Carbon for farmers: An introduction to the carbon market

Climate change is now an inevitable feature of the conversation around UK farming as the government strives to achieve ‘net zero’ emissions of greenhouse gases by 2050.

Although farming releases greenhouse gases, farmland can also remove carbon dioxide from the atmosphere and help mitigate climate change.

Subsequently, there is a lot of talk about ‘carbon’ in farming, but it can be difficult to follow the many new terms and jargon being used and how it is relevant to your business.

In the second in our series explaining carbon, Regenerate Outcomes’ Chief Scientific Officer and sheep and beef farmer Dr Matt Jordon discusses carbon markets and the opportunity for farmers to sell soil carbon credits.

You can read the first piece in this series where Matt explains the benefit of getting a carbon baseline in place below.

How can farmers remove carbon from the atmosphere?

Carbon dioxide can be removed from the atmosphere using natural processes.

This process of removal, known as carbon sequestration, takes place in soils when we build organic matter which contains carbon. Planting new hedgerows and trees also sequesters carbon.

Carbon removals are measured in tonnes of carbon dioxide equivalent.

Building soil organic matter sequesters carbon

One tonne of carbon dioxide equivalent represents one carbon credit.

Farmers can take opportunities to be rewarded for the carbon they’re sequestering by generating and selling carbon credits.

There is demand for these credits from companies in other sectors of the economy as they work towards their own net zero targets.

How does the carbon market work?

The carbon market is well established with viable opportunities for UK farmers today.

In fact, the carbon market is a lot older than many people realise and the first carbon markets emerged in the late 1990s.

However, the conversation is quite new to farming and soil carbon credits from UK farmland have only really taken off in the last 5-10 years.

The compliance market and the voluntary market

There are some key categories within the carbon market.

The first is the difference between the regulatory compliance market and the voluntary carbon market.

The compliance market is based on the Emissions Trading Scheme run by the European Union, with the UK setting up its own version following Brexit.

This only applies to energy intensive industry, power generation and aviation and is a ‘cap-and-trade’ scheme.

Farmers have the opportunity to sell soil carbon credits into the voluntary carbon market

In other words, emissions across these sectors are capped. If individual companies are under this cap, they can trade their surplus allowance to those who are over their cap and are required to buy.

Over time, the cap is slowly reduced to bring overall emissions down.

In contrast, the voluntary carbon market is based around companies monitoring their own emissions, then seeking to buy carbon credits to offset or otherwise mitigate them.

Simply put, a company emits one tonne of carbon dioxide equivalent over here, then buys a carbon credit representing one tonne of carbon dioxide equivalent removed from the atmosphere over there. They can then claim net zero emissions overall.

Removal versus avoidance credits

Within the voluntary carbon market, carbon credits can be generated from emissions removal or avoidance.

A removal credit represents one tonne of carbon dioxide equivalent removed from the atmosphere by soil carbon sequestration or some other means.

An avoidance credit is based on reducing a source of emissions through changed practices or adoption of new technology.

The vast majority of credits in the voluntary carbon market are generated through avoidance.

Agricarbon carrying out soil carbon testing

They typically come from renewable energy projects, rainforest protection in the Global South, or things like clean cookstove projects and so on.

These projects can be controversial as it is often difficult to prove the carbon credit value has actually been responsible for delivering a reduction in emissions that wouldn’t have occurred otherwise. Therefore, avoidance credits are increasingly falling out of favour.

However, this means that demand for high-quality removal credits such as soil carbon credits is increasing.

Carbon credit verification standards

Within the voluntary carbon market, there are a number of international standards that set rules for generating carbon credits.

The UK Woodland Carbon Code and Peatland Carbon Code are examples of such verification standards, with credits from these listed on the UK Land Carbon Registry.

There is no UK specific soil carbon code.

International standards like the Verified Carbon Standard have methodologies for soil carbon credits from agricultural land. These credits are listed on the Verra registry.

The UK British Standards Institute is in the process of developing assurance standards for these international verification standards to increase confidence in their validity.

However, there is no obligation for project developers in the voluntary carbon market to follow a verification standard.

Some soil carbon programmes in the UK aren’t verifying their credits and simply self-assessing and finding buyers for unverified credits.

Verified credits are worth more money

Although validation and verification are expensive processes, they typically more than pay for themselves through the price premium this can unlock.

For example, self-assessed soil carbon credits in the UK are currently trading for around £40-50, whereas verified soil carbon credits are currently estimated to be worth £60-80.

Furthermore, farmers benefit from knowing their credits are generated following a reputable standard with third-party verification.

You can be more confident these will stand the test of time, compared to an individual company’s ‘black box’ approach to self-assessing their sequestration.

Selling credits to reputable buyers

Lots of farmers are concerned about integrity in the carbon market and the risk of ‘greenwashing’ where companies buy carbon credits but continue business as usual pollution.

This is avoided by only selling carbon credits to companies which are using them in a responsible way to contribute to an overall net zero target, rather than simply buying credits but doing nothing about their existing emissions.

Carbon baselining and measurement to generate verified carbon credits

Regenerate Outcomes provides rigorous soil carbon baselining and measurement at no upfront cost.

Our mentoring team work with farmers to build productive soil by increasing organic matter.

The increase can then be used to generate soil carbon credits which you can retain or sell for additional income.

The credits we generate comply with the internationally recognised Verified Carbon Standard and underlying soil carbon measurement protocol: VM0042: Methodology for Improved Agricultural Land Management.

We only sell credits to companies which can demonstrate their purchase is part of a broader policy to reduce greenhouse gas emissions and minimise negative impacts on nature.

Download our Programme Handbook to find out more.