Are carbon markets for farmers making a difference?

With COP26 underway, Bill Goldie, Head of Carbon Offsetting at Plannet Zero, explains how farming and agriculture businesses are being incentivised to be greener and if those incentives are helping to reduce climate risks.

In the UK, emissions from industry remain a sizeable proportion of our total carbon footprint, while those from agriculture and horticulture account for about 10% of all UK greenhouse gas emissions.

Before trying to answer whether or not the farming and agriculture industries are doing enough to combat this, and if government incentives such as The Woodland Carbon Code and Peatland Code are working, it’s important that I explain how the voluntary carbon markets operate and what exactly a carbon credit is.

The voluntary carbon markets allow carbon emitters to offset their unavoidable emissions by purchasing carbon credits. These credits are created by projects targeted at removing greenhouse gas (GHG) emissions from the atmosphere, or avoiding GHG emissions from being emitted.

Each carbon credit is equivalent to one tonne of CO2 avoided/removed. For example, a business with 1,000 tonnes of residual emissions per year after reductions, can invest in a project, or projects, that create 1,000 carbon credits – resulting in a carbon neutral status for the business.

Carbon finance, crucial for the development of offset projects and for those businesses who use the resulting credits for their carbon reporting, is the significant factor in the effort to remove carbon from the atmosphere. Scaling the voluntary carbon market encourages the development of both nature-based and technology-based removals, vital for us to reach net zero emissions.

It has become clear that to become net zero a business must invest in projects that remove CO2 from the atmosphere, rather than simply investing in projects that ‘avoid’ an emission from taking place, such as renewable energy, energy efficiency and forest protection.

There is a growing realisation that a significant volume of carbon removal credits that will be required could come from the farming/agriculture sector.

The most popular example of projects that remove CO2 from the atmosphere is tree planting (afforestation/reforestation). However there simply is not enough available space on earth to plant the trees required to remove the volume of CO2 required to meet the Paris Agreement’s 1.5 degree target.

What’s more, trees take many years to sequester the carbon whereas soil carbon projects can demonstrate more rapid carbon sequestration. Like tree planting, soil carbon removals are nature based and are vulnerable to reversal through natural disaster or human interference. As such, they are deemed short lived removals with permanence of around 100 years or less.

Other project types, that are considered longer permanence, such as, carbon capture and storage, are significantly more expensive to deliver, and, in many cases, already cost in excess of €100 per tonne of CO2 removed (tree planting in the UK costs circa €25-30).

Verra, the largest registry of global carbon credit projects, recently released its first such methodology. It states: “This methodology quantifies the GHG emission reductions and soil organic carbon removals resulting from the adoption of improved agricultural land management practices. Such practices include, but are not limited to, reductions in fertiliser application and tillage, and improvements in water management, residue management, cash crop and cover crop planting and harvest, and grazing practices.”

Gold standard, another significant carbon registry, is close to modifying and launching its own soil management methodology.

While both these established and globally recognised registries have been considered in their approach – although perhaps slow to launch – this has created an opportunity for more niche registries, such as Commodicarbon – a European registry set up to offer farmers an opportunity to create additional revenue by changing practices around use of fertilisers and tilling of land and selling the carbon credits created.

We are seeing large farming and fertiliser conglomerates such as Yara (Agoro Carbon Alliance) and Cargill with their RegenConnect initiative joining this sector.

This all leads to a conclusion that regenerative agriculture could create significant volumes for the growing demand for carbon removal projects in much the same way renewables created huge volumes of carbon avoidance credits in earlier stages of the voluntary carbon market.

There are, however, questions around additionality and verification processes that must be beyond doubt for the future the integrity of the voluntary market.

New technologies

Data will be required to prove that farmers are not increasing their profits by improving farming practices and, therefore, no longer need carbon finance. This is analogous to the renewable energy sector where costs were reduced to such a point that the sector could no longer claim a need for carbon funding. As a result, both Verra and Gold Standard ceased accepting grid-connected renewable projects from January 2020.

An even more challenging issue surrounds verification. Incorporating new technologies, such as AI, and satellite imagery, along with actual soil samples taken from the farms – to set a baseline for soil stored below the ground and to measure the ongoing additional carbon stored – needs to be better understood if resulting algorithms are used to calculate the number of credits awarded.

A further challenge is ensuring that the cost of entry for a small-scale farm is financially viable and allows such farms to participate. There also needs to be assurance that each registry that creates methodologies and creates the carbon credits meets the same quality standards.

In summary, this sector has to deliver on driving carbon underground and reducing farming practices that increase GHG emissions.

The voluntary carbon market is expected to reach a record high in 2021, with the issuance of almost 250mn t of CO2-eq of credits (at the time of writing). This implies an increase of over 30% year-on-year. Many global players are entering this space and the demand for these types of credits is going to scale so significantly that the issues mooted above will need to be resolved.

Our farmers, foresters and other land owners/managers will play a crucial role in the national effort to tackle climate change, through reducing greenhouse gas emissions and increasing carbon storage.

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