The impending pop of the climate bubble.
Prime Future 169: the newsletter for innovators in livestock, meat, and dairy
There is a bubble brewing at the intersection of climate and agriculture.
In the US alone, $3 billion in climate-smart farming grants have been doled out alongside many more billions from NGOs dollars, and more still in climate tech venture capital funding.
While I couldn't find a good breakdown on how much climate tech venture funding has gone into ag-related startups, it's safe to say a lot, considering that overall climate tech has seen more than $260 billion invested since 2018 (as of Nov 2022), and nature-based solutions are a significant part of the space.
The topic of climate impact is likely here to stay, but I'm skeptical that the money pouring into the sector is here to stay.
We all know the hype cycle:
Here's how the climate/ag convo feels:
And while there is a chance the US government-funded climate-smart farming program becomes another entitlement (oops - we aren't supposed to call it an entitlement if it's for farmers🤭), it is likely temporary. It's a throwing against the wall to see what sticks.
Which isn't necessarily a bad thing. Ideally we will learn some things that will be useful when the funny money dries up.
Yet, things feel bubbly on both the “agriculture is the problem” side as well as the “agriculture is the solution” side.
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One of the distinct features of this bubble is the rise of carbon markets as a mechanism for buyers to purchase carbon credits in order to offset their own emissions and the emissions of their supply chains.
As a reminder, Microsoft recently published a report on their view of the state of the world around carbon markets, which is important considering they are one of the largest buyers of credits globally. Microsoft noted that there are more marketplaces for credits than there are buyers or sellers of credits. That feels very, very bubbly.
While it isn’t (or shouldn’t be) controversial to say there’s a bubble brewing in climate/ag, in the spirit of learning out loud, I’ll also admit….
I do not believe carbon markets are a long-term climate solution.
I do not believe carbon markets will ever go mainstream.
I do not believe carbon markets have staying power.
(I do not like green eggs and ham. I do not like them in a box. I do not like them with a fox.)
I say this as someone who WANTS carbon markets to work. Another revenue stream for producers? Yes, do that. A market-based solution to a problem? Bless it.
But watching this concept evolve over the last several years has left me doubtful about its longevity.
So, let's talk about the reasons behind the skepticism and my operating assumption about what climate-smart ag looks like after the bubble pops.