Carbon for farmers: Carbon credits in the supply chain and insetting
Climate change is now an inevitable feature of the conversation around UK farming.
Although farming releases greenhouse gases, it can also remove carbon dioxide from the atmosphere and help mitigate climate change.
There is a lot of talk about carbon in farming, but it can be difficult to follow the many terms and jargon being used and how they are relevant to your business.
In the latest in this series of articles, Regenerate Outcomes’ Chief Scientific Officer and sheep and beef farmer Dr Matt Jordon discusses how carbon credits can be used in the farming supply chain and the concept of insetting.
Carbon insetting for farmers
In the last piece in the series, I discussed how you can generate soil carbon credits which can be sold on the voluntary carbon market.
Another use of credits within the voluntary carbon market is for so-called insetting.
Companies typically think about their emissions in tiers, referred to as Scopes.
Scope 1 emissions are from direct company activity and operations (e.g. carbon dioxide from a vehicle fleet).
Scope 2 emissions are from the company’s energy usage (e.g. carbon dioxide from a power station to keep the office lights on).
Scope 3 emissions are indirect emissions that a company is responsible for that occur outside its own operations but within their value chain.
Matt Jordon, Chief Scientific Officer at Regenerate Outcomes
For example, for UK supermarkets, emissions on UK farms that supply produce to them would count as part of their Scope 3 emissions.
Most companies typically report on their Scope 1 and 2 emissions, but attention is increasingly turning to Scope 3 too.
Keeping carbon credits in the food supply chain
Farmers have an opportunity within the food value chain for the carbon credits generated on farm to be used as ‘insets’ against food companies’ Scope 3 emissions.
This keeps agricultural carbon within the food value chain, rather than selling carbon credits as ‘offsets’ to companies in other sectors of the economy.
“Farmers have an opportunity within the food value chain for the carbon credits generated on farm to be used as ‘insets’ against food companies’ Scope 3 emissions. ”
Insetting can be more attractive than offsetting.
This is partly because the voluntary carbon credit market has attracted scrutiny due to concerns that companies buy carbon credits rather than reduce their emissions. At Regenerate Outcomes we only sell carbon credits to companies who have credible plans to reduce their own emissions.
At the same time, some farmers don’t like the idea of their soil carbon credits being used in a completely unrelated part of the economy.
However, insetting also has some challenges. The first is around verification.
Verification of inset carbon credits
As would be expected in the absence of external pressure from consumers or regulation, food companies often opt for a light touch approach to monitoring emissions and sequestration in their supply chains.
This means there is currently a reliance on low-cost remote approaches such as satellite monitoring, models and standard equations for emissions rather than on-farm measurements, with limited or no physical sampling or independent verification of these numbers.
Agricarbon carry out physical soil carbon sampling for Regenerate Outcomes
While this is low cost, it also risks lacking integrity and may not adequately represent what is happening on farm.
However, in time, independent, third-party verification may become more widespread, as is already the case in the offset market.
A fair price for farmers
The second challenge with insets is ensuring the true value is passed back to the farmer.
Voluntary carbon credits have a value in the market, but there is a risk that food companies simply require them from farmers ‘in with the price’ of the food they’re already buying.
For example, instead of a premium being paid for produce with carbon credits attached, the carbon credits could simply become a condition of keeping the contract, or the premium offered could be well below the value of those credits in the offset market.
Therefore, a key function of the offset market from a farmer’s perspective is ensuring a counterfactual price for farm carbon credits, so they can evaluate potential carbon deals that they’re being offered from food companies down the line.
Regenerate Outcomes enables farmers to generate verified soil carbon credits, which you can either opt to sell as offsets or choose to retain in your supply chain as insets.
The credits we generate comply with the international Verified Carbon Standard and underlying soil carbon measurement protocol: VM0042: Methodology for Improved Agricultural Land Management.
These verified credits come with a price premium to generate maximum value for farmers.
The mentoring we provide can also unlock farm productivity and profitability by using improved soil health to reduce input costs and increase margins, resulting in benefits to the core farming business.
Download our Programme Handbook to find out more.