Carbon Credits Revenue from Agriculture Sector

Studies have revealed that #agriculture is both a victim of and a contributor to #climatechange by producing a substantial amount of greenhouse gas emissions. Results from various research shows that agricultural activities contribute approximately 30 percent of total greenhouse gas emissions, mainly due to the use of chemical fertilizers, pesticides and animal wastes. Studies shows that the past 200 years of agriculture released over 100 billion metric tons of CO2 (GtCO2) from the soil into atmosphere. These greenhouse gases include nitrous oxide (N2O), carbon dioxide (CO2) and methane (CH4), which all contribute to climate change and global warming and consequences are faced by the farmers due to damage in the agricultural production. This is the sad part of the story!

But, best part of the story is that Carbon farming, a sustainable farming practice, is the most prominent solution to the agricultural practices that can counteracts climate change and prepare for its impacts. The carbon farming not only increases the organic matter content in the soil, optimizes production costs, reduces GHG emissions but also expands income of farmers from selling carbon credits by participating in carbon markets.

This article focuses on the following aspects –

·??????Carbon credit concept for agricultural sector

·??????Strategies to generate carbon credits for farmers

·??????Carbon markets available from where farmers can generate carbon credits

·??????Stories depicting success in gaining agriculture carbon credits

What are carbon credits in Agriculture?

In general, carbon credits are a medium of exchange used to “offset” CO2 emissions under the Cap-and-Trade guidelines set by the Paris Agreement. A carbon credit is an offset purchased by companies as one way to reduce their impact on the environment. Carbon credit specifications include: one carbon credit corresponds to one metric ton of carbon dioxide; and for generation of carbon credit careful measurement, reporting and verification (MRV) is an essential part of the methodology.

Farmers can take part in Carbon credit schemes by adopting various practices; viz. no-tillage farming, precision nitrogen use, cover crop planting, agroforestry, maintain and enhance soil organic carbon on mineral soils, managing peatlands, creating grasslands, livestock and manure management, nutrient management on cropland and grasslands.

Carbon farming is one of the best practices that improves soil health and maximizes reduction of GHG emission thus contributing to the climate change mitigation and adaptation effort. Carbon farming techniques are science based, well researched by soil scientist, agricultural scientists and include cover crops, optimized tillage, and fertilizer management techniques to name a few.

Many regenerative farming methods follow the traditional ways of farming that were used for thousands of years. These include:

·??????reducing soil disturbance due to tillage,

·??????ending the use of synthetic pesticides and fertilizers through mob grazing and manure/compost

·??????Maximizing soil coverage through living roots and mulching (covering the soil with mulch)

·??????Promoting crop rotation by moving away from monocultures and growing cover crops, which improves biodiversity

·??????Combining livestock rearing with crops and other plants.

These regenerative farming methods are applied on degraded lands and restore it back to nature.

One of the concepts which deals with nitrogen or nitrous oxide (N2O) can be also adopted for carbon credit generation. In theory, a farmer can adopt no-till (which reduces N2O emissions by 57% over chisel tilling) and other regenerative farming methods that reduce N2O emissions and determine how much of that emission is prevented. Then the farmer can get and sell the resultant carbon credits in a carbon market.

Farmers can get benefit from growing cover crops and sell it as carbon credits. Cover crop concept is somewhat different from primary cash crop. These are planted without the intention of harvesting. Popular examples of cover crops are barley, oats, legumes, radishes etc. and they protect the soil from erosion and enhance nutrient bank of the soil. Studies shows that an estimation of 20 million acres of cover crops can sequester over 66 million tons of CO2 equivalent a year which is equivalent to about 13 million vehicles.?

Strategies to generate carbon credits for farmers

To generate carbon credits the interested agricultural industry should follow the following strategies-

??Selection of right carbon credit generating program

??Baseline study of the farm

??Adoption of best agronomic practices

??Implementation of guidelines and practices to generate carbon credits

??Measurement, Reporting, and verification of data generated

??Verification of the results

??Earning of certified carbon credits in agriculture

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Carbon markets available for farmers to generate carbon credits

Farmers and agricultural farms can avail sustainable land stewardship by removing large scale carbon in the atmosphere and storing it in the soil through carbon farming. In exchange farmers receives compensation in the form of carbon credits by participating in the carbon markets. There are generally two broad categories of carbon markets namely,

- compliance markets and

- voluntary markets

Compliance markets are also referred to as mandatory or regulatory markets. Some examples of the regulatory compliance markets are: EU Trading Systems (ETS), Clean Development Mechanisms, UNFCCC, Regional Greenhouse Gas Initiative (RGGI) etc. These bodies provide the farmers a platform to buy and sell emission allowances among other parties to balance out emission margins at a price. This emission credit has a value as it allows the holder a clearance to emit at a limited capacity. Each of the registry body has unique methodologies and specific carbon farming practices to be followed when registered.

Studies revealed that farmers can generate a passive income by participating in carbon markets. Typically the price ranges from $10-15 per ton of CO2 equivalent. For instance, if a farmer with 3 ha land earns 2 carbon credits per ha, the potential income would be up to rupees 6750.

Footprints of Agricultural Carbon Credit

In recent years, voluntary carbon markets have grown tremendously in scaling the low-carbon economy including carbon farming. For example, CME group (Chicago Mercantile Exchange) has started trading futures contracts for offsets generated from agriculture, forestry, and other land use, called Nature-Based Global Emission Offset (N-GEO). However, to ensure the transparency of N-GEO futures, only the offsets from Verra’s Verified Carbon Standard for Agriculture, Forestry, and Other Land Use projects and/or the Climate, Community, and Biodiversity Standards are accepted for trading.

A number of large corporations such as Microsoft, JP Morgan, Delta Airlines, Google etc. are making pledges to become or remain carbon neutral by adopting agriculture-based carbon credits through voluntary carbon markets. Most carbon programs are paying farmers who participate in their pilot programs between $10 and $30 per acre per year.

A report published states that by mid-2023 hundreds of farmers could get payments for carbon credits issued in India for implementing climate-friendly practices which reduce carbon emissions. In India, a carbon farming programme has been initiated by a private entity Grow Indigo (GIPL), a joint venture between domestic seed major Mahyco and US-based Indigo. In this project around 45,000 acres of paddy growing land in Punjab and Haryana have been registered for the carbon credit initiative. The farming techniques adopted by the farmers are- direct seed rice, which improves water use efficiency and no tillage practice which conserve soil organic carbon, prior to planting of paddy could register for the programme for getting carbon credit. Carbon credits from farmers can be purchased by the industries especially aviation, mining or manufacturers of fertilizer, who have less scope for reduce their carbon footprints because of the very nature of their business.

Globally investors and companies like Cargill, JPMorgan Chase, Shopify, and Microsoft have committed to promoting farming methods that regenerate the soil by buying carbon credits from farmers. Lawmakers also recognize the role that cover crops play in reducing emissions by capturing and storing CO2 and N2O. For instance, the Biden Administration proposed $28 billion for land conservation programs, out of which $5 billion for farmers and landowners for growing plant cover crops.

There are many such examples can be found around the world. In Canada, over 20 million metric tons of carbon emissions reduction are from agricultural carbon credit projects in Alberta alone. Similarly, the EU regulation for carbon farming and emissions trading goal is to cut 42 million tons of CO2 by 2030.?

Way forward

From the above discussion it is clear that agricultural soil carbon capture and sequestration methods can help address climate change and also brings fortune to the farmers by boosting their financial conditions.

A robust measurement, reporting and verification (MRV) is very much needed to ensure that agricultural techniques adopted for emission reductions are fully inclusive and benefit the people and communities participating them. Because, the price of carbon credits is not equal in nature. It mostly depends on the quality. Studies shows that a high-quality carbon credit is real, additional, transparent, measurable, and permanent.

A global third-party verifier like VERRA, Gold Standards, CDM, ?can contribute proper implementation of the agricultural projects with approved compatible methodology.?However, the existing methodologies should be reviewed on the basis of their applicability irrespective of geographical locations.

The price of the carbon credit is another factor that has to be look into. Carbon credits should be freely traded on a marketplace with fair amount of income generation so that farmers come forward to participate in such carbon market.

Net Zero Think, a climate focused service provider?is providing various solutions to generate carbon credits from agriculture activities and increase the income of the farmers.

To know more, send an enquiry to [email protected] or visit to www.netzerothink.com

Author: Dr. Pranamika Bhuyan (Lead Environment & Carbon Market Expert)