6 Misconceptions About Carbon Programs for Farmers

6 Misconceptions About Carbon Programs for Farmers

While the agricultural carbon markets are ripe for opportunity, there are a number of misconceptions about them. Here are six key misconceptions we would like to address with our clients in regenerative agriculture.

1. “Greenwashing” is Rampant in Carbon Offset Markets

“Greenwashing” is a term used to describe actions that are marketed as environmentally friendly but are not in reality. A subtle example of greenwashing is the depiction of nature scenes on single-use plastic water bottles that harm the environment, in an attempt to lure additional customers. Another example could be rewarding a landowner for conserving carbon-sequestering forestland that was not in danger of being harvested anyway. However, the intent of most carbon programs that issue carbon offsets, and entities who purchase carbon offsets is very much the opposite of greenwashing.

Carbon programs utilize third-party verification and adhere to internationally recognized standards. They also use technology and methods that are subject to stringent scientific peer review in order to build trust with their clientele, and to award carbon credits that are verifiably real and quantifiable, among other essential characteristics. It is in their best interest to be trustworthy, as trust from carbon credit generators and buyers is paramount in building a functional and profitable market to draw clients from in the long run.

2. “I’ll Just Do it Myself”

Many farmers are already actively investing in their business’ supply chain to reduce, remove, or eliminate greenhouse gas emissions – this is a great thing. This is often referred to as carbon insetting and is a fantastic compliment to carbon offset programs.

In order to participate in offset markets, and to earn external financial incentives for doing so, independent audits are required to ensure credibility of any offsets earned (based on carbon reduced and/or removed) and gain trust from purchasers.

As well, the audit process itself must be meaningful. Procedures or methodologies for a given carbon project, which project developers and certified auditors both adhere to, are often assessed against standards that are internationally recognized by purchasers.  By trying to “self report” and earn credits on a DIY basis without enlisting a carbon program and a certified auditor, farmers can risk losing out on climate incentive opportunities by failing to align with the standards and expectations of purchasers.

3. Carbon Offset Projects Are Prohibitively Expensive

If a farmer were to develop a carbon project directly through a traditional, non-profit entity such as Verra, Climate Action Reserve, Gold Standard, or American Carbon Registry, it could be prohibitively expensive on a per acre basis for all but some of the largest commercial farms in the United States due to the high cost of verification (auditing) and related field sampling work (if required).

However, in many cases, these fees can be largely (if not fully) waived by enrolling with an established carbon program that covers the costs. To provide assurance and credibility, many of these programs work in partnership with traditional registries to continually improve, review and uphold standards and methodologies for carbon projects. Within the last 5 years, carbon programs for farmers often require negligible or even zero upfront fees as they have recognized that farmers typically do not hold large amounts of cash on hand (tied up in assets). To account for this, fees to the programs are awarded via a form of revenue share of the issued credits upon sale, and/or commissions paid by offset purchasers (emitters). As well, newer carbon programs are mitigating in-field costs with more efficient technology such as remote monitoring or modeling carbon sequestration once the baseline is established.

4. All Carbon Programs are the Same

In the emerging carbon market, there are dramatic differences from one carbon program to another. Areas such as cost, revenue potential, crop inclusivity, geographic eligibility, credit ownership, market transparency, use of technology, and contract provisions (such as freedom or lack thereof to adopt or change agronomic practices) are all variable from one provider to another.

To learn more about the different types of carbon programs available, check out the Carbon Credits: Go-To-Market Strategy course provided by PanXchange.

5. It’s too Early / Lacks Substance / Isn’t There Yet

Fifty-eight percent of Fortune 500 CEOs said in a recent Fortune survey that they have a plan to achieve net-zero greenhouse gas emissions by 2030, including Microsoft, Google, Goldman Sachs, among others. The analyst community reports climate investor groups are getting larger even in as small as a 6-9 month window in 2021 (i.e. single family office expanding to multi family office).

With climate change at the forefront of media coverage, and major intergovernmental cooperation in panels such as the United Nations Intergovernmental Panel on Climate Change (UNIPCC), the key difference between offsets and other asset classes (and even carbon offsets in the past) is that the existential importance of climate change underpins demand. As a result, last year carbon credits outperformed broad market indices such as S&P, and Bitcoin, in value of 1$ invested on an annual basis, and in-particular, nature-based offsets have held strong and steady (including during the peak COVID 19 concern period) according to pricing data published by Xpansiv.

From a commodity markets perspective, commodity prices have not seen this kind of supply-side volatility perhaps ever in recent history (i.e. year over year, WTI is up 29%, Henry Hub Gas up 74%, metals down 15%, Copper down 21%, etc). In verified carbon markets, the fear was that carbon offset credits are a discretionary purchase, and companies could delay the budget for offsets and buy necessities instead – however, this has not been the case. In sum, while carbon offset markets are messy, imperfect and rapidly evolving, they have substance and are very much here to stay.

6. It is Difficult to find a Legitimate Carbon Program Provider

As carbon offset markets continue to show great promise and rapidly evolve, a surge of new entrants has made their way into the space. As a farmer, finding the most trustworthy and credible program is essential.

Many purchasers evaluate credible carbon offsets and the programs they come from based on International Carbon Removal and Offset Alliance (ICROA) standards, as well as those at least  equivalent such as:

• Verra (Verified Carbon Standard)

• Plan Vivo

• Gold Standard

• American Carbon Registry

• Climate Action Reserve

Credits that are real; verified (by an accredited third party); quantifiable (using acceptable methods, including quantification of margin of error); permanent; additional (represent a meaningful change from the status quo); unique (not “double counted”) are what are considered most acceptable by Fortune 500 purchasers such as Microsoft under ICROA standards. Of note is the concept of being quantifiable, as there is often pushback from purchasers and regarding margins of error and distrust of measurements and technology. While there is a margin of error, credible verifiers will take this into account and apply a conservative evaluation of the amount of carbon offsets earned by a client.  As quoted by Liz Minne (Global Sustainability Director at Interface) “we can’t let perfect get in the way of good” in terms of channeling investment toward fighting climate change. That said, market participants should conduct their due diligence and be aware that greenwashing does exist. To assist with this, PanXchange offers an introductory carbon markets course, a great resource to learn how to assess carbon programs and ask the right questions.