Farmers are NOT engaged with the carbon markets? Is this a problem? And if so, for who?

Farmers Are Skeptical

George King's recent opinion piece in Beef Central entitled Carbon Trading Best Scheme To Lose Your Farm Since the 80's Offshore Debt Debacle is being widely shared amongst farmers. George's comment: "It is a fugazi, trading an invisible natural gas which is critical to all life on earth and has limited GHG properties compared to water vapour" is resonating with clear-thinking farmers.

Leading farmers, like George King are calling the Carbon market a scam. They’ll back up their claims by describing the way offsets work in practice. When a farmer does the 'right' thing and sells it to the big emitters - coal, oil and gas - it just means they can keep emitting. It doesn't stop anything or reduce GHG emissions. We are shifting economic wealth around, but not decreasing GHG's or improving the climate and environment.

George King is a long-time Holistic Management practitioner and farmers like him that were the early movers in regenerative ag, think the system is rigged against them. Farmers ask: Why do they count negative things immediately, but the good things I've done in the past count for nothing, and the things I can do going forward will take years to yield?

When it comes to early movers in the carbon markets - there's a risk, that these first movers may have to buy the carbon back later for their own enterprise - at a higher price.

The ERF system is not practical or scalable. But why? If everyone thinks it's so important to have farmers becoming "carbon sinks", Why are the carbon methods, markets and the regulator so complex and hard to engage. If you take away the spin and look at the mechanisms, it's almost like they don't want it to work at scale.

Farmers are saying: "Why can't someone just explain this to me simply?" and "If it's that complex - then, I don't want to be a part of it". Farmers aren't opting in to Carbon Projects.

Is this a Farmer Problem?

Farmers are not interested in participating in carbon markets and the low engagement and high confusion show this to be true.

But, a farmer is exposed to the Climate and Environment in a practical way that most people can barely imagine. Farmers are the only ones with real assets on the line and they get "the link between biodiversity and breakfast" that urban people only theorise about. Farmers also get the interplay between organic matter and water-holding capacity. They suspect its the hydro-cycle and not the carbon-cycle that needs management and addressing.

Lots of farmers think they are just not going to participate, but they may not get a choice.

There's plenty of farmers who would like to crawl into their shell and wait for this "carbon madness" to pass. They hope that by not participating, it - the brokers, the self-interests, the current fad - will just go away. The ostrich with its head in the sand comes to mind.

Unfortunately mandatory reporting puts this "retreat" strategy at the bottom of the pile of strategies.

Mandatory Reporting of CO2E

As a farmer, you are the start of the economy - Primary Sector - and the rest of the economy has decided to value climate as Carbon Dioxide Equivalent ("CO2E") and they are including your CO2E emissions in their CO2 emissions.

Farmers might think you are just not going to participate. But you more than likely have to because you're part of the broader economy.

Supply Chains

Supply Chain companies have taken the position that their Scope 3 Emissions are the sum of their suppliers emissions. In other words your emissions are a reported and become a cost to them. They are likely to want to recoup these costs. They want farmers to eat these costs or become certified Net Zero.

A few farmers are working direct-to-consumer or for whatever reason don't worry about the cost imposition that supply chains are likely to push down on farmers as mandatory reporting commences in 2024/25.

Banks

Farmers will also be compelled to participate in emissions reporting and carbon markets, because almost all farmers are a customer of bank. Banks, that just like your supply chain, has taken on the position that their Scope 3 Emissions are the sum of their customers emissions. In other words your bank is interested in the revenue-penalty your supply chain may apply to emissions and much more.

A bank is also interested in your environmental asset and carbon market activities. This isn't just a peripheral interest - banks have to provide eligible "Interest" holder consent for ERF projects in Australia. When banks' customers (the farmer) apply to the clean energy regulator for a carbon project the bank is interested - in every definition of the word.

Banks want to know the "opportunity cost" associated with a carbon project and how it effects capital value for the entire property. For example, depending on the carbon method deployed, often times carbon projects restrict activities like grazing for several years and this reduces carrying capacity and possibly land values. Banks want to know this stuff because it effects lending criteria and risk.

You could argue that a lack of farmer engagement in Carbon markets is a problem for the Supply Chains and Banks. However, as we discuss later when we look at AgTech, the banks and supply chains intend to calculate the emissions and practices of "their" farmers from space.

Government Legislated CO2E Reporting

Farmers might want to "wait it out" when it comes to carbon markets, but you are part of country that has legislated 43% reduction by 2030 and Net Zero by 2050.

Every government advertisement, industry event you go to and politician talking about agriculture these days is saying the same thing up front about regenerative agriculture... it being like a "carbon pump" removing carbon from the atmosphere and sequestering it in our national soils and plants.

The government is pregnant with desire for carbon markets. They see farmers as natural participants and a clear way of them achieving their legislated targets.

You could argue again that the lack of farmer engagement in carbon markets is an issue of national importance and problem for the government. But, you can also see what they've created in the ERF and rightly ask is the scheme fit for purpose?

The "Factory Has No Roof" Risk

Farmers might think they can make this mandatory reporting issue go away by not participating. Farmers like George King seem to be saying - just do not engage in this stupid scam. This too shall pass.

But the risk for the likes of George is that their supply chains - "BigAg" - are a "true believer" in the power of AgTech. AgTech is exciting these tech-bro-cum-farmer-startups, where the principle competitive advantage they see is: the factory has no roof.

AgTech is promising Big Ag that you don't need the farmer to know their emissions because you can see what they are doing from space and that you are able to do this because unlike say the manufacturing industry, the agricultural industry "factory" - has no roof.

Industry believes farmer emissions can be estimated from space and used to calculate how much the supply chains must purchase on behalf of farmers and charge the farmer to be Net Zero.

Industry bodies are supporting AgTech and Big Ag in this playbook with fervour. They all know that several big cheques will need to be written before the mandatory reporting emissions issue is resolved for large companies, financial institutions and governments.

The tech-bros and VC-backed remote sensing businesses see themselves as the solution to low farmer engagement. They are saying we don't need the farmers engagement. This should bother everyone!

Who's Business Is It?

Yes everyone wants to know the farmers business. In fact it seems almost inevitable that farmers will be paid in the near future based on what they produce - less the cost of how they produced the what. Or in other words the amount of carbon emissions produced in the process of production.

If by this stage you think farmers can opt-out of the carbon markets you are braver than me. I think farmers are looking down the barrel and this low engagement / high confusion position where most farmers are is exactly where the rest of the economy wants them.

The Setup

Despondent and confused farmers are better targets for change.

As a farmer - you are just where they want you to be - at just the right time.

You see, they know that farmers have a "Gap".

They will start penalising farm emissions in 2024-5. They are doing it sooner in the US and Europe.

Depending on the ERF Method that is used by the farmer, it could be several years before the carbon project generate any carbon credits. If you are planting trees or regenerating trees - it takes several years for them to mature. It can also take several years for farmers to develop a credit balance (>2000 ACCU's) of sufficient volume to commence retirement of credits or trade in credits. This is the law.

Farmers also need to finance / fund the costs of any carbon projects - if they can get eligible interest holder consent from their bank. Carbon projects do typically have upfront costs associated with commencing them i.e Trees, guards, fences and advisory services. Then a long delay.

With reporting happening sooner than most farmers expect and the inherent delay between starting a carbon project and when they yield, there exists a gap where most farmers could be "buyers" or "short" in the near future.

This sucks given any previous good done by farmers is not eligible.

This sucks given over the long-term farmers have the only genuine sequestration "technology" we know of that works i.e photosynthesis. Farmers control the process of photosynthesis. Converting that free sunlight and rain into a marketable product and sequestration. Only this capacity is at the disposal of a farmer. The rest of us are just emmitters

Suck or not, the truth is that most farmers are going to be considered net emitters when mandatory reporting kicks in during the 2024/5 financial year.

As a farmer, when you are convinced this "carbon-market-thing" is a scam right now and do nothing to prepare, your supply chain or bank is going to offer you a "lifeline" later. This will 'help' you to grow trees for 'them' so you can be net zero.

You'll end up taking a deal that solves your short term funding problem by giving away your sequestration rights over the long term.

A Bad Deal (almost) Guaranteed

Farmers through photosynthesis can draw down carbon into soils and vegetation from the atmosphere. Pretty much everything else, done by everyone else, is an emission.

Farmers could be short carbon initially given the way the market is setup, but overall they are the best source of carbon that everyone else needs. This is something banks and supply chains understand better than farmers do.

Your bank and your supply chain don't want farmers that feel empowered and understand what their actual material value is worth. They want you to want their help. That way you will be willing to give over your sequestration rights in the long-term for cents on the dollar - and basically everyone else across industry, government and VC-backed models is relying on farmers doing that!

Answering our initial questions

This article started out with a desire to see if low participation is a problem and who 'owns' that problem. The answer would seem to be that farmers have the problem - wether they like it or not, wether its fair or not, wether they participate or not.

There's only really one option for farmers and that is to participate in carbon markets.

Taking Back Some Control

Farmers do not have to do it on their own.

At Regen Farmers Mutual we help our Members to work together and get farmer-first outcomes.

Members work together and face this market together.

In doing that, they aggregate their environmental assets and negotiate better outcomes.

Working together as members of the Regen Farmers Mutual, individual farmers can get the collective power of the group.