Objective A5 - Carbon markets

Qualitative data on Soil Organic Carbon (SOC), carbon markets, and compensation schemes in agriculture and forestry have been compiled and are freely accessible.

The "4 per 1000"-Initiative has identified 3 to 5 commendable compensation schemes and shares them among the network through the collaborative platform and the Initiative's website.

3 to 5 alternative economic instruments providing a real financial incentive that drives the transformation towards agroecology have been explored and/or developed.

Carbon markets are not attractive to farmers because effective market demand for carbon sequestration is low (low prices), opaque market participation is complicated, and transaction costs are high.

Land users, particularly small-holder farmers, do not perceive the existence of carbon markets as an incentive to adopt good practices that foster SH and carbon sequestration. Transaction costs are very high relative to the low value of the carbon credits. There exists no clear overview of the differences between established certification schemes and other market mechanisms. A range of competing approaches to designing and delivering carbon market mechanisms exists, confusing market players and slowing the increase of demand. 

The role of carbon markets in supporting the out-scaling of good practices that foster SH and carbon sequestration remains below its promised potential. Demand for carbon certificates is still low, which hampers a price increase. Due to high certification costs, entering the carbon market is only profitable for large areas or many aggregated plots. Therefore, a cluster approach is the only available solution today to involve small farmers, but this approach always needs an intermediary to carry out the project.

Methodology for C-stock change

Markets Access

Ease of market access and attractiveness to landowners and managers.

Assure systems that will create good incentives and are workable for them.

Enable long-term visibility on the price of a ton of carbon in the long term. We need to see the carbon market as a complementary source of revenue, not as the major one.

Improving market access could include aggregation methods that allow farmers to combine their efforts to reduce transaction costs and make it feasible to participate in markets.

Market Intelligence

Monitor development and take stock of the situation in the different countries, of the financial solutions and mechanisms that have been put in place to support the change in farmers' practices or any positive steps for reducing greenhouse gases.

Take stock of the situation in the different countries, of the financial solutions and mechanisms that have been put in place to support the change in farmers' practices or any positive steps for reducing greenhouse gases.

Impartiality & objectivity

The neutrality of Task Force Members is of concern. Team members are likely to have direct or indirect incentives to promote the carbon market mechanisms they participate in. Maintaining objectivity during this process will be critical.

Openness to innovation

Open to innovation and out-of-the-box thinking. (Openness to innovation)

Ability to identify innovative solutions to improve market mechanisms.

There are new technologies for increasing SOC, new monitoring technologies … The best carbon schemes in 2030 and 2050 will not look like today. We need to anticipate that.

Robust and efficient MRV

Robust and efficient MRV. (Robust and efficient MRV of soil carbon)

Suppose sampling of soils remains too resource-intensive to monitor Soil organic carbon (SOC). In that case, we need to utilize the practical options we have the modeling of SOC with robust scientific models. Uncertainty must be dealt with through conservativeness and not be used as an excuse not to conduct projects.

Foresight

Higher accuracy of climate prediction models to recognize the urgency for CO2 removal. (Successful renegotiation of emission reduction pathways)

CO2 emissions and emission reduction potential have to be estimated with higher accuracy to design emission reduction pathways that lead to certificate shortage, increasing certificate prices, and a strong incentive for emission reduction and sequestration.

Co-Benefits

Include ecosystem benefits in payments for carbon sequestration. In other words, expand the value of credits to include ecosystem benefits.

To price credits from nature-based solutions fairly, we must value the ecosystem benefits. Fair prices allow a practitioner to be adequately compensated, comparable to planting a forest monoculture.

Inclusiveness

Level of involvement of stakeholders in current and under-development soil carbon markets.

Stakeholders in current and under-development SOC carbon markets are the ones who will have the most precious feedback on carbon schemes.

Adaptation of Article 6

Article 6 of the Paris Agreement must integrate soil carbon sequestration projects.

Article 6 of the Paris Agreement must integrate soil carbon sequestration projects. "4 per 1000" must provide information to help the signatories of the Paris agreement agree on incorporating carbon sequestration projects in the compliance markets.

Know-how

Lack of knowledge on how to participate in carbon markets.

According to countries, the compensation mechanisms may not be accessible, or the actors are difficult to identify or reach.

Competition among certification companies

Competition between private certification companies and the 'over-selling' of short-term gains can lead to a loss of confidence for farmers.

Trade with data

Private companies want to hoard or sell data.

Clusters of data held do not create a mechanism to develop international systems

Highly restrictive procedures

The procedures for carbon offset projects are long and restrictive.

A carbon project to be financed takes more than 12 months. Project leaders are sometimes tired and give up along the way or do not know the right door to submit their projects.

The legal hurdle for CO2 removal

There is no legal basis that forces polluters to pay for the removal of CO2 emissions.

There are also little diffused rewarding mechanisms for farmers that develop carbon credits at the regional and local scales.

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