Background Climate
Agro-concerns are interested in carbon farmers
The United Nations climate conference currently underway in Glasgow has put carbon farmers back in the spotlight. Companies such as Yara, Bayer, Cargill and Rabobank have plans or have already started a carbon farmer program. Other companies are also working on this. Will it be a new trend: the large agro-related companies entering the newly developed market for carbon farmers?
The idea behind carbon farmers is simple. Farmers take cultivation measures to capture CO2 from the atmosphere in the soil, for example by growing green manures or applying non-inversion tillage. The farmer records the measures he takes in a digital system and thus earns carbon rights. These rights can then be monetized by selling them to companies that want to offset their CO2 emissions.
The knife cuts both ways
It seems like a win-win situation. Farmers create an additional steady source of income alongside their business activities in a, especially now, highly volatile agricultural market. And companies or industries that are difficult or impossible to make sustainable can still offset their emissions through the carbon rights. Capturing CO2 in this way and linking salable rights to it is a new approach.
The market is still in its infancy and that entails a lot of uncertainty. This creates doubts among the farmer and the industry (read: buyers). Emissions trading systems such as the European EU ETS have been around for some time, and the ETS market has therefore been viewed with a slanted eye when valuing the 'new' carbon rights.
Initiators of carbon projects are in a dilemma when it comes to prices. On the one hand, the carbon rights must yield enough for the farmer to get enough participants and thus create supply. On the other hand, the rights should not become so expensive that the interest of the industry disappears.
More possibilities
Although some industries are difficult to make sustainable, that does not mean that nothing is possible. For example, for the steel or fertilizer industry, the choice becomes: do we continue on the existing footing and buy off the CO2 emissions with rights or does that (in the long run) become too expensive or socially unacceptable and we must and can, for example, electrify or switch to green hydrogen? For example, Tata Steel previously announced that it was working on complete sustainability of the blast furnaces in IJmuiden.
Farmer sees objections
The general tendency is that it is an attractive way for the farmer to make it more sustainable, to work on healthy soil and also to receive compensation for this. Nevertheless, the enthusiasm of the large companies in the agricultural sector is met with a lot of skepticism among farmers. First of all, there is the price of the carbon rights. Prices mentioned by the mainly American initiatives vary somewhat, but are somewhere between €30 and €50 per hectare per year. Any additional costs or a lower yield of the cultivated crop quickly evaporate the profit from the carbon rights. Also, the long-term connection, which is attached to most programs, and the large amount of valuable and sensitive data that ends up at the supply companies, is something that some farmers are not comfortable with.
The Netherlands is different
An insider within the Dutch market says that this is where the greatest opportunities lie for livestock farming. A relatively large number of root crops are grown in Dutch arable farming and, unlike grains or legumes, these are more difficult to combine with, for example, NGK or green manures. Permanent grassland, on the other hand, can lend itself to carbon sequestration. With relatively limited effort, a livestock farmer can market the carbon sequestration that already takes place in grassland. The large companies involved in this mainly focus on (extensive) arable farming as the sector with the most opportunities. As a result, the chance does not seem great for the time being that the Dutch market will be dominated by the large companies in the agricultural sector. But if carbon farmers really take off, that could change in no time.
Jurphaas Lugtenburg
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