DMI’s NZI DS4G eyes climate policies, supply chain partners in net zero fastlane: but who gets the carbon credits?

Author’s Note: This is part two in a multi-part series about DMI’s Net Zero Initiative and Dairy Scale for Good implementation. Part one previously covered some of the 12- to 13-year history as well as the ‘scale’ approach for getting the industry to net zero faster. 

By Sherry Bunting, Farmshine, April 30, 2021

ROSEMONT, Ill. — The official launch of DMI’s Net Zero Initiative (NZI) in October 2020, and World Wildlife Fund’s (WWF) dairy net zero case study published in January 2021 (and corrected in February for a math error that overestimated the industry’s total CO2 equivalent emissions) are two of the mile-markers in farm visits and partnership development since Caleb Harper was hired by checkoff in May 2020 as executive director of Dairy Scale for Good (DS4G).

In those 11 months, Harper reports visiting 100 dairy farms representing over 500,000 cows in 17 states, processing 350 manure samples, and gathering over 8000 ‘data points.’

Earlier this month, Harper, along with Dr. Mike McCloskey, presented a “value proposition” for the dairy industry during a Balchem real science lecture about ‘net zero carbon emissions implementation on the farm.’

McCloskey of Fair Oaks Farm, Fairlife and Select Milk Producers has chaired the DMI Innovation Center for U.S. Dairy’s Sustainability Initiative since inception 12 to 13 years ago.

In short, DS4G pilots are setting up through “sponsorships” from large dairy-buying partners on large farms within their own supply chains. DMI’s former MOU sustainability partner, the WWF, makes the case in its report that “achieving net zero for large farms is possible with the right practices, incentives and policies within five years (by reducing) emissions in enteric fermentation, manure management, feed production and efficiency, and energy generation and use.”

“This value proposition for dairy cuts two ways,” said Harper. Farms of 2500 cows or more can go toward digesters tied to renewable fuel production, while farms 2500 cows and fewer can move toward a digester model that handles food waste, receives tipping fees and generates electricity.

Both models will depend on a combination of government subsidies, low carbon renewable fuel standards, electrification of the U.S., supply chain sponsorship and sale of resulting carbon-credits, according to information presented by Harper and McCloskey.

NZI aligns with climate policies announced and anticipated from the Biden administration, which mirrors what is coming out of the United Nations’ Food Summit, and World Economic Forum (WEF) Great Reset.

WWF has long been tied closely with WEF setting a global agenda and with the World Resources Institute (WRI) that evaluates science-based targets for companies making net zero commitments to “transform” food and agriculture.

“Innovative models are just now starting to bear fruit,” said Harper, citing McCloskey as a forerunner of “building out” the anaerobic digester concept.

For his part, McCloskey said they “counted on incentives” back in 2008 to be able to grow and “be the catalyst.” He talked about a future sustained by marketing the new products created as substitutes for fossil fuels, mined fertilizers and other products, as well as continuing to take in other carbon sources instead of landfills.

“We have the vision to set this all up, to perfect the technology and get it cheaper… so when we’re all doing the same things, incentives won’t be needed,” said McCloskey looking 10 to 20 years down the road when he sees this “surviving on its own.”

Harper described distributive models from the WWF report. One “being born” in California incorporates separate large scale dairies in a cluster – up to 20 or 30 farms within a 20-mile radius — each with its own digester that can “drop compressed methane into a transmission line to a centralized gas cleaning facility.” In this model, dairies either have a manure or land lease contract or an equity position in the operation.

This model, he said, relies on “societal values of green energy.”

Another distributive model being born in Wisconsin is described as a central digester with adjacent gas cleaning and upgrading. In this model, the manure from multiple farms is sent to the centralized digester by pipe or truck.

“These dairy clusters become ‘green’ clusters,” Harper elaborated. “So, it’s not just about the milk. They become a primary source of green energy inside of a state or nation.”

Food waste co-digestion is part of a different DS4G model driven by states adopting regulatory policy to keep organic material out of landfills. Harper said dairy farms can take advantage of such policies by centralizing waste collection for co-digestion.

“As we think about reducing emissions… a big part of that is bringing things grown off farm on farm, destroying their greenhouse gas potential, and taking credit for that ‘sink,’” Harper explained. 

However, in this example, the co-digestion is what gives the dairy its carbon credits, so technology that can handle higher waste-to-manure ratios and state / local regulations allowing farms to handle the off-farm waste are necessary. Such details were not discussed by Harper, and are presumed to be what large scale dairy pilots address.

The WWF case study showed bottom line profit and loss of $500,000 annually for a 3500-cow dairy. Harper believes this is a “conservative” estimate based on electricity production. With the right policies in place, the renewable natural gas value proposition would produce higher returns, according to Harper.

The renewable natural gas market will still be building over the next five to 10 years, he said, so these models also rely on renewable fuel credits and other fixtures they expect to be part of the Biden administration’s climate policies.

Manure handling technologies apart from the digesters were also discussed, which according to the WWF case study, represent one-third of both emissions-reduction and income potential.

Harper is actively engaged in studying the differing chemical profiles of manure between farms, regions, and states — saying he wants to “understand manure” — with and without digester.

Looking at scale, Harper talked about adapting municipal human waste treatment systems for processing manure on large dairies. He highlighted what is called the “omni processor” — a Bill Gates investment to separate small scale municipal waste and create drinking water using a spindle with multiple discs heated to where nonvolatile solids are in the dry matter and the rest are captured as they volatize.

One “off the shelf technology” Harper is focusing on is already in use to produce discharge quality water. It is the membrane system of ultrafiltration (UF) and reverse osmosis (RO) — the same UF RO technology McCloskey pioneered in milk processing to remove water from milk for transport and refine elements for value-added products.

Stressing the large amount of water in dairy manure, Harper said UF RO “is a process designed exactly for de-watering.” Whether this process occurs before or after the digester, he said it is part of “the technology train, so whatever you are tagging onto is working more efficiently, processing less water and more nutrients and refining more things to find value in.”

All of these technologies, according to Harper, can build on each other and tie together with “electrifying” the United States, strengthening low carbon renewable fuel standards, adopting renewable fertilizer standards, and monetizing carbon. 

One unsettled aspect in this regard, however, appears on page 9 of the WWF case study and was not mentioned by McCloskey or Harper in their presentation. 

What happens to farmers when their carbon reductions and removals become part of the supply chain in which they sell their milk, or are sold to companies as part of a milk contract?

The WWF report makes this observation: “There could be significant interest from large dairy buyers in reducing embedded carbon in their products by purchasing value-added carbon ‘insets’ directly from farmers or cooperatives within their supply chains. Were companies to work closely with the dairy industry to advance these initiatives and enable greater GHG reductions, they could potentially use these measures toward meeting their own reduction targets … and incentivize dairies to embrace net zero practices through long-term contracts or other purchase or offtake agreements.”

That’s an aspect of the tens of millions of dollars in dairy pilot partnerships pledged by Nestle, Starbucks and potentially others for their own supply chains through DMI’s NZI DS4G.

WWF explains further in its report that, “Such agreements could provide stability and collateral as dairies consider investing in technology like anaerobic digesters. Some of these companies might even be interested in finding ways to bundle and purchase carbon credits produced on dairy farms where they buy milk.”

Such incentives, contracts and bundling – starting with DS4G pilots — leave dairy farms exactly where in the supply chain?

The WWF report states it this way: “Such purchases would shift the emissions reductions from the farmer to the company. This would result in the dairy essentially selling the credits that would enable its net zero status, as the emissions reductions cannot be double counted. 

“So, if the reductions are sold, the farmer can no longer be considered net-zero. This is a conundrum that is beyond the scope of this paper,” the WWF report admits.

This important detail in the NZI DS4G implementation was not mentioned by Harper or McCloskey.

Meanwhile, these initiatives also rely on climate policy, with former DMI executive Tom Vilsack now having crossed back over into government as U.S. Ag Secretary just 20 months after seeking pilot farm funding and Net Zero target policies when he testified before the Senate Ag Committee in June of 2019 while employed by checkoff as CEO of the U.S. Dairy Export Council.

President Joe Biden has said USDA is a key department in his administration’s climate action policies.

To be continued

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