Who will pay for climate-smart milk?

This story by MIT Environmental Solutions Journalism Fellow Carolyn Beans was originally published in Lancaster Farming, where it appears with additional photos. It is part of a series of articles on climate-smart dairy.

Walk down the dairy aisle in many grocery stores, and you’ll see a wide range of labels attached to milk, from grass-fed and organic to regenerative and ethically sourced.

These labels are designed to catch the attention of consumers who care deeply about how their food is produced and may be willing to pay a premium.

In recent years, a new category of claims is beginning to show up on milk cartons in select stores across the globe: climate-friendly.

But are consumers willing to pay more for dairy produced with less greenhouse gas emissions? If they are, will the profits make it back to the dairy farmer?

Creating a Market

Surveys regularly suggest that consumers want products generated with lower emissions. PwC’s 2024 survey of more than 20,000 consumers across the world, for example, found that 46% said they are “buying more sustainable products or products with a reduced climate impact.”

Respondents also reported a willingness to pay an average of 9% more for items “produced with lower supply chain/carbon footprint.”

But whether consumers will actually pay more remains unclear.

“We don't have a lot of these products on the market, so most of the knowledge that we have on the consumer side is based on surveys,” says Swati Hegde, an agricultural methane expert at World Resources Institute. “I might say, ‘Yes, I want to buy this product.’ But I might not actually buy it when I have to pay more for it.”

In 2022, the USDA launched the more than $3 billion Partnerships for Climate-Smart Commodities program in part to create a market for foods farmed with reduced greenhouse gas emissions, including milk.

Given USDA’s cancellation of the program in April, it’s unclear how many of these marketing efforts will continue. But some foods produced through the partnerships program have already made it to market branded with climate-friendly language.

Wisconsin-based The DeLong Co. dedicated its $40 million partnerships grant to creating a “Grown Climate Smart” brand for grain growers. The DeLong Co. pays by the acre for regenerative farming practices, turning over 97% of the USDA funding directly to farmers, says Dylan Vaca, the brand and marketing manager for the company's Grown Climate Smart effort.

Cover cropping, for example, earns farmers $45 per acre, and no-till earns them $10 per acre, he says.

Many of the program’s more than 230 growers are paid for multiple practices at once. Collectively, they farm more than 400,000 acres, mostly in the Midwest.

The DeLong Co. then sticks its “Grown Climate Smart” label on the bushels and encourages companies that incorporate the grains into their products to do the same.

“This is all to build and develop a market that, ultimately, one day, commands a premium,” Vaca says.

In November 2023, Central Standard Craft Distillery in Milwaukee became one of the first to add “Grown Climate Smart” to its products. About a dozen more companies followed, many of them distilleries.

According to Vaca, The DeLong Co. was given the green light to continue under the USDA’s new Advancing Markets for Producers program, so more of these labels will be popping up in stores.

For now, it’s too early to say what impact the “Grown Climate Smart” label is having on sales. Vaca expects to have that data in the coming months.

Value-Added Labeling

Consumers do seem willing to pay more for dairy products bearing certain label claims.

The USDA organic label, for example, has helped smaller-scale dairy farmers in the Northeast earn a more reliable return and compete with larger conventional operations, says Carolyn Dimitri, an applied economist in the Department of Nutrition and Food Studies at New York University, and a consumer representative on the National Organic Standards Board.

But unlike climate-friendly labels currently on the market, the organic label is certified by USDA, so all participating dairies must adhere to the same regulations.

Before organic regulations were tightened, some dairies cut corners, which made for an uneven playing field, Dimitri says.

“I would only want to make an investment (in switching to a climate-smart label) if I knew that I could get a certification that had bite and could guarantee me more money," she says.

A claim of “100% grass-fed” can also bring a higher price. “If you buy Maple Hill grass-fed milk, you're going to pay a lot more than you would for conventional milk. But in this case, we convinced the consumer that it’s worth it,” says Jim Hau, president of the New York state-based Maple Hill Creamery, a dairy company sourcing certified 100% grass-fed, organic milk from more than 150 small family dairies, mostly in the Northeast.

Because of this premium, smaller farms are able to compete with larger conventional ones. “It's hard to do a big industrial farm in a grass-fed way,” Hau says.

Neutral Foods, which was founded in Portland, Oregon, is one of the first to test whether consumers are willing to pay more for dairy explicitly marketed as better for the climate.

“With perhaps some other brands, it's more of a peripheral attribute that is maybe an add-on,” says Marcus Lovell Smith, the CEO of Neutral Foods. “For us, it was really central to why the company was started.”

Neutral Foods funds the equipment or supplies necessary for dairy farmers — largely within the company's own supply chain — to reduce greenhouse gas production. The company might, for example, support the purchase of a feed additive that reduces enteric methane emissions or a solid-liquid separator that minimizes the methane released from manure.

For any emissions remaining in its supply chain, whether from dairy cows or supermarket refrigerators, the company purchases carbon offsets from dairy projects outside its supply chain.

When Neutral Foods’ milk first hit dairy aisles in 2019, all of its products’ claims to carbon neutrality were purchased through offsets. Since then, according to Lovell Smith, the company has funded over 40 farm projects, and around half of the carbon neutrality now comes from reductions in the company's supply chain.

“Our goal, as rapidly as possible, is to get to 100%,” Lovell Smith said. Consumers want to see companies “actually doing the hard work in their supply chains.”

Neutral Foods has had its biggest success selling to other businesses, such as Shake Shack and coffee shops, rather than directly to consumers, Lovell Smith says. “I have 15 seconds in a grocery store to convince him or her to buy our milk out of 10 other ones.”

Building Trust

Some industry experts question whether climate-smart labeling would simply lead to consumer confusion and the possibility of greenwashing — deceptive claims about a product's environmental footprint.

“I think it will be really hard to define climate-friendly milk,” Dimitri says. “How is anyone to know that it is really climate friendly? How climate friendly is it? What does it actually mean?”

“It almost becomes a game, how many badges can I put on (the product) and get the consumer to get excited?” Hau says. “I believe that the consumer gets a little weary of that after a while and starts to doubt the legitimacy of some of them.”

Educating consumers by connecting them with Pennsylvania farmers at, for example, farmers markets, is key for helping them understand what climate-smart, organic, or even traditionally processed milk offers, says Kristi Kassimer Harper, the consumer member of the Pennsylvania Milk Board. “(Consumers) can really have the conversation with farmers about how their food is produced, what it goes through to get from farm to table.”

Having a verified label also matters to consumers, says Christopher Wolf, an agricultural economist at Cornell University. Dairy companies can self-verify eco-friendly claims, hire a third party to verify them, or, in the case of organic, go through a government verification process.

Government verification earns the highest consumer trust. “People will tell you they don't trust the government, but when you start looking at things like verifying actions and stuff they value, government verification is the highest,” Wolf says.

Maple Hill uses a third-party verifier, Organic Plus Trust, to certify its grass-fed claim.

The company had been a recipient of a Partnerships for Climate Smart Commodities grant, a designation that is noted on its packaging.

But for the time being, Hau would not consider adopting a climate-smart label unless there were a government verification system like organic or a third-party standard like OPT that multiple producers in the industry adopted.

“Unless there's that kind of a standard, it's just not meaningful,” Hau says. “Maybe it makes the consumer feel better. But if they don't really know what it means, they're not going to run to your brand because of it.”

At Neutral Foods, a variety of third-party verifiers confirm the reductions achieved by each of the company's individual farm projects. The third-party verifier SCS Global Services then checks each resulting dairy product’s carbon-neutral claim.

In its annual sustainability report, Neutral Foods posts the percentages of offsets and within-supply-chain reductions that account for its climate neutrality claim.

“Consumers are extraordinarily smart,” Lovell Smith says. “If you're not genuinely committed, they will know that.”

Will Farmers Get a Cut?

Even if consumers are willing to pay extra for climate-smart milk, some dairy producers wonder whether their farms will see any of the profits.

Schrack Farms, a dairy in Loganton, Pennsylvania, switched to no-till half a century ago and has been running an anaerobic digester for nearly two decades. “We have yet to be compensated for that extra benefit,” says co-owner Jim Harbach. “Nobody really comes out and measures anything, and nobody pays you any more for doing it a different way.”

Jared Kurtz of Kurtland Farms in Elverson, Pennsylvania, uses many environmentally conscious practices on his dairy, including cover cropping, no-till farming, nutrient management, and streambank fencing that keeps cows out of the farm’s springs that ultimately feed into the Chesapeake Bay.

“It's always been our goal, and our belief, that if we don't do our part to help make the water as clean as possible leaving our farm, then it has less of a chance of staying clean downstream,” Kurtz says.

Kurtz wouldn’t be surprised if the dairy industry someday simply requires more climate-smart practices. “We already have animal care standards that we have to follow in order to ship our milk,” he says. “If it's really beneficial, then eventually all the co-ops will push or pull or help convince their producers.”

Paul Mason of Mason’s Chrome View dairy in Nottingham, Pennsylvania, agrees that, someday, lowering emissions may just become a requirement. But if the technology for measuring greenhouse gas production on individual farms improves, he would like to see co-ops reward farmers who produce less greenhouse gases, much like they now reward farmers who produce better milk with a quality premium.

In February, Mars announced a similar program through its partnership with the New Zealand dairy supplier Fonterra. Over five years, Mars is pledging to help around 2,000 dairy farmers to purchase climate-smart tools, but also to provide a cash incentive worth, on average, $15,000 to roughly 165 dairy farmers who hit especially rigorous sustainability targets each year.

For farmers working with Neutral Foods, the payment comes in the form of the equipment or supplies required to bring down emissions.

“Our job is to find farmers projects that are climate-smart and also fit in with that farmer’s particular interests,” Lovell Smith says. Neutral Foods did, however, recently merge with another brand, Zeal Creamery, which pays a premium for grass-fed milk.

Farmers must be paid for the work that comes with any additional certification, or the supply chain simply doesn’t work, Hau says.

“If I add a cost, I have to compensate them for it, or farmers will go out of business," he says. "And if farmers go out of business, I'm in trouble. I need the milk. So the only way to do that is to increase the price of milk on the market.”