Carbon Insetting: Who gets the credit? [Part 1: Setting the scene]

Let's talk carbon insetting within agri-food value chains! This approach is all about reducing a company's greenhouse gas footprint by avoiding or removing carbon within their own supply chain. Lets focus on the carbon removal part of the story.

The coming years will likely see a surge in companies utilising carbon removals within their supply chains to reduce their greenhouse gas footprint, while choosing to bypass the use of verified carbon credit units.

Is this just a way for big food companies to push decarbonisation responsibility onto farmers, without paying the full price? Or a practical way to avoid burdensome red tape?Some see this unaccredited insetting as the "end of offsetting", others fear "unregulated greenwashing". The truth, as always, is probably somewhere in between.

For the sake of clarity. There are two pathways for carbon-removals to be used as part of a carbon insetting program:

• Unaccredited = no creation and retirement of a carbon credit unit.
• Accredited = creation and retirement of a verified carbon credit unit.

The good news? We have more tools than ever to decarbonise and improve landscape health! Unaccredited insetting has its place in that toolkit.

The key question? In the context of an agricultural value chain. Who benefits most from this approach: farmers, consumers, or the big food companies?

In this multi-part series of articles, I will delve into the issues that matter:

• Permanence & Buffers:?How do we ensure the carbon stays put?
• Additionality / lock-out risk for farmers:?What happens if an insetting program folds?
• Cost:?Can unaccredited insetting ACTUALLY save money?
• Farmer Power:?Who benefits the most from this approach?
• Farmer and food co partnerships: Can this bring everyone closer together?

Putting my cards on the table:

To cut to the chase. This is my position:

? Right now, using unaccredited carbon-removal for insetting is just too risky. It can be confusing for consumers, lacks the guarantee of permanence that verified carbon credits provide, and risks that farmers are locked out of carbon markets if the insetting program is cancelled.

In our current early 2024 reality, unaccredited carbon insetting programs appear to only significantly benefit the huge food companies.

?? One exception: Unaccredited carbon-removal based insetting may be a useful tool for vertically integrated food brands.

If they own the farms and can take the risks, responsibilities and rewards of a carbon insetting program on their own shoulders.

? Unaccredited insetting makes total sense when it comes to avoided-emissions:

• This is a no-brainer, and not discussed further in these articles.
• Avoided emissions would only require a verified carbon credit unit if the intention is to sell the emission reduction outside the value chain (not carbon insetting).
• The assumption is that companies will have credible and verified emission measurement processes, to quantify the annual carbon footprint.

The best solution?

? Verified carbon credit units as part of an insetting program. This gives everyone a fair shot:

• Farmers:?Get rewarded for good land management and have the security of a tradable carbon unit that can be used inside or outside the value chain.
• Consumers:?Can trust the carbon is actually being stored for the long term, and that some credits are held as a buffer for carbon leakage.
• Food Companies:?Have a stronger case to guard against greenwashing, via the increased integrity of third-party verification.

The scope of the conversation:

Just to make sure we are all on the same page. These articles are focused firmly on the topic of removal-based Carbon Insetting.

Carbon Insetting: Removing CO2e within land or infrastructure controlled by the company. Or, working with supply chain partners to help them to avoid or remove CO2e. This may involve a carbon credit.

Specifically, this choice of "accredited vs. unaccredited" is focused on carbon removals, such as planting trees, building soil carbon or other activities that remove and store atmospheric CO2e.

We are talking about activities occurring within the land footprint of a company’s direct operations or own value chain (not on adjacent land, which would be outside the value chain).

Follow the link to download a short and sharp guide to the three decarbonisation tactics: reducing, insetting and offsetting. Produced by Kakariki Capital (disclaimer: I work for Kakariki and was lead author of the guidebook, I am sure you will love it!).

Secondly, we are talking about the food and fibre value chain. Where we are assuming (for the sake of this discussion), that farmers are supplying to a downstream partner such as a food manufacturing company, who is leading the insetting program.

Setting the stage: SBTi FLAG and The GHG Protocol

Before we tackle the nitty-gritty of permanence and buffers, let's get some context.

In 2023, the Science Based Targets initiative (SBTi) released its Forestry, Land, and Agriculture (FLAG) Guidance. SBTi is basically the gold standard for companies setting credible decarbonisation goals. Their FLAG guidance helps companies with agricultural supply chains establish specific targets for land use and management. This includes exciting new possibilities – companies can now utilise carbon removal activities (like tree planting or soil carbon programs) within their supply chain to reduce their Scope 3 emissions!

Here's the catch: SBTi has been less than encouraging of companies utilising offsets (which they call "beyond value chain mitigation"). Many people (myself included!) believe SBTi should work harder to encourage the immediate use of offsetting, to compensate for all unavoidable emissions, alongside emission reduction efforts (these efforts can take significant time to ramp up, or can be stuck waiting for new technologies).

The good news? The FLAG guidance paves the way for companies to embark on insetting programs focused on carbon avoidance and removal, with or without a formal carbon credit unit.

This brings us to the Greenhouse Gas Protocol (GHG Protocol) , the world's go-to standard for carbon accounting. Their Land Sector and Removals Guidance provides a framework for companies to calculate their land use changes, management emissions, and carbon removals within their annual GHG reports. While still in draft form, the final guidance is due for release in early 2024 (hopefully!).

Think of it like this:

• SBTi FLAG = target setting,
• GHG Protocol = emission accounting.

Together, these frameworks open the door for the increased adoption of unaccredited insetting programs.

Accredited vs. unaccredited : The Carbon Credit Conundrum.

So, companies pursuing removal-based carbon insetting face a key question: accredited vs. unaccredited?

• Accredited:?Companies create and retire verified carbon credit units through third party carbon credit regulators.
• Unaccredited:?This approach involves carbon removal activities without creating or retiring a formal carbon credit unit.

While unaccredited insetting offers flexibility, it comes with significant risks, especially for program integrity and farmers being locked into a single approach. We'll explore these issues in detail in the next part of this series, but here's a sneak peek:

• Greenwashing:?Without verification, it could be difficult to guarantee the carbon is actually being stored permanently.
• Confusion for Consumers:?It's hard for consumers to understand the impact of unaccredited insetting claims, or to be able to track validity of claims long-term.
• Farmers are locked in: Insetting programs have the risk of locking farmers into a single pathway, with no bargaining power, ability to sell carbon credits outside the value chain, or to participate in a verified carbon program if the insetting program is cancelled.

Stay tuned for Part 2! Now that we have set the scene, we'll be tackling the critical issue of permanence and buffers in unaccredited insetting programs, and explore the impact on farmers, consumers, and companies.