION Opportunities for dairies to reduce their GHG emissions are rapidly expanding. On the supply side, an increasing array of standards can now measure and reward dairies for implementing practices and technologies that reduce GHG emissions or sequester carbon. On the demand side, virtually every company with retail consumers is under pressure to reduce its GHG emissions. Food and agriculture companies in particular are under intense pressure to reduce emissions from their supply chains. Finally, the offset market is expected to intensify and grow between now and 2030. In short, there are meaningful opportunities for dairies to take advantage of these market demands if they act soon.

NEXT STEPS Dairies interested in enhancing the environmental sustainability of their operations should consider these next steps:

1

Evaluate and select a tool like FARM-ES to conduct an initial GHG inventory of your dairy. This will help you determine the greatest opportunities for reduction and potential payback. Review the projects receiving USDA funds under the Partnerships for Climate-Smart Commodities 32 to determine if they are a fit for your operations and then reach out to projects that could provide funding to implement sustainability practices on your dairy. Learn more about the potential programs in which your dairy can participate. Resources such as The Context Network’s “Ag Carbon - Get Smart Stay Smart” report and subscription service may be useful to Allied members.

2

3

4

Select one or more insetting programs, such as the Value Change Initiative, to research in more detail.

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1. Innovation Center for U.S. Dairy. “U.S. Dairy’s Environmental Footprint.” https://www.usdairy.com/getmedia/42a3aeae-381e-48ba-bb91- a5fca1b77e0b/dairysenvironmentalfootprintpdf.pdf.pdf.aspx 2. Farm Environmental Stewardship. https://nationaldairyfarm.com/dairy- farm-standards/environmental-stewardship/

3. Cool Farm Alliance. Cool Farm Tool. https://coolfarmtool.org/coolfarmtool/

4. EPA. AgSTAR Livestock Anaerobic Digester Database. https://www.epa.gov/ agstar/livestock-anaerobic-digester-database 5. Kebreab, E., Feng, X. (2021) Strategies to Reduce Methane Emissions from Enteric and Lagoon Sources. CARB report 17RD018. 6. ARB. Short-Lived Climate Pollutants. https://ww2.arb.ca.gov/sites/default/ files/2020-07/final_SLCP_strategy.pdf

7. Global Methane Pledge. https://www.globalmethanepledge.org/

8. Beauchemin, K.A., Ungerfeld, E.M., Eckard, R.J., Wang, M. (2020) Review: Fifty years of research on rumen methanogenesis: lessons learned and future challenges for mitigation. Animal. 14:S1. https://doi.org/10.1017/ S1751731119003100

9. Zelp. https://www.zelp.co/

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