Farmers wanting to sell their carbon credits are being told to understand their carbon footprint before entering into any agreement.
Carbon has become a major talking point for UK farmers and landowners, but most of the talk is about how to monetise it.
Strutt & Parker says one of the questions it is asked most frequently by farmers is how they can sell their soil carbon.
The company says it's clear that many people are operating with limited information, for example they haven’t worked out whether they actually have any surplus carbon to sell.
The rural agency adds that some do not know the difference between the voluntary carbon market and the compliance carbon market.
Jonathan Armitage, head of farming at Strutt & Parker, says: “Understanding the basics is important to make informed decisions and enable farmers to ask the right sort of questions before entering into an agreement.
"Selling carbon may be an opportunity to generate a new income stream, but there are also potential pitfalls making it an area that requires careful navigation.”
Strutt & Parker has produced a guide to help farmers understand more about how carbon credits markets work, highlighting some of the wider considerations worth bearing in mind.
Its advice for farmers thinking about selling their carbon includes first understanding how much carbon their land can sequester, how much carbon they are emitting as a business and whether there is any surplus that can be sold to third parties.
Mr Armitage explains: “It’s about minimising the risk of unintended consequences further down the line, which might arise if a business is unable to demonstrate its own low-carbon credentials.
“For example, if a farmer has sold all the carbon their land can sequester to third parties, they could find themselves in a position where they cannot easily offset their own emissions, which might prove costly if carbon offsets are made a requirement for land-based businesses."
Once a landowner has sold sequestered carbon, this will appear on the buyer’s balance sheet, Mr Armitage adds.
"Looking into the future, it seems inevitable that supermarkets and food processors will want their own supply chains to be low carbon.
"If a farmer has sold all their carbon credits to another emitter for offsetting purposes, they will not be able to use the ‘sold sequestration’ against their own emissions.”
Establishing baselines now by measuring activities and soil carbon levels in a verifiable way will assist farmers to make informed decisions, he explains.
It might also prove important in the future to be able to demonstrate the impact of any positive actions taken now.
What should I consider?
Strutt & Parker advises that farmers who are in a position to sell carbon credits should consider the following:
• Ensure that the verification scheme is of high quality: There are a small number of acknowledged international standards for verification and buyers will want to rely on a trusted and rigorous process.
• Have a contingency plan in place to avoid breaking contract – Contracts between buyers and sellers of carbon are usually agreements over a long period of time i.e. 30 years. Be aware that if, for instance, a woodland suffers from a fire, the seller would have to still provide the same amount of carbon sequestration as per the terms of the contract. This could mean replanting woodland or supplying it from another source.
• Protect your own reputation by knowing your buyer – Accusations of greenwashing can happen when buyers offset their carbon but have not taken other steps to reduce their unsustainable emissions of greenhouse gases and therefore are still major pollution contributors. To avoid getting involved with such buyers, transparency and knowing the buyer is key.
• Understand the implications that lie within carbon trading – These include considering the consequences for farming economics, interactions with other environmental schemes, effect on the capital value of land and property, tax issues, land tenure issues and the consequences of any land use change.
• Investigate if there are alternatives – This could include generating new income streams by delivering other ecosystem services, such as land management practices which reduce flooding or improve habitats. There are growing numbers of large corporate companies willing to partner with landowners on environmental projects as it helps them to meet their Environmental Social Governance (ESG) objectives.
