There are 7.6 billion people on the planet today. By 2050, there are projected to be 9.7 billion — or put another way, in just thirty years we will add the equivalent population of seven United States. The world’s most credible energy forecasting entities predict a global increase over that time not only in demand for energy, but demand for fossil energy. Even with steady increases in energy efficiency and a massive increase in renewables, consumption of fossil fuels will grow. That means carbon dioxide emissions won’t be reduced significantly without some technology to do so.

The only technology to deeply reduce CO2 emissions from fossil fuels is carbon capture and storage. CCS can control and sequester nearly all greenhouse gas emissions from an industrial facility.

Is this vision realizable? Indeed: the United States has more than 700 years’ worth of capacity in deep saline formations and similar geologic strata to store the carbon dioxide we generate.

Importantly, capturing carbon dioxide costs money, and people would rather get value for the CO2 they capture than put it in the ground for nothing. To the rescue comes CO₂-EOR. About 4 percent of total U.S. oil production today comes from enhanced oil recovery via CO2 injected into oil formations. We have over 100 years’ worth of storage capacity in oil formations alone, and the more we look, the more we find. We are by far the world leader in this technique. The United States has been producing oil with CO2 for 45 years, and the injected gas is proven to stay trapped underground.

Other countries have coal and oil deposits located near one another, where coal can be used to produce electricity and the CO2 can be captured and easily shipped by pipeline for production of oil.

The above facts have more to do with whether the world meets climate targets than does increasing efficiency and use of renewables.

There are people around the world pushing divestment from fossil fuels because of climate concerns. To serve their goal, they instead ought to be pushing for investment to improve clean fossil fuel technology. However, policies today all over the world favor renewables as the preferred energy source. The International Energy Agency found that in the decade from 2004-13, world governments provided nearly $2 trillion in renewables subsidies, while investing barely 1 percent of that to developing CCS technologies.

In the United States renewables have received government support in the form of mandatory purchases (through the Public Utility Regulatory Policies Act), set asides (through state renewable portfolio standards), tax credits, loan guarantees, grants, and other programs. CCS has similar climate benefits, but despite its importance is not on an equal footing.

Investment in renewables has borne results. Costs have come down and market penetration has gone up. The same is expected for CCS. That is the aim of the Department of Energy’s research and development programs: to bring the costs down for CCS, and to “mature” the technology across a variety of applications and circumstances.

Last year, the first full-scale CCS project on a power plant in the United States began operation — the PetraNova project at the W.A. Parish plant in Texas. The technology by all reports is working very well. It is the second power plant in the world to deploy full-scale CCS, the other being SaskPower’s Boundary Dam Unit 3 in Saskatchewan, Canada. Both first-of-a-kind projects offer lessons and efficiencies for next-of-a-kind projects.

To add a final acronym, both also are CCUS projects — carbon capture, utilization, and storage. At both facilities, the CO2 is being used to produce crude at nearby oil fields. Think of CCUS petroleum as “low carbon oil.”

It may be surprising to know that there are parts of the world today that would love to store CO2 because of its potential for oil production, if only they could get the gas. We have too little captured carbon dioxide because of a gap between the cost of capture and what drillers will pay for it. In the United States, Congress is considering increasing current tax credits to close that gap. Another factor to change the economic equation is research: finding ways to get more oil per molecule of CO2 injected. So is development: recent lab results are promising.

CCS is a win-win, with perhaps additional wins appended. It has climate benefits, energy benefits, U.S. technology benefits, and potentially geopolitical benefits if the United States can help allies better control their own energy futures.

During the 20th century, global raw material use rose at about twice the rate of population growth. Society’s demand for resources is already equivalent to what 1.7 Earths can provide. And the World Economic Forum estimates that by 2030 we are going to have 3 billion new middle class consumers. These sobering statistics highlight the pressing need to reevaluate the economic model that has been in place since the industrial revolution.

At Google, we believe global businesses should lead the way to driving a 21st century model in which people’s lives are improved while reducing dependence on primary materials and energy from fossil fuels. And we believe this can be done in a way that makes business sense, providing economic return, community benefits, and a restored natural environment.

In 2015, Google established a goal to embed circular principles into the fabric of our company’s infrastructure, operations, and culture. To achieve this goal we are focused on three strategies: Utilizing energy from renewable sources, designing out waste from our operations, and thinking in cascades.

Today we are the largest corporate renewable energy purchaser in the world. We’ve signed contracts to purchase 2.6 gigawatts of renewable energy — equal to taking over 1.2 million cars off the road — and this year we will reach 100 percent renewable energy for our operations.

In addition to our renewable commitment for our operations, we’re working to help our users adopt clean energy themselves with tools like Project Sunroof, which is now available in all 50 states and Germany, and uses Google 3D Earth imagery to calculate each roof’s solar energy potential to determine how much a home could save by installing solar panels.

We’ve also been focused on designing waste out of our systems. In 2016, across our 14 global data centers, we diverted 86 percent of waste from landfills and last fall we announced a new commitment to zero waste to landfill for all our data center operations.

A major strategy for achieving this goal is how we manage the servers that are at the heart of our data centers. These servers deliver your Gmail and favorite YouTube videos but they are also a great example of the power of deploying circular economy at scale.

First, we focus on maintenance. Google’s process for data center repairs enables longer life expectancy of servers. We aggressively refurbish and remanufacture components: in 2016, 36 percent of servers deployed were remanufactured machines. We also redistribute components through secondary markets and sold over 2 million units in 2016 alone. And 100 percent of what is left gets recycled. Through this approach, we are saving hundreds of millions of dollars per year and significantly decreasing the amount of virgin material needed to operate our data centers.

Our food team has also been looking for ways to reduce waste before food hits the plate, since feeding more than 70,000 people around the world breakfast, lunch and dinner is a pretty big undertaking. In April 2014, we formalized this effort by partnering with LeanPath, a technology that helps us understand exactly how and why food is being wasted in order to improve our process. Today we have 129 cafes participating in the LeanPath program across 11 countries. Since the start of the partnership, these efforts have saved a total of three million pounds of food.

As we know, to truly enable materials to cascade through the loops of the circular economy we must focus on what’s contained in the materials we are choosing. According to the Environmental Protection Agency, there are approximately 85,000 known chemicals in the world. 21,000 of them are registered on the Chemical Substance Inventory mandated under the Toxic Substances Control Act, and only six are federally regulated. That means the buildings in which most of us spend roughly 90 percent of our waking hours are built using materials with unknown impacts on human health and performance.

In 2016, Google and the Healthy Building Network launched Portico, a first of its kind building materials analysis and decisionmaking tool. For the first time, everyone involved in a construction project, from owners and designers to contractors and manufacturers, could work together to leverage the data in Portico to find healthy materials and improve indoor environments.

At a time when we recognize climate change and resource constraints as two of our most significant global challenges, creating effective solutions will involve a complex mix of policy, technology, and international cooperation. At Google we are working to utilize circular economy principles as a transformative strategy for people and the planet but we also know that we’ve only just begun to realize what is possible.

Kate Brandt is Google’s lead for sustainability and previously served as the nation’s first federal chief sustainability officer.

The private sector can generate a billion tons per year in greenhouse gas emissions reductions over the next decade, with corporations contributing half. This is not overly optimistic. If we start with the assumption that firms seek to maximize profit, then motivations to reduce carbon emissions arise from at least seven sources, supplemented by the moral norms of corporate managers.

The first is the cost savings that exist because of the gap between the energy efficiency steps that businesses could take with a positive return on investment and the steps they actually take. Economists and engineers differ about the size of the gap, but credible reports suggest that inefficiencies alone could account for half a billion tons of reductions. Inefficiencies exist because of market failures (split incentives, insufficient information, outdated pricing customs, etc.) and behavioral failures (steep discount rates, ingrained habits, contrary social norms, etc). Private-sector initiatives that target these market and behavioral failures have had great success.

The second source of motivation is reputation. Most of the book value of many of the largest firms in the world, including major high-tech firms, is corporate or brand reputation. Companies will do back flips to build and protect their reputation, and many recognize that most of their retail and corporate customers support climate mitigation. In fact, the public believes that corporations have the greatest responsibility to address climate change among society’s various actors. The political system can marginalize these concerns via gerrymandering, lobbying, and other strategies, but market pressure remains.

The third arises from supply chain pressure. A study of the 10 largest firms in each of eight sectors demonstrated that more than half impose environmental requirements on their suppliers. These include pressure to reduce carbon emissions. A company like Walmart, which has more than 10,000 suppliers in China alone, can have an enormous impact on global carbon emissions, and it just announced with several major NGOs that it would achieve a billion tons of emissions reductions from its supply chain by 2030.

The fourth and fifth arise from investors and lenders. Divestiture and socially responsible investment initiatives have received a great deal of attention and have applied pressure for emissions reductions. In addition, investors with more than $100 trillion in funds participate in the CDP (formerly the Carbon Disclosure Project). Similarly, lenders have acted individually and in groups to increase the pressure on fossil fuel investments and companies with large carbon footprints.

The sixth arises from the importance of employee morale and recruiting. Most of the population, including a disproportionate share of potential new employees in the highest skill areas, are concerned about climate change. Companies that cannot recruit and retain these employees are at a competitive disadvantage.

The seventh is the anticipation of government regulation. Although the federal government may not regulate carbon emissions for another four to eight years, utilities and other corporations often make strategic decisions and capital investments with a longer time horizon. Despite recent pullbacks by the Trump administration, government regulation of carbon emissions is still a substantial risk over the long haul, and many companies have incentives to reduce emissions in the interim to be well positioned when that happens.

Finally, even though self-interest can explain most of the opportunity for corporate emissions reductions, limited empirical evidence and everyday experience suggest that the values or norms of corporate managers and directors matter too. No smart manager is going to announce that he or she is sacrificing corporate profits to achieve personal norms, but the shift toward sustainability by many of the largest companies in the world has often begun with a transformational moment by top managers that arose when the importance of doing the right thing became clear, and the other seven motivations made the ability to do the right thing affordable, if not profitable. It may never be possible to establish the extent to which managers satisfice on profits to address climate problems, but this motivation should not be underestimated.

These reasons support the notion that corporations have self-interested and other motivations to reduce carbon emissions in the near term, but it is also important not to lose sight of a fundamental question: As compared to what other viable approach? No one solution will provide a silver bullet, and if we compare any one strategy to a perfect but unattainable government alternative we will miss the chance to buy time until the evidence of climate change becomes so undeniable that even our flawed political system will be forced to respond.

Michael P. Vandenbergh is David Daniels Allen Distinguished Professor of Law at Vanderbilt University.

The companies best prepared to reap the benefits of a waste-free society will be those that understand that the traditional linear model of resource extraction to disposal is ultimately unsustainable. Leadership businesses are powering the transition.

Thomas Singer is principal researcher in the Sustainability Center at The Conference Board, a global business research organization. Singer is the author of numerous publications, including Business Transformation and the Circular Economy.

By 2030, the global middle class will comprise an estimated 5.4 billion people, more than doubling in size from its 2010 total. As a result, companies can expect more consumption and greater demand for the raw materials that go into making countless products. For businesses, the increased purchasing power of a bigger middle class undoubtedly brings good news, but the scenario also brings challenges.

The companies best prepared to reap the benefits of this scenario will be those that understand that the traditional linear economy is ultimately unsustainable. The conventional, age-old approach can be defined as a take-make-waste model, in which raw materials create products that ultimately end up in landfills, waterbodies, or are otherwise disposed. Alternatively, companies that hope to remain competitive in this brave new world should begin paying attention to — and enacting attributes reflective of — the concept of the circular economy. Such a model aims to keep products, components, and materials at their highest utility and value at all times. At its simplest level, the circular economy is about finding ways to decouple economic growth from the use of limited resources.

While a concerted effort by companies can help surmount this demographic challenge, the current way of doing business undoubtedly lacks the efficiency to handle the pressures of an extra three billion middle-class consumers. A surge in demand for goods will stress natural resources and raw materials — ones already over-exploited, such as minerals, oil, water, and lumber. Even greater competition for these resources may cause significant price shocks for raw materials and may disrupt existing supply chains. Consider that “water crises” has appeared in the World Economic Forum’s list of top five global risks in terms of impact in each of the last five years. Continuing down the take-make-waste path will expose companies to significant procurement and supply chain risks, as the resources they depend on grow increasingly scarce.

For most companies, the aforementioned challenges tend to fall into the oblivion of the long-term-risks category. To be fair, some companies with robust strategic planning functions take long-term risks such as these into serious account. But for most, short-termism rules the day. What some call “quarterly capitalism” often sidetracks issues that go beyond a fiscal-year timeframe.

However, while the demographic and resource-use trends fall more into the long-term category, several short-term pressures are making some companies rethink the sustainability of their models. Consider the notable shifts in the types of products and services in growing demand by consumers. Surveys find that almost half of Americans would spend more money on purchases if they could have a guarantee of ethical and responsible manufacturing practices. Two-thirds of global online consumers express willingness to pay more for products and services from companies that make positive environmental and social impact a priority (an increase from 50 percent in 2013). Admittedly, consumer demand for sustainable products is a notoriously tricky trend to measure — does sentiment translate into purchases? — but the overall signals are encouraging.

The most significant pressures for companies to incorporate circular economy attributes into their business strategies are actually coming from other businesses. And these are current, immediate pressures, not future forecasts. Dell, for example, finds that it is not uncommon for requests for proposal from commercial and public-sector customers to include sustainability criteria, which in some cases can account for as much as 15 percent of a bid. As more and more companies establish sustainability goals — such as waste reduction or energy-efficiency targets — these companies become increasingly interested in products and services that can help meet those outcomes. This was a key realization for Kimberly-Clark: some of its disposable and hard-to-recycle products (such as nitrile gloves and single-use garments) stood increasingly at odds with the sustainability goals of its customers. This realization led to the development of the company’s RightCycle project, a circular economy initiative aimed at converting these hard to recycle products into useful new items.

As Dell and Kimberly-Clark have found, pressures from evolving customer needs are nudging companies to rethink their business models and consider alternatives to wasteful linear versions. In a recent survey by The Conference Board, one-third of company executives agree that, compared to three years ago, their companies prefer to be offered services that extend the lifetime of a product rather than having to purchase a new one. A similar percentage of respondents agree that their companies are now more likely to use a model based on pay-per-use of a product. These trends have spurred the launch of several circular economy pilots and business models, including remanufacturing and product-as-a-service businesses, among others. The implications are significant: Companies need to prepare themselves to meet these changing customer dynamics or face the real possibility of becoming irrelevant and going extinct.

The circular economy concept is not new. In fact, early versions of the concept date back to the 1960s, but regulation and national policies to promote this model remain in their infancy. To date, most circular economy initiatives remain voluntary and driven largely by individual corporate efforts, along with support from organizations such as the Ellen MacArthur Foundation. However, some recent and emerging regulatory activity related to the model highlight the need for businesses to continue to engage with policymakers on this front. Companies that stay on the sidelines may find themselves unprepared when forced to make changes to their business models, while companies that have been actively involved in circular economy thinking will have an advantage by anticipating regulation.

The most noteworthy regulatory activity is taking place in Europe. In December 2015, the European Commission adopted a Circular Economy Package to stimulate the EU’s transition to a sustainable manufacturing model. The package consists of an EU Action Plan for the Circular Economy that establishes actions and targets, including the development of standards for secondary raw materials and measures to promote reparability, durability, and recyclability of products. The package includes legislative proposals on waste, which set targets for reduction and establish measures for waste management and recycling. For example, the proposals set common EU targets for recycling 65 percent of municipal waste and 75 percent of packaging waste by 2030. The proposals also set measures to promote reuse and incentivize producers to put greener products on the market and support recovery and recycling schemes.

Several legislative proposals have already been delivered under the EU Action Plan. A few examples include a proposed regulation to create a single market for fertilizers made from secondary raw materials (such as recovered nutrients); mandatory product design and marking requirements to make it easier and safer to dismantle, reuse, and recycle electronic displays (such as computer monitors and televisions); and a proposal to amend the directive that restricts the use of hazardous substances in electrical and electronic equipment (the RoHS Directive).

In addition, several individual European countries are implementing roadmaps and national strategies to promote circular economy activity. For instance, last year The Netherlands and Finland released strategic roadmaps outlining their visions for the circular economy. The Hague’s roadmap includes a goal of a 50 percent reduction in the use of raw materials by 2030. Other countries have been at this for longer, with Germany having introduced a Circular Economy Act in 2012 and Denmark having laid out a national waste reduction strategy in 2013.

Regulatory initiatives focused on the circular economy have also emerged in Japan and China. Japan has had a version of its current Law for Promotion of Effective Utilization of Resources in place since 1991. Its regulatory efforts led to the creation of a number of circular economy indicators and associated targets, including measures of resource productivity and material recycle rate. Tokyo’s targets for 2020 include increasing resource productivity to 460,000 yen of GDP per tonne of resources used (up from the 2015 target of 420,000). The goal also includes increasing the overall material recycle rate to 17 percent (up from the 2015 target of 14-15 percent).

China first introduced circular economy issues as a national development strategy in its 12th Five-Year Plan (2011-15). They remain a significant part of the Five-Year Plan ending in 2020. One of the government’s targets entails increasing the reuse of solid industrial waste as a share of total waste from 65 percent in 2015 to 73 percent in 2020, and 79 percent in 2025. To further promote the growth of circular economy initiatives, in 2013 the government founded the China Association of Circular Economy, a national multi-industry organization. Among the group’s focuses are issues related to industry, agriculture, resource recycling, remanufacturing, and green consumption. In addition, as in the case of Japan, China’s statistics bureau has a number of indicators that the government aggregates to create a circular economy development index.

In the United States, EPA has adopted Sustainable Materials Management as a regulatory framework. Much like the circular economy concept, SMM is a systematic approach to using and reusing materials more productively over their entire lifecycles. The focus of SMM revolves around four primary objectives: decrease the disposal rate, which includes source reduction, reuse, recycling, and prevention; reduce the environmental impacts of materials across their lifecycle; increase socioeconomic benefits; and increase the capacity of state and local governments, communities, and other stakeholders to adopt and implement SMM policies, practices, and incentives. The Resource Conservation and Recovery Act sets the legislative basis for SMM in the United States.

At the supranational level, the circular economy represents a key element of the United Nations Sustainable Development Goals. While voluntary and non-binding, Goal 12 refers to “responsible consumption and production,” and includes a target calling for a substantial reduction of waste generation by 2030 through prevention, reduction, recycling, and reuse. This is particularly relevant for companies that are aligning their business strategies with the UN goals.

While regulatory activity continues to evolve, in many cases business pressures — not regulation — have driven companies’ circular economy initiatives. In fact, in a survey by The Conference Board of over 50 company executives, cost savings ranked as the number-one reason for pursuing circular economy initiatives, with 44 percent of respondents pointing to this motive. By comparison, only 6 percent of respondents pointed to regulation as the primary driver of their companies’ circular economy initiatives. The focus on cost savings is not all that surprising, given the expected future price volatility of raw materials. For businesses that rely heavily on such resources, circular models provide a hedge against volatile prices.

Along with cost savings, a key driver of companies’ circular economy initiatives is evolving customer preferences. As mentioned previously, the types of products and services customers are looking for are shifting, and several companies are looking to circular models to remain relevant. Waste Management, for example, had to revisit its business model to retain customers. Realizing in the 2000s that landfill volumes were dropping, and strongly sensing that market pressures were pushing customers to embrace different waste strategies, Waste Management paused to try to comprehend the future impact of these trends on the business. Were they just short-term? What was the risk of inaction?

Company leadership recognized that failure to quickly adapt to changing customer needs could put the firm at risk of becoming irrelevant. This realization catalyzed a shift in mindset — participating in the circular economy (or “cradle to cradle” thinking, as it was referred to at the time) was crucial for Waste Management to remain relevant to customers and their evolving needs. Today, the traditional landfill business accounts for only a small portion of the company’s revenue, as more and more customers pursue zero-waste goals. “Green services,” which include recycling and environmental consulting, account for as much as half of Waste Management’s revenues.

The company’s early focus on circular economy initiatives centered on ways to reduce, reuse, or eliminate materials, particularly by looking at byproducts and waste materials from large customers. For example, one of Waste Management’s early initiatives involved working with U.S. auto companies to capture waste materials, such as scrap metal, and return them back to the production loop by finding new uses for the material — a traditional closed-loop initiative. Today, these initiatives have evolved to move Waste Management further up the value chain, collaborating with product designers and manufacturers to learn how their work affects the ability to capture products at their end of life.

The company works closely with designers to identify materials that either have a lower environmental impact or greater value, and can therefore be used in closed-loop initiatives. By going further up the value chain, Waste Management influences purchasing decisions and works side by side with designers to identify their specific problems associated with waste — and engineer them out. The company’s circular economy focus has widened to look not only at capturing and returning waste materials to the production loop, but also identifying ways to produce items that are ultimately more recoverable. This shift to tackling waste reduction at the design stage — rather than at end of life — also aligns with the current focus of the EU Action Plan.

The core premise of the circular economy — finding ways to decouple economic growth from the use of limited resources — has inspired a number of business initiatives with significant revenue-generation potential. For instance, five years ago Philips embarked on a transformation process that resulted in a decision to embed circular economy thinking into its core business. As for the thinking, what has helped Philips stay in business for 125 years — through several periods of economic disruption — has been the company’s ability to adapt to changing needs. For instance, Philips believes that if the company wants to be around for at least another 125 years, it will have to shift the way it and other companies use resources, given that current levels of consumption will not be sustainable.

In the case of Philips, the company’s main focus on circular economy initiatives hinges on the notion of switching from selling products to selling services. For example, “light as a service” is one of Philips’ primary circular economy initiatives — a shift away from selling light fixtures to providing lighting solutions. The company sees this as a response to a clear customer need. On the one hand, it is about financial considerations — customers find it much easier to swallow operational rather than capital expenditures. It also helps Philips stay on top of the latest customer needs and learn about customer usage patterns. And it allows the firm to extend replacement cycles to longer periods. Anyone not convinced that circular economy initiatives contribute to business value should take note: Circular economy initiatives such as light as a service already account for about eight percent of Philips’s annual revenue, and the company plans to double this amount by 2020.

Hewlett-Packard is another company that has benefited from innovative circular economy initiatives. The Internet of Things — essentially the interconnection of smart devices — has been a key enabler of the company’s circular economy initiatives. Take HP’s Instant Ink service, for example. By subscribing to this service, consumers’ internetconnected printers recognize when ink cartridges are low and HP then automatically ships new cartridges directly to the consumer. The new cartridges include return envelopes, enabling HP to close the loop by incorporating up to 80 percent of the plastics from returned cartridges into the manufacturing of new ones. The initiative’s direct-to-consumer model has also helped HP eliminate about 67 percent of materials used per printed page (primarily by eliminating the over-packaging retailers need for marketing and theft-prevention reasons). And since the costs of shipping cartridges to customers are now internalized, the product-as-a-service model incentivizes HP to maximize the amount of ink included in each cartridge, which also means that users need to replace Instant Ink cartridges less frequently.

For HP, much of the success of Instant Ink comes from the fact that the service addresses customer pain points. Notably, Instant Ink is marketed as an easier and more affordable option for consumers (customers can save up to 50 percent compared to purchasing ink from traditional outlets), and not as a circular economy or sustainability initiative. The service introduces sustainability benefits without pushing them as such to consumers.

Companies like HP understand that technology plays an important role as an enabler of the circular economy. Take 3-D printing as an example. 3-D printing has the potential to make it easier for companies to make production-ready parts on demand and locally, which can help extend the life of products and encourage design for repairability. This disruptive technology could potentially relocalize manufacturing.

Circular economy initiatives are not without their challenges. Companies that have launched successful pilots have done so only after overcoming multiple roadblocks and failed attempts. One of the biggest challenges in launching these initiatives comes from the need to align the interests and expectations of multiple partners along the value chain. Because circular economy initiatives often involve collaborating on the materials end and sourcing side, as well as with partners on the logistics of product take-back, disassembly, and reuse, ensuring open and transparent communication is crucial. These initiatives rarely succeed in silos.

The importance of close collaboration is unsurprising given the central role that innovation plays in circular economy initiatives. When The Conference Board surveyed global CEOs in 2016, two of the top three strategies they point to for meeting the Innovation and Digitization challenge relate to collaboration: engaging in strategic alliances with customers, suppliers, and other business partners and establishing a strong collaborative culture that encourages cooperation and coordination across functions and business units. The collaborative nature of circular economy initiatives means there is added importance in establishing partnerships based on transparency and trust. A lack of trust in partners is a major reason behind failed projects. When initiatives fail, either internally or with customers, it is often because of breakdowns in communication that result in stakeholders not being aligned about the shared risks and the shared value of the initiatives. While business partnerships matter, an overreliance on partners introduces a significant set of challenges.

Regulatory roadblocks can also present a significant challenge to circular economy initiatives. Specifically, inconsistencies in regulations across geographic regions and borders can add complexity and cost to these initiatives. Without uniform rules, something as simple as moving materials across frontiers can come at a high price tag and erode most of the economic value from business models that rely on product take-back systems. There is a clear need for addressing these regulatory issues at a policy level in order to prevent the unintended consequences of these rules from stifling circular economy initiatives. These challenges highlight the need for businesses to engage at the policy level.

The ultimate success of circular economy initiatives, much like the success of broader corporate sustainability initiatives, depends largely on having the support and buy-in from leaders who are willing to invest in them. This is not a simple ask: Obtaining buy-in from the brass ranks as the number one circular economy challenge companies point to, according to The Conference Board. But for companies that wish to remain relevant and competitive in the long term, this is an imperative. If there is one thing in common among companies that have successfully launched circular economy initiatives, it is that their CEOs and board members understand the concept, can connect it to business value, and can convey its value to investors, customers, and other stakeholders. TEF

In 2018, Congress must reauthorize the Farm Bill. Even in a polarized Washington, the measure represents a unique opportunity to bring disparate parties together to help the sector achieve meaningful reductions in carbon emissions and boost rural economic opportunity

The new Farm Bill that will occupy Washington next year presents a unique chance to make progress on two critical issues: addressing climate change and enhancing economic opportunity for America’s farmers, foresters, and ranchers. Congress should lift its sights and consider new and aggressive ideas to reward and incentivize these businesses for taking advantage of market and technology innovations that utilize the carbon-reduction potential of the U.S. agricultural sector.

This article makes the case for why it is both economically wise and politically practicable for Congress to take this approach, by establishing a major new reverse-auction payment mechanism for agricultural enterprises that undertake cost-effective carbon reduction and storage measures on their land. If done right, this approach could help spur a new “carbon farming” industry by establishing a robust and rigorous agricultural marketplace in the United States for the chemical that combines with oxygen to form the most common greenhouse gas. At the same time, Congress should significantly scale up the federal agricultural research and development budget, to encourage greater innovation in the farm sector with a focus on improving productivity and resilience, producing more on fewer acres, increasing potential revenue to landowners, and keeping America competitive in global agriculture markets.

There are at least three reasons why the timing for progress on carbon reduction in the agricultural sector is ripe.

First, the agricultural sector provides carbon reduction opportunities that work. To understand how, take one example: soil tends to naturally contain and store organic matter. Various agricultural practices including intensive tillage that exposes soil to air can release carbon dioxide to the atmosphere.

Yet modest changes can yield a different result: through a variety of activities such as no-till or reduced-till agriculture — when seeds are drilled directly through crop residues into untouched soil — more carbon remains in the ground rather than in the atmosphere. Other farming practices with similar effect include the use of cover crops and residue management, planting field borders and other areas with perennial grasses and other native plants, and bolstering crop rotations with carbon storage in mind. There are also many additional opportunities beyond cropland that can increase carbon on working agricultural land, including for example sustainably managing grazing practices on pasture and rangeland, integrating more trees into field borders and stream banks, and restoring forests on marginal lands.

And it turns out that these types of land-sector carbon-reducing practices are not only feasible, but quite cost effective. Last year, the United States released a Mid-Century Strategy for Deep Decarbonization, which was designed “not to predict near-term policymaking [or] model the future U.S. energy and land sectors with precision . . . but rather to describe key opportunities and challenges . . . and highlight findings that are robust across scenarios.” One such finding was the continued and enhanced role of the U.S. land sector as a net carbon sink.

The MCS analysis estimated that, by 2050, land-sector and other carbon-removal technologies could sequester 30 to 50 percent of emissions across the economy, while carbon-beneficial forms of biomass could also displace fossil fuel consumption in sectors that are harder to electrify, such as aviation and heavy-duty vehicles. These reductions could take the place of reductions in the electricity sector or elsewhere that would come at a greater cost. On the other hand, in a scenario where the land sector is underutilized, the pressure to cut emissions shifts to other parts of the economy at a significantly higher cost per ton of carbon.

Second, the economic returns for farmers, foresters, and ranchers of a robust, market-based land-sector emission-reduction strategy could be significant and timely. According to the U.S. Department of Agriculture, net farm income in 2017 is down nearly 25 percent from 2015 levels. This decline reflects a growing set of structural challenges facing the U.S. farm sector. A Kansas City Federal Reserve Bank analysis found recently that American farmers are becoming “increasingly reliant on international demand and exports to support domestic prices and farm incomes,” and are challenged by “reduced farmland values,” “weaker credit conditions,” and “increased interest rates and collateral requirements.”

These trends are especially problematic given the slow rebound of employment and wages in rural areas. According to USDA, while employment in metropolitan areas exceeded its pre-recession peak by nearly 5 percent by 2016, employment in nonmetropolitan areas was still nearly 3 percent below its respective peak. Adding to the economic challenges are demographics — the average American farmer is 58 years old, nearly the oldest out of all U.S. professions. New revenues, markets, and skilled jobs are needed to attract the next generation of landowners and managers.

Together, these economic factors reinforce the need for economically efficient policies that help the agricultural center modernize and improve financial returns for farmers, foresters, and ranchers.

Third, the United States is falling behind in the global race for the type of technology-enabled progress in agriculture that carbon farming and sustainable land-sector management represent. The types of R&D that increase agricultural productivity also tend to decrease agricultural carbon intensity, while freeing land to support more forests, biomass production, or high-value natural areas. For example, precision agriculture, which can depend on greater utilization of sensors, drones, big data, and automation, can seed huge carbon reductions — just as it boosts farm productivity overall.

Despite this potential, public agricultural R&D investment in the United States has fallen in real terms over the last decade and a half and has fallen considerably as a share of total public R&D spending in the United States over a longer period. While private agricultural R&D investment has grown in recent years, private R&D dollars are not a substitute for the publicly funded basic research that drives innovation advances.

In 2015, USDA’s Economic Research Service modeled scenarios with different levels of public investment and found that slowdowns in support lead to a significant innovation gap within two decades. Specifically, if the current approach to public investment persists, the growth of agricultural total factor productivity drops dramatically — by almost 40 percent. The analysis concluded that, once depressed, such productivity will be significantly harder to make up by too-little, too-late investments in R&D.

While the United States is slowing down on agricultural R&D, others are not. Over roughly the last two decades, the U.S. share of public investment by major countries in agricultural R&D “fell from 22.5 percent to 13.4 percent.” In particular, the United States has fallen behind Chinese public investment in agricultural science. According to USDA, China passed the United States in public investment in 2008 and has kept focused on the field — following what historically has been a uniquely American playbook. Between 1990 and 2013, Chinese public investment in agricultural R&D grew eight-fold. As a result, U.S. leadership on technology-enabled agriculture is faltering at a moment when the global agricultural market is poised to grow dramatically.

Fortunately, there is a way to simultaneously address these climate, economic, and innovation challenges.

Economists have long acknowledged that the most economically efficient way to reduce greenhouse emissions is to place an economy-wide price on carbon. Modeling suggests the American land sector has the potential to deliver up to 1.2 billion metric tons of carbon dioxide equivalent reductions annually in a $40-per-ton carbon-reduction scenario, similar to anticipated reductions in the energy sector. This underscores the fact that there are clear, cost-effective emissions reductions to be gained from the land sector if appropriate policy mechanisms are in place to drive them. It also reinforces that, in the current environment, where the United States has no economy-wide carbon price and there is no effective nationwide market for land-sector carbon offsets, we are under-incentivizing land-based sequestration activities.

In the absence of an economy-wide policy, the most scalable approach would be to create a new, nationwide program of direct payments and credits to producers who effectively sequester and store carbon. This approach could be implemented in two ways. In states that have established carbon markets, sequestration policies in the land sector can offset carbon emissions reduction obligations of energy-sector entities. California, for example, already allows 8 percent of carbon compliance to come from offsets, including from agriculture.

Such a pay-for-performance model could also be implemented by the federal government — kickstarting action in states that don’t have economy-wide carbon prices and increasing ambition in states that do. Specifically, the federal government could run reverse auctions to make carbon payments to carbon-sequestering projects, using mandatory funds authorized through the Farm Bill.

Such a model is not without precedent. Australia, for example, has a voluntary carbon offset program for farmers called the Carbon Farming Initiative, which after its first years of implementation was rolled into an economy-wide carbon-pricing scheme. Under the CFI, farmers can earn credits for activities like “reducing livestock emissions, increasing efficiency of fertilizer use, enhancing carbon in agricultural soil [and] storing carbon through revegetation and reforestation.” These credits can then be sold to other parties to meet their carbon obligations. While the CFI has been challenged by underfunding and a continuously evolving policy context, over 500 land-based projects have been registered to date, and hundreds more across on-farm energy-saving and fuel-reduction practices. We would need to design a system that works for American stakeholders, but we can learn from the experiences of other countries in launching these programs.

Narrower but analogous programs also exist in the United States. California has forestry, livestock, and rice methane offset protocols as part of its economy-wide cap-and-trade program, under which 173 projects have registered to date. At the federal level, USDA’s Environmental Quality Incentives Program provides hundreds of millions of dollars annually in financial and technical support to farmers engaging in conservation practices that “improve soil, water, plant, animal, air and related natural resources on agricultural land and non-industrial private forestland.” Although EQIP payments are not made on a carbon basis, they support many of the same practices that could qualify under a carbon-payment scheme.

One of the biggest pitfalls identified from Australia’s experience is that uncertainty regarding the availability of annual funding can distort an effectively functioning market. If farmers don’t have a long-term and significant price signal, it is harder for them to justify upfront investments in emissions reducing technologies and techniques. In the U.S. context, providing mandatory funding in the Farm Bill over a 10-year window would help address this concern and would also reduce the risk that farmers simply “pull forward” the lowest-hanging-fruit actions that would have taken place just a few years later — the problem of additionality. A certain and long-term funding source would promote efficient improvements as well as provide enough lead time to finance complementary investments.

A second challenge in establishing an effective market-based payment program is compensating carbon reductions on an apples-to-apples basis across different practices, land-sector types, and regions. Carbon-accounting rules that define eligible practices, ensure additional carbon is being stored or reduced, and provide guidance on how to ensure lasting carbon benefits, can be developed to ensure agricultural activities are being treated robustly and equally throughout the program. Many such protocols already exist in California and under voluntary credit registries like the Voluntary Carbon Standard and American Carbon Registry.

A third challenge is avoiding payments for “hot air,” or emissions reductions that would have occurred even without an offset mechanism. We know there are ways to deal with this issue. For example, in California’s rice farming protocol, farmers who voluntarily participate are required to produce emissions estimates based on historical farm area, crop yield, agricultural techniques, and other measures. They then submit records to calculate emissions reductions once they begin one or more of the three authorized management practices (dry seeding, early drainage, or alternate wetting and drying).

Over the long-term, policymakers should strive for a maximally accurate program that builds on California’s approaches by measuring actual emissions at each farm, compared against a baseline. The federal government and state governments could play an important role in providing farmers with the resources to more easily follow these measurements in real time with advanced monitoring equipment and tracking software. The next generation of carbon tracking and reporting is already under development with support from programs like USDA’s Conservation Innovation Grants.

A final concern is that applying a crediting mechanism to one sector of the economy raises the specter that you end up replacing emissions in the American agricultural sector with emissions elsewhere. This effect, known as leakage, could happen, for example, if U.S. timber prices increased because this program had the effect of decreasing U.S. timber supply and, as a result, global markets demanded more deforestation in other parts of the world, like the Amazon.

A government analysis of Australia’s CFI indicated little reason to suspect significant leakage to date in the program. However, as activities are deemed eligible or ineligible for credit under the program, potential and actual leakage should be fully analyzed and considered. If the United States enacts this program domestically, ultimately the most effective way to fully mitigate leakage risk is to bring as many countries and sectors into the fold as possible, which U.S. policymakers could work on through the existing United Nations climate change negotiations process.

While there will be some investment of time and federal resources needed to develop a reverse auction program as well as expand and strengthen the available suite of rigorous measurement protocols, these actions are critical to unlocking the full potential to reduce carbon emissions from the land sector and even sequester carbon. Within the federal government, this work should be undertaken through cooperation between the Environmental Protection Agency and USDA. Based on experiences elsewhere, however, we know that building a program that serves as a sufficient market signal, compensates emissions reductions on an apples-to-apples basis, maximizes additionality, and avoids leakage is within reach.

In addition to a new market mechanism, policymakers should use the Farm Bill to accelerate the pace of agricultural innovation by improving the techno-economics of low-carbon practices. Public investment in agricultural R&D is a key ingredient of that innovation equation — to lead globally, the United States must steadily and substantially increase USDA and other agencies’ budgets for agricultural R&D by a factor of three by 2030 and focus those efforts on advancing the technologies that will unlock new possibilities in carbon farming and sustainable land-sector management. This will allow the United States to close the public investment gap with China and reestablish itself as the go-to place for agricultural innovation.

To be sure, increasing the research budget is not sufficient. We must do so in a way that optimally promotes acceleration of innovation. The American energy R&D program provides a powerful playbook for how to build out an ecosystem for innovation. As outlined in the Mission Innovation Domestic Implementation Framework, the program is composed of four elements: “foundational mechanisms to increase breadth of knowledge within a scientific discipline”; “translational mechanisms to target incremental improvements along defined tech-roadmaps”; “disruptive mechanisms to validate high-risk, high-reward, off-roadmap ideas”; and “integrational mechanisms to facilitate collaboration across disciplines and stakeholders.” Our increased public investment in agricultural R&D needs to tend to each of these components within the agricultural ecosystem.

Fortunately, significant progress has already occurred. For example, USDA supports land-grant universities to spur foundational R&D by enlisting them in advancing “competitive peer-reviewed research, education, and extension activities through multiple programs, including the Agriculture and Food Research Initiative.” We can bolster the effectiveness of these programs by adding resources and increasing capacity at our national laboratories to focus on agriculture-oriented missions. To facilitate translational work, USDA can define and launch a new priority research effort to channel existing and new R&D resources toward ambitious productivity and resilience goals. The department should be given the green light to increase direct work with experts in other agencies who have begun to look at these important issues in recent years.

For example, ARPA-E, the Department of Energy’s advanced-research program, has already ventured into agricultural R&D where it shared a nexus with energy. We know this approach works to bring forward disruptive technology, so we should consider formally charging ARPA-E (or a similar capacity) to undertake this work on a systematic basis to advance our agriculture goals. Additional interdisciplinary teams like the ones at DOE and NASA can work with USDA to meet our goals for 21st century agriculture.

As with any innovative policy idea during this polarized era in Washington, some will question the political economy of this reverse auction and investment proposal because it is does not fit neatly into preconceived notions of coalition building in Congress and the administration. But this ignores the new coalition that it could attract if policymakers are willing to consider this proposal on its merits: legislators who are looking for policies to reduce emissions and legislators who are looking to bolster the incomes of farmers and rural Americans, all while helping America regain a global competitive advantage in a post-Paris marketplace that is looking for ways to feed a billion more people without breaking the planet.

For that new coalition to come together, Congress should take seriously the transparent stakeholder process that will need to occur for farmers, ranchers, and foresters and the rest of rural America to buy into this program and allow it to realize its climate and economic benefits. To bring and keep all relevant stakeholders to and at the table, the revenues from the auction must function as an incentive, not a mandate. This does not just make political sense, it makes economic sense as well. The social costs of carbon are already being borne by the economy. This auction is an approach to abating those costs in an effective and efficient way.

The process must engage the diversity of actors in the land sector; it must strive to develop workable solutions that all find fair (especially with regard to baselines and measurement, monitoring, and verification); and it must work with all key parties to avoid unintended consequences. We must also leverage state-level policies that support these aims and with which farmers are already familiar, harmonize with existing state-level policies like California’s cap-and-trade program, and spur a race-to-the-top to improve state-level policy. Ultimately, for this program to work, farmers, foresters, and ranchers will need to lead the way. TEF