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Carbon farming: Four actions the EU can take to make it happen

Economic Comment

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With contributions from Barbara Baarsma, Kim van der
Leeuw and Julia Bolton from Rabo Carbon Bank

  • To meet shared climate goals, the EU’s vision for agriculture includes scaling up carbon farming and land-based carbon removal.
  • Public and private initiatives to better understand sustainable agricultural management practices and the respective business models provide valuable insights to policymakers.
  • Based on our own experience in pilots, we share four actions that can support scaling up carbon farming now.
  • Later this year, the EU Commission will release a regulatory framework for an EU certification of carbon removal that could standardize different initiatives and encourage better farm-level measurements.

In their Fit for 55 proposals, the EU has laid out its vision for EU agriculture, including the ambition to make the agriculture, forestry, and land use sectors (AFOLU) climate neutral by 2035 and guided by national, binding targets starting in 2030.

With the goal of increasing land-based carbon removal on agricultural land, the EU released the Sustainable Carbon Cycles (Carbon Farming) Policy Communication in December 2021, to be followed by a regulatory framework for an EU certification of carbon removals later this year. The goal is for carbon farming initiatives to contribute 42 Megatons of CO2 equivalent (Mt CO2e) storage per year to Europe’s natural carbon sinks by 2030, which represents approximately 20% of today’s natural carbon sink.[1] This goal signals that an EU-level framework is an important part of their 2035 climate neutral target for the EU land sector. It is also part of their future vision for agriculture, namely, a system that rewards ecosystem services, biomass production, carbon sequestration, and biodiversity alongside traditional agricultural outputs.

However, this Policy Communication still leaves a lot of uncertainty about how the EU framework will interact with the growing voluntary standards (set by private companies and NGOs) that also estimate and reward carbon sequestration, greenhouse gas emissions (GHG) reductions, and other farm-level environmental impacts. Persistent challenges remain around monitoring, reporting, and verification (MRV); non-transparency and uncertainty around carbon credit prices; and the unattractive cost-benefit of changing farming practices. How will a voluntary EU carbon removal certification scheme take off?

From our own pilots in the Netherlands and abroad, we would like to highlight some important lessons that can support carbon farming in general. Both public and private support are needed to make wide scale changes to the agriculture system. We must also ensure that, for the moment, they do not crowd each other out.

1. Set very clear guidelines on how to establish methodologies for project-level baseline emissions measurement and MRV for soils:

At the moment, there is large variation in how individual projects establish a baseline and estimate changes in soil quality indicators over time. Clarity would enable large-scale, results-based rewards to farmers and provide incentives for continuous improvement instead of “just” compliance with guidelines. The baseline and MRV guidelines for voluntary projects should align with monitoring and compliance systems used in national GHG inventories and agricultural and land use statistics. The project data can then be used to enhance EU or national data systems, thereby increasing their robustness and cost-effectiveness.

2. Make pilots more precise with more data points on soil quality:

Estimating soil organic carbon (SOC) content and SOC stock changes due to management practices requires lots of granular data on soil properties over a medium- to long-term time horizon. There are significant focus and resources at the EU level to improve EU and national soil monitoring data and compliance systems for EU regulations.

However, this data is often not specific enough for pilot-level projects. The EU implementation of carbon farming initiatives would greatly benefit from a granular, high-coverage soil quality database such as those developed and used in other regions (e.g. the NRCS’s Soil Survey Geographic database in the United States). While the LUCAS soil database is an incredible soil dataset from across the EU, the data is not available at a high enough resolution to use for a project-level baseline or MRV system. Several groups are working to combine Copernicus and Sentinel data with other remote sensing and field sample datasets, but an EU-wide soil quality database is too expensive for private companies to develop on their own.

Under the revised Land Use, Land Use Change and Forestry (LULUCF) Regulation proposal, Member States need to improve their data related to soil carbon and non-CO2 gases as well. The Carbon Farming Communication says that every land manager should have access to verified GHG emissions and removal data by 2028 and that carbon farming initiatives should contribute to the new net carbon removal target of 310 Mt CO2e by 2030. These initiatives are also key to reaching the 2035 AFOLU net-zero target. Currently, crop and grassland management practices do not generate net soil-based carbon removal at the EU-aggregate level; rather, crop and grassland are an emissions source. In some EU countries where agricultural management practices – such as better residue management, longer crop rotations, afforestation/reforestation, and pasture restoration – have increased in the last two decades, cropland and grassland areas have also increased carbon storage levels.

3.  Address the risks of permanence and reversal in land-based carbon removal:

Changing agricultural land management practices offers significant climate mitigation potential. However, agriculture and carbon sequestration are vulnerable to weather and climate-related events. The permanence of soil carbon is not guaranteed in agriculture. It could be disrupted, for example, by future management decisions (e.g. by a successor or new land owner-renter) or natural disasters. Yet, this non-permanence is inconsistently addressed across protocols. The new carbon removal guidance needs to have robust mechanisms that address non-permanence and reversal risks in a conservative manner. Such mechanisms could include conservative buffer pools, 100 years of required permanence, or ton-year accounting recommendations. The EU Commission could also provide guidance for mandatory discounts to reflect the risks of reversibility and the non-permanence of carbon in soils. This guidance could be used across all voluntary carbon standards and in future national GHG inventories. Some national carbon programs (e.g. France’s Low Carbon Label) already recommend using mandatory discounts to reflect the risks of non-permanence of carbon in soils.

4. Provide clarity and set the direction for the next few years:

The timeline for the Fit for 55 proposals seems far away and individual countries are still figuring out their national agriculture and land use sectors’ emissions reduction targets and pathways. Nevertheless, individual land owners need more clarity now about what this could all mean for them. Meanwhile, further along the supply chain, more and more food and agribusiness companies are making voluntary corporate commitments and setting targets that include reducing their scope 3 farm-level emissions. Recently, the Science Based Targets initiative released a new corporate standard for AFOLU companies This will change the way companies report and verify their AFOLU-related emissions, but also how they account for land-based removals (for the first time). How this new voluntary corporate standard will interact with the upcoming EU carbon removal scheme has yet to be analyzed.

Another unclear point is how to prove additionality, which varies by voluntary protocol. In general, voluntary carbon credit programs cannot reward specific farming practices that would have happened otherwise: for example, land management practices that are already widely adopted or required by law. The proof of additionality will become more complex if the EU makes standards that restrict the voluntary market. On the other hand, regulatory uncertainty on this important point may also prevent parties from kick-starting carbon farming initiatives today.

Footnote
[1] The 42 Mt CO2e is the estimated difference between the average reported emissions and removals in the 2016-2018 period from land use, land use change, and forestry (LULUCF) and the new removal target of 310 Mt CO2e proposed for 2030. Using the recent average LULUCF removals level as a reference to set a new 2030 target is one of the approaches suggested in the revised LULUCF regulation. 

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Author(s)
Elizabeth Lunik
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO

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