Carbon credits: earning from CO2 sequestration

Carbon farmers or carbon farming. These concepts are regularly used as a solution for compensating CO2 emissions and/or as a revenue model for farmers. The first projects have now been launched in America in which farmers can actually sell certificates for CO2 that they capture in the form of organic matter in the soil. Things are moving a little slower in Europe, but here too the first initiatives are taking shape.

How does the market for CO2 rights or carbon credits work and what opportunities are there for the Dutch farmer? Talked about that Boerenbusiness with Erikjan van Huet Lindeman of Dutch Carbon Credits, one of the parties taking the lead in this young yet unexplored market.

Carbon credits, ETS, CO2 rights, concepts that are very similar to an outsider. What are the differences?
“The carbon market can roughly be divided into two categories. The first is the mandatory European Emissions Trading System (EU ETS) that was introduced in 2005. The aim of the system is to reduce CO2 emissions from heavy industry. is done by issuing annual emission allowances, which companies can trade among themselves. The number of available allowances is reduced over time and the idea behind this is that the CO2 allowances become more expensive and companies are forced to reduce their CO2 emissions further and further Large European companies are obliged to participate in this system and must have sufficient rights to cover their emissions."

"The other market is the voluntary carbon credits or certificates where CO2 is removed from the air and stored for a long time. By purchasing these certificates, companies can voluntarily compensate their CO2 emissions, for example from a drive for socially responsible production. This is a young market that still needs to be developed further. There are opportunities for agriculture that is the only sector that can actually remove CO2 efficiently from the air and store it in the soil with the help of plants/crops."

"For the sake of clarity, the ETS market is a mandatory and strictly regulated market that cannot be mixed with certificates based on CO2 removal. The initiatives to extract and capture CO2 from the air to create tradable carbon credits are based on a voluntary basis. In essence, that is not correct, I think. Companies are allowed to emit CO2 as long as they pay for emission rights, without any obligation to have that CO2 removed from the air. If you really want to help the climate by reducing the CO2 percentage in the atmosphere to reduce emissions - which is what the policy is aimed at - there should be a link between emission allowances and CO2 removal."

In America, the voluntary carbon market is gaining momentum more than in Europe. Are Americans more environmentally conscious than Europeans?
"I think that has more to do with the nature of American agriculture. The projects that are underway there are often aimed at the extensive grain companies in the prairies. Yields are low, but companies have a lot of hectares. A relatively small payment per hectare for carbon sequestration quickly adds up on a large area. And due to the generally low financial returns per hectare, the extra income from credits is a welcome addition to the balance more quickly compared to the Dutch situation."

"Companies that want to offset CO2 like to look at the low prices in America, for example. Projects for planting or preserving forests in faraway places are also popular with European companies. The mood on this is shifting. Compensating CO2 emissions by however, remote projects are coming under more scrutiny. A recent example of this is Sweden's Arla, which claimed to produce CO2-neutral milk by offsetting CO2 emissions by planting trees in Africa. The Swedish Consumers' Association felt that Arla had claim misled consumers and filed a lawsuit against the dairy group. Although Arla did nothing wrong, it has withdrawn the claim of CO2 neutral milk and is looking for ways to compensate for CO2 emissions from dairy farmers."

Does that offer opportunities for Dutch farmers?
"Certainly! There is a trend that companies want to compensate their CO2 emissions locally. What could be better than as a company being able to show your customer which farmer on which plot extracts your CO2 from the air and captures it. Very practical and tangible and directly verifiable. To make this carbon sequestration interesting for Dutch farmers, the price has to match the measures he has to take for this and the Dutch hectare prices. Companies that want to compensate for CO2 still have to get used to that."

How does that work if I, as a farmer, want to sell carbon credits?
"In the Netherlands, the system of the National Carbon Market Foundation is best applicable; we as Dutch Carbon Credits also work with that. Carbon projects have a duration of ten years. At the start, the organic matter content in the soil is measured and model calculations based on the soil type, cropping plan, the supply of organic matter in the form of compost or farmyard manure, etc., we set a potential carbon sequestration target, half of the expected carbon sequestration is paid out based on the measures taken by the farmer to sequester CO2 The settlement of the other half takes place on the basis of the amount of CO2 that is actually captured in the form of organic matter."

What do the carbon credits ultimately bring in?
"There are many variables when calculating the potential, but on average it is feasible for most farmers to capture somewhere between 1.500 and 2.000 extra kilos of CO2 per year per hectare. So that is 1,5 to 2 certificates per hectare per year. At a price of €80 to €100 per ton, the CO2 rights become interesting for the farmer. This of course differs per company and depends on the adjustments that the farmer has to make in his business operations. crops, the calculation is different than on a more extensive farm. In addition to the financial yield of the carbon credits, increasing the organic matter percentage also has agricultural advantages, for example that the soil retains moisture and minerals better and becomes easier to work with. arable farm that is considering expanding its cultivation plan, the proceeds from the carbon credits can be the deciding factor in extensifying and for a dairy farmer with a lot of In addition to grassland, the carbon credits can offer the opportunity to capitalize on the natural CO2 sequestration of grass."

Jurphaas Lugtenburg

He is a market specialist in grains and other agricultural commodities at DCA Market Intelligence. He also focuses on onions, potatoes, and roughage. Jurphaas also runs an arable farm in Voorne-Putten (South Holland).

j.lugtenburg @boerenbusiness. Nl

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.