Decarbonizing rice cultivation - the next battle in sustainable ag

Greg Michel is an investment partner at Cell Capital where he focuses on deploying the Investbridge AgriTech fund into Seed to Series A agri food tech companies in Europe, Middle East and Africa

What’s one area in climate you’d like to see more founders working on and investment going to?

Decarbonised rice 🍚

Methane is a greenhouse gas that’s now often correlated with agriculture. And with reason, since this sector contributes to roughly half of all anthropogenic methane emissions in the world.

While public attention is mainly focused on methane coming from belching ruminants, another part of agriculture is, so far at least, flying largely below the radar: rice cultivation.

So, where does the methane come from?

In order to answer that, we need a look beneath the surface of how rice today is cultivated.

Rice is mostly grown in fields that are flooded the vast majority of the crop’s life. The water has two side effects: 1) a positive for farmers, is to prevent the growth of undesirable weeds 2) the topic of the day, it acts as a quasi-hermetic blanket on top of the soil.

When flooded, the soil no longer has contact with the air (aka: anaerobic conditions). It’s the exact right environment needed for specific bacteria in the soil who decompose organic matter.

In these conditions, they start to multiply and produce methane which eventually bubbles to the surface or “evaporates” through the plant. How much of it depends on the soil composition but on average the equivalent is 5 tonnes of CO2 per hectare per harvest.

On top of this, many farmers still burn the rice straw after a harvest to prepare the field for the next harvest - further adding to overall emissions.

Solutions in sight - from farming techniques to GMOs

A) Practices

The good news is that we know pretty well how to effectively mitigate this methane. It’s mainly about preventing these anaerobic conditions from taking hold. There are two interlinked practices that are known for their effectiveness without sacrificing yield or even improving it. Both are very well researched and have been around for some time now :

• Systems of Rice Intensification (SRI): this technique has been proven time and time again to massively improve yield, particularly in developing countries, while at the same time lowering water needs. More on it here.

• Alternative Wetting and Drying (AWD): as the name says, it involves drying your fields a couple of times during the course of the harvest (see image below). There are some drawbacks like weed management and a jump in emissions of nitrous oxide but even with these taken into account, the overall the results are dramatic: for 3 or more drying events in the course of the season, the reduction in global warming potential is north of 70%.

Both practices also help save a lot of water, which in a world where droughts are ever more present, is a massive advantage.

B) Genetics

Another solution could come from evolution in genetics. GMO rice with a barley gene called SUSIBA2 (SUstainable SIgnaling in BArley 2) has been shown to boost yield and reduce methane emissions by around 50%.

Another GMO rice known as C4 targets fertilizer and water efficiency, needing considerably less of both to grow. Even though regulatory pathways for GMOs have been established, consumer demand for such products is still a question mark due to public misgivings around the topic.

Who is this interesting to?

Reducing methane emissions from rice cultivation has started to pick up more public attention recently - just check out the recent news about Bill Gates’s VC arm and Temasek launching a startup to decarbonise rice cultivation in Asia.

There’s governments putting in place regulatory policies and incentives to help drive change, producers who are scrambling to meet their net zero targets and farmers looking to generate additional returns.

• 👩‍⚖️ Governments:

  • The EU’s new Common Agricultural Policy is rewarding farmers who implement “climate-and environment-friendly farming practices and approaches (such as organic farming, agro-ecology, carbon farming, etc.)”

  • The Dutch, Australian and Vietnamese governments are also active in incentivising rice supply chains to move toward sustainability using SRI and AWD

  • The Swiss government is the first one making use of Article 6.2 of the Paris Agreement by helping farmers in Ghana switch to SRI.

• 🏭 Food producers:

  • Many large food conglomerates have now come out with their net zero targets and are scrambling to try and reach them. A particularly key topic for all of them is how to reduce scope 3 emissions via insetting. In rice specifically, many have joined the Sustainable Rice Platform (SRP). Members include Mars, Ebro, Olam, Sunrice and many others.

• 🌾 Cooperatives and farmers:

  • There is growing interest from this group to generate additional returns to boost their bottom line. The ability to sell carbon credits on the back of the implementation of climate positive practices is a big draw. Whereas this is mostly in emerging markets, it’s also true in Europe given the CAP’s payment system outlined above.

How do you go from drying paddies to carbon credits?

The idea here is fairly logical. If you can get paid as a farmer to store carbon in the ground using regenerative practices, you should also be paid for implementing practices that avoid the release of methane in the atmosphere.

The credits are not linked to carbon per se but get a carbon-equivalent weight. It being methane, they should be that much more valuable, and therefore fetch a good price, given the gas’ high warming potential.

The difference between “traditional” regen ag and rice

The idea here is similar, albeit quite different in principle, from the arable agriculture-centric regenerative plays such as Indigo, Soil Capital, Klim and Climate Farmers. The point is not to store carbon in the ground (though it also happens using AWD because the plants grow deeper roots), but to prevent methane from forming. This means there is a fundamental difference in how you approach calculation of emissions.

In regen ag plays, you need to establish your soil organic carbon baseline. This requires soil sampling. Then, you can either measure carbon through an outcome-based approach (again using sampling) or via a model-based approach i.e. an approximation of the carbon you’ve stored given soil composition and practices used (which ultimately needs a sampling as well to reconcile model with reality).

In rice, what you need to know is your soil's propensity to generate methane under various flooding conditions. So there is a need for robust “baselining” of sorts but then you don’t need regular sampling anymore.

Measuring, Reporting and Verification (MRV) - the key enabler

If you’ve dabbled in carbon credits before, you will have seen these three letters MRV everywhere. They are the very core of the credibility of any carbon credit generated. Anything being done to claim a carbon credit needs to go through this process. And with the rise of greenwashing claims, it is a massive reputational risk for everyone in the chain - carbon project sponsor, MRV provider, verification body (Verra, Gold Standard), and the ultimate buyer - if the claims are bogus or overinflated. There are a whole host of players in MRV (like Regrow or Agreena).

The vast majority of them use remote sensing i.e. satellite images (sometimes combined with drones) enhanced by computer vision algorithms. Remote sensing is pretty much the only really viable way of observing practices in the fields but it comes with drawbacks. The most used satellites today (Sentinel and Landsat) do not have a good enough image resolution to be precise enough. Likewise you can only observe practices and make estimates. You’ll only actually know the exact carbon stored in the ground once you’ve done multiple soil sample at some depth (1 to 1.5 meter) in a field. This will change with the launch of new satellites equipped with ground penetrating radar capabilities but for now, no solution is perfect.

The specific issue in rice

Bringing this all this back to rice, the difficulty is that if you want to sell carbon credits on the back of climate positive practices is to be able to measure two things:

1. 🌊 The water level in paddies: This is complicated as you need to be able to measure not only visible water but also water present under the soil surface as well. The difficulty level in getting this done for the whole harvest is compounded because as the crop grows, it covers the soil/water more and more.

2. 🌡 The intensity of emissions: You need to have measured on the ground what actual methane emissions correspond to what soil, flooding level and, crucially, fertilizer use (since it has a large impact on nitrous oxide formation during the drying). This needs to be done in all major areas of the world where rice is grown. There is no shortcut here, any player aiming to achieve proper scale needs to go through this.

Change of practices - the biggest challenge and the key to success

Assuming you’ve cracked the two above meaning you now have reliable tech which forms the base of a model which in turn is verified by Verra or Gold Standard. What you need to do is persuade farmers to actually implement these practices.

Anyone dealing with ag will tell you that changing practices takes time and the right incentives. Often the impetus for change comes from the threat of sticks: new regulations or offtakers in integrated supply chains dictating growing protocols. But carrots work just as well and are the most powerful: anything that is proven to put more money in the pockets of the farmer will go a long way. The perspective of additional revenues through the sale of carbon credit is a strong incentive for farmers to adopt SRI or AWD for sure but it doesn’t mean that it’s going to guarantee fast adoption.

You’re dealing with generational knowledge that’s been passed on for centuries and a highly fragmented landscape of small holder farms. This is where picking the right implementation partners locally is key. They are the ones who will do the work on the ground to convince farmers and cooperative to jump on the bandwagon. This can be governments, local authorities, cooperatives, food groups or carbon project promoters. The quality of the partnerships and the partners’ ability to push adoption at scale is what will decide the success of anyone who decides to tackle methane emissions in rice.

Blank space

So far this is a wide open space with barely any startups having a proper go at it. The only company closest to cracking it (to the best of my knowledge) is CarbonFarm, which came out of Entrepreneur First. The rest of the competition field are companies that have few carbon projects in rice as part of their wider carbon portfolio. In there you find Terra Global Capital, Regen Network and Indigo for example. An adjacent company to watch but focused on forestry is Pachama.

At Cell Capital, we're excited by the possibilities of reducing methane emissions from rice. If you're building something in this space, please feel free to reach out directly at [email protected] for a chat.

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