Recommendations on Beneficial Management Practices to Natural Climate Solutions Fund from the Nature-based Climate Solutions Advisory Committee

Recommendation Summary

Question asked of us: How can the Natural Climate Solutions Fund (NCSF) better advance the adoption of climate-focused Beneficial Management Practices (BMPs) in agricultural areas and ensure that value is attached to BMPs that increase soil carbon and reduce greenhouse gas (GHG) emissions? What are the barriers to adoption and how can we mitigate them?

Specific Recommendations:

1. Current government adoption incentive mechanisms (the environmental stewardship elements of Canadian Agricultural Partnership) require evaluation regarding their efficacy in increasing adoption levels, as well as whether they are working on desired BMPs of relevance to NCSF. The program also requires examination of its structure in terms of its requirements (i.e. Environmental Farm Plan), and its level of funding for specific BMPs. This program has been in place since 2008 and has not been properly evaluated regarding its effectiveness in increasing BMP adoption, nor its success in actually generating environmental improvements.
2. Canada’s Next Agricultural Policy Framework must be developed to accelerate Natural Based Climate Solutions (NCS) specifically the focus on NCS related BMPs and their adoption. This development should consider information generated in the first recommendation. The development should also consider the need to generate data, pilot and experimentally test in the “field” new incentive mechanisms, focus attention on extension services and how to make them more effective, and enable functioning markets to reward landowners who adopt climate smart practices.
3. Consider the construction of linkages between the Two Billion Trees Initiative and agricultural NCS. This recommendation could feed back into the second recommendation where the use of trees on agricultural land to advance NCS as well as other benefits could be considered or designed as BMPs.
4. Some recommendations for specific BMPs in agriculture are: a) linking projects in the NCSF to BMPs not eligible for current and future regulatory/voluntary markets; b) Some BMPs in the OFCAF that reduce N₂O emissions should be carefully considered as some may actually increase N₂O emissions; c) include subsurface band placement of nitrogen as a BMP for N₂O emission reduction; d) consider projects that recycle nitrogenous compounds from wastes generated in the food system and urban environments back to land for food production; and e) Consider BMPs that encourage naturalization of marginal agricultural landscapes to reduce N₂O emissions and promote carbon sequestration.

Recommendation 1 Narrative

Governments have invested significant resources into researching and designing BMPs in the agriculture sector to address various environmental problems. However, very little research effort has been allocated to understanding or increasing their adoption by producers. This would involve examination of adoption processes by Canadian producers as well as the design and evaluation of policies and programs that provide incentives (either financial or otherwise) to increase levels of adoption. We note that an extensive literature exists on adoption of land management practices, however, much of this literature deals with regions of the globe beyond Canada. This distinction is important as environmental, agronomic, policy, and socioeconomic conditions associated with many of the studies are different than those found in Canada. However, the literature does not clearly identify a set of consistent factors that explain adoption behavior.

Current information on barriers to BMP adoption by producers in Canada points to the costs borne by the producer in implementing most BMPs as the most important reason.^{Footnote 1} This is supported by numerous surveys of producers that provide qualitative or quantitative information on barriers to adoption, as well as studies that examine the actual costs of adoption of most BMPs.^{Footnote 2} However, we acknowledge that other factors likely play a role as well. However, these factors have not been well-researched in Canada for many BMPs or regions.

Current Canadian BMP adoption incentives involve a mix of both public and private programs with the public efforts taking place at largely provincial and municipal levels. The largest “program” in the public adoption policy space involves the environmental stewardship elements of Canadian Agricultural Partnership (ESCAP) which with some exceptions, provides “cost share” funding (1/3 federal, 1/3 provincial, 1/3 producer) to producers to adopt BMPs. These have been in place since the first partnership agreement (the APF) in 2003 and with minor tweaking, have essentially remained static since the APF.^{Footnote 3} These programs are operated at provincial levels, which has the advantage of addressing provincial or regional environmental concerns, but add the complexity that it is relatively difficult to gather detailed information on adoption across jurisdictions for comparative purposes. These ESCAP programs are the largest one by funding level in most provinces of Canada.

BMP adoption incentive programs are also operated by various non-government organizations. Many of these (but not all) suffer from issues relating to additionality and permanence, which of course is something of considerable interest to the NCSF. They also have not been formally evaluated in terms of their effectiveness in incenting BMP adoption or the generation of environmental improvements.

The ability for the NCSF to advance climate focused BMPs will also be affected by the range and discrepancy in policies and regulations pertaining to remaining intact habitats such as wetlands and grasslands embedded in agricultural landscapes. Additionally, policies and regulations that apply to the restoration of these habitats within agricultural landscapes vary widely. For example, wetland policies in Atlantic Canada are rigorous and firmly based in adoption of the mitigation hierarchy of avoidance, minimization and compensation. In the Canadian prairies, policies and regulations range from full protection of certain wetland classes to agricultural water management strategies that in effect facilitate wetland drainage. An added complexity is how these policies and regulations are applied to private vs public lands, and how in some cases agricultural lands and practices are omitted and/or grandfathered. Lastly, for practices involving the management of water, such as wetland restoration, implementing these typically requires going through a permitting process. In certain circumstances, it is difficult to deliver this type of programming due to regulatory barriers.

The most critical issue regarding both the public and private BMP adoption programs is the lack of evaluation of their effectiveness, both in terms of assessing their eventual environmental impact and the presence of the program(s) on increasing adoption levels of desired BMPs. Program or more specifically impact evaluation would lead to information that would allow the programs to evolve or adapt as both environmental and socioeconomic conditions in the sector change, or as knowledge is gained.^{Footnote 4}

Related issues involve:

1. Determining and understanding the degree of permanence in land management systems that incentive systems provide for adopting and implementing BMPs. For example, once adopted by a landowner, how long will the BMP remain on the land, and is this longevity influenced by the structure of the incentive system in place? Further, what role would other factors play in affecting this longevity (i.e. presence or effectiveness of producer social networks);
2. Eligibility of land managers for Canada’s largest adoption incentive system, the ESCAP, is acquisition of an Environmental Farm Plan (EFP). Adoption levels of EFPs are not well understood due to lack of analysis arising from data confidentiality requirements, among other issues. Adoption rates reported by Statistics Canada through the national farm census and subsequent surveys shows low levels of EFP adoption in the west, moderate levels in Ontario and higher levels in Quebec and the Maritimes. High adoption levels are likely due to cross compliance policy measures (especially in Quebec). But the fact remains that a major constraint in increasing adoption of BMPs could be this EFP requirement. Research in Alberta suggests that EFPs are adopted by a particular subset of producers. Questions remain about whether having an EFP results in actual BMP adoption, and if EFP recommendations regarding suggested BMPs are actually implemented by participants.
3. Many suggested BMPs provide private benefits to producers (e.g. precision farming equipment, zero tillage in some regions, etc.). Other BMPs provide largely public benefits and their adoption usually imposes high implementation costs on the adopters (e.g. wetland restoration). These latter BMPs are the ones that need detailed focus in NCSF, especially in policy mechanisms that provide financial incentives, as they could provide significant co-benefits that might not be captured in the bottom line of the adopters.

Recommendation 2 Narrative

A study by Bain and Nature United underscores producers’ need for incentives to adopt new practices, financial support to bridge the transition, and extension services to adopt the right practices. Cost-share programs are just one mechanism available to satisfy these needs, and the Government of Canada provides a significant share of the financing for cost-share programs. Adoption incentive programs could be better designed to enable producers to evaluate the environmental and economic implications of practice adoption on their farms or ranches in future agricultural policy frameworks (APFs). Their redesign should consider:

• Use of a science-based NCS Hierarchy to provide preferential cost-share funding for initiatives with higher GHG mitigation potential.
• Support monitoring and evaluation of cost-share projects according to agri-environmental impacts and ROI by region and soil type. Use this information in evaluating effectiveness.
• Develop an interpolated system of technologies to build robust baseline measurements of SOC and on-farm management practices.
• Scale and accelerate investment in NCS science, social science, innovation, and measurements.
• Consider the use of field experiments to test various policy/program solutions to increase the adoption of desired BMPs.

Financial incentives, however, are but one component of an overall adoption implementation framework. Another component that is not well resourced or understood in Canada are extension services. Agri-businesses and agri-food companies are working to meet EGS targets and reduce climate risks in their supply chains. Advice on practice adoption could be linked to new revenue streams, price premiums and market access. Trusted advisors and educators who are experienced with NCS practices could be critical partners in this work. The new APF could consider an expanded role for extension efforts in increasing BMP adoption. This could involve:

1. Expansion of support for independent extension services including programs that combine advisory services with peer-to-peer learning and training on NCS adoption, including certification programs for trusted advisors to connect producers to carbon program and market opportunities.
2. Expansion and strengthening of Living Lab networks to develop a deeper understanding of the potential role and effectiveness of extension in increasing NCS practices, and ensure trusted advisors can participate in these programs. For BMPs focused on water quality and quantity that also offer NCSs, extension services via the recently proposed Canada Water Agency should be explored.
3. Establish a multi-stakeholder taskforce (producers, government, industry and NGOs) and advisory committee to devise approaches for knowledge development and translation on NCS adoption, and to oversee the development of education and certification programs for trusted advisors.

The renewal of the APF could consider enabling markets to value and reward the adoption of climate-smart practices. Canada is lagging globally in positioning its agricultural sector to be rewarded and recognized for climate action. Whereas producers in the United States, Europe, Brazil and India have access to a range of agriculture-based carbon market projects, value chain interventions, and climate-friendly certification and labelling programs, Canada has barely scratched the surface of these opportunities. There is a need for the Government of Canada to take action to enable markets to recognize and reward climate-smart choices by actors along agri-food supply chains. This recognition could involve:

• Facilitate public-private partnerships to test and implement innovative financial instruments that show promise in improving the climate resiliency of agri-food supply chains (see Bayer CIG example).
• Support research on life-cycle analysis (LCA) of Canada’s agri-food supply chain’s GHG emissions (e.g., EU’s work outlined in Farm to Fork strategy and the EU Methane strategy).
• Invest in knowledge sharing among supply chain actors (especially producers) to improve awareness about carbon opportunities, their associated risks and the impacts on businesses (e.g., Purdue University explainers on carbon markets).

Recommendation 3 Narrative

Canada’s Two Billion Trees program is an opportunity to embrace the emission reduction potential of nature while creating rural economic opportunities. Some of the most promising near-term mitigation opportunities available involve planting trees in agricultural lands (7.42 Tg CO2e/yr in 2030). Incorporating trees into agricultural landscapes also offers many co-benefits, including increased crop yields, soil quality, biodiversity conservation, and improvements in air and water quality.^{Footnote 6}

Building linkages between the Two Billion Trees Initiative and the Agricultural Climate Solution program, and incorporating incentives for planting and stewardship into initiatives supported by the NCSF, will help maximize pre-2030 emissions reduction, while also increasing the availability of plantable space and enhancing the benefits Canadians and our climate from this investment. Thus, many tree planting opportunities on private land can be considered both on agricultural landscapes but also through involving private woodlot owners in the forestry sector. Perhaps these opportunities could be considered BMPs and included in the suite of practices considered by many farmers.

Recommendation 4 Narrative

Linking projects in the NCSF to some BMPs not eligible for current and future regulatory and voluntary markets could foster achieving reduction goals. To this end, national and provincial offset markets, regulated and voluntary, should be used to inform BMP practices for NCSF.

Currently the On Farm Climate Action Fund (OFCAF) is limited to five BMPs that reduce N₂O emissions from agricultural soils (nitrification and urease inhibitors, split application, organic amendments, legumes in rotations, and moving from fall to spring fertilizer application). However, there are great uncertainties and nuances in using those BMPs to actually reduce emissions. In fact, greater N₂O emissions could also be achieved by their use. For example, using forage legumes in an annual rotation used to supply N to a subsequent grain crop can result in as much N₂O emitted as using conventional N fertilizers.^{Footnote 7} Projects proposing the use of the current five BMPs need to be carefully examined to ensure they have a good likelihood of emission reductions.

There is Canadian research supporting consideration of additional BMPs that reduce N₂O emissions that are not eligible for OFCAF funding. Subsurface banding has been the common BMP used by grain producers on the Prairies for three decades because nitrogen losses are less with subsurface banding than surface application and incorporation. There has been a disturbing trend to use surface application using custom applicators. Surface placement of N fertilizer should not be eligible for NCSF; rather, projects promoting subsurface banding should be encouraged.

Organic amendments such as livestock manures are already being used across Canada. However, there are supply constraints with livestock manures. The utilization of urban and municipal sanitation wastes, as well as digester effluent/solids, could be new sources of organic amendments that can recycle nitrogen and other nutrients to the soil and back through the food system. Their use could reduce the need for application of N fertilizers and the amendments could result in more stable forms of carbon in the soil, which will contribute to emission reductions.

Complex agricultural landscapes contain areas of low productivity, yet farmers invest resources and inputs (fertilizers, seed, tillage, pesticides, harvesting) in farming these areas. Producers invest in these areas out of practicality and not economic reasons. Low productivity inherently means high GHGs relative to output. Examples of such areas include depressions, drained wetlands, eroded knolls, entranceways and saline areas. Naturalizing such areas can reduce N₂O emissions from lack of N fertilizer addition. It can also mean increasing soil organic carbon from increasing productivity through perennial cover and encouraging stabilization processes. Projects that encourage the adoption and monitoring of naturalized landscape areas in the NCSF can help achieve emission and sequestration goals.

Related link

• Nature Based Climate Solutions Advisory Committee