What is Carbon Intensity: Understanding the Basics
Before we get to defining carbon intensity, let’s talk about why it matters for ag and biofuel producers.
The federal government has created tax credits for ethanol producers and Sustainable Aviation Fuels (SAF) under sections 45Z and 40B, respectively, of the Inflation Reduction Act. These tax credits unlock billions for the biofuel industry, but they are contingent on reporting carbon intensity scores.
So what is carbon intensity?
Carbon intensity is how much carbon dioxide and other greenhouse gases (CO2e) is released in relation to a specific activity.
In the case of farming, carbon intensity is how much carbon dioxide is released by growing, fertilizing, irrigating, transporting, etc. grains.
What is a carbon intensity score?
Right now, for biofuels, a carbon intensity score is a calculation of how much carbon dioxide is released in the farming, transportation, refinement, etc. of the grains that eventually become a biofuel.
We say “calculation” instead of “measurement” because it is currently not standard practice to have CO2 sensors on every plant, field, truck, refinery, etc.
How is a carbon intensity score calculated?
There are a handful of mathematical models that are accepted to calculate carbon intensity scores.
In the US, the most widely accepted model is called the GREET model (Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model).
While the GREET model is widely available for free as a spreadsheet, it requires 85+ inputs, and there are multiple variations for SAF, the California Low-Carbon Fuel Standard (LCFS), et al.
Companies like AgIntensity use mathematical models to calculate a score range based on fewer inputs that are more accessible to growers. This will allow growers to calculate carbon intensity scores off of a variety of models (SAF, LCFS, etc.) with less hassle.
How are carbon intensity scores certified?
In many cases carbon intensity score certification is arbitrary right now.
The federal government has not released standards for certifying carbon intensity scores, so any company offering score certification is basing that certification on a private or even self-created standard (as of the date of publication of this article).
Think of it like getting a degree from a college that isn’t accredited. Does it mean something? Maybe - the student probably learned a lot at that college. Will it hold up to a state or federal standard? We’ll see, but we wouldn’t bank on it.
How are carbon intensity scores verified?
This is one of the questions we get most frequently, if these scores are created using mathematical models, how will anyone know if they’re true?
There are a few answers to this question:
Models like GREET have been tested for accuracy and are already accepted by the federal government.
Carbon intensity scores aren’t required to be proven… Yet.
For us, we would think of “verification” or “proof” as having a true measurement of carbon dioxide output related to farming and biofuel production. This would include CO2 sensors in every field, on every combine, in every big rig exhaust pipe, etc. Even the farmer’s own breath would have to be measured for true verification.True verification is unlikely.
In reality, the government will probably never require true verification (down to the carbon intensity of the chicken that the farmer had for dinner last night, how much carbon was released raising it, so he could move and breathe and farm the next day). It’s more likely that the government will require some level of verification using sensors or satellites that are far less invasive and more realistic.Honesty is already required.
Just like filing your taxes or being an eyewitness in court, the government will likely require honesty in reporting under penalty of perjury. If you put accurate numbers into your calculation, to the best of your knowledge and ability, then your score will likely be accepted - subject, as always, to some level of audit or retroactive inspection.What about clawback?
Similar to reporting “business miles” on company vehicles, there is a point at which over-examining numbers would not make sense except in cases of likely or obvious fraud. Did you really drive from your office to Shirley’s Diner to meet with Jim for a hamburger and discuss business for more than 51% of the meal? It would probably take IRS agents more manpower than they have and are willing to exert to claw back the 67 cents per mile you claimed.
That said, two important notes: we’re not your CPA or lawyer, and as our CPA says, “it’s never wise to play the audit lottery.”
Be honest in your scores, and no one should have any problems.
Is carbon intensity scoring worth the hassle?
Yes.
Sorry, let’s be a little more nuanced in our answer: definitely yes.
The entire industry is moving toward sustainability requirements. You could even argue that all industries are moving toward sustainability requirements.
Carbon intensity scoring isn’t about saving the planet, though it’s nice if that’s something you’re interested in.
Carbon intensity scoring is about staying in business.
Right now, it’s being incentivized with tax credits. If we’re smart, getting ahead of it, there’s probably money to be made in carbon credits or offsets for those who take this seriously as early adopters.
For everyone else, carbon intensity scoring will come as a requirement, another government regulation you have to comply with.
Just like the government subsidized cars with airbags in the ‘80s, but now they’re a standard requirement.
Early adopters make money. Late adopters get regulations.
Whether anyone agrees with climate change or scoring requirements doesn’t really matter.
The Inflation Reduction Act has it. California is going to start requiring it. The EU has their standards. Different administrations might speed up or slow down these requirements, but just like airbags, they’re not going anywhere.
If growers want to continue to feed and fuel the whole world, they’re going to have to report carbon intensity scores.
But here’s the good news:
Growers are already doing the work. You adopt new practices and technologies because you’re good at what you do.
Carbon intensity scores are just about putting a number to what you’re already doing.
We might learn new practices along the way, but we’ve never met a grower who isn’t eager to do right by the land that gives them their livelihood.
Carbon intensity scores are going to show that growers have been leading the way for longer than anyone realizes.
