The first policy option is the public procurement of carbon farming units, where the Commission and/or member states would purchase CRCF units from farmers through an EU-wide procurement system. 

The generation of credits from operators would be voluntary, but the Commission or member states would have an obligation to procure a certain amount of CRCF units annually. The CRCF units could then potentially be collected in a centralised pool from which private actors (either from the agrifood sector only, or from all sectors e.g. aviation and automotive) could buy units on a voluntary basis. 

The mandatory climate standards (MCS) option sets a target for large agri-food companies to annually decrease their scope three emissions, specifically, their indirect emissions occurring on farms. 

This option was suggested as a means of alignment with current approaches to corporate climate commitments and reporting requirements, such as the Corporate Sustainability Reporting Directive (CSRD) and the Science-based Targets initiative (SBTi). The MCS could either cover retailers, which could influence climate-conscious consumer behaviour, or the meat and dairy processors, who purchase products from farmers and could incentivise more sustainable practices at the initial stage of food production. 

Under the AgETS option, a cap and trade carbon market would be established, covering either farms or meat and dairy processors. This system involves setting an overall limit (a cap) on the total greenhouse gas emissions that covered entities can cumulatively emit. 

Reduction targets are set through the gradual lowering of this cap, though the study assumes it will never reach zero, given that certain emissions in the sector are considered ‘residual’. This cap would take the form of emission allowances, which obligated entities would buy (or receive for free),  sell, and trade on the open market. Each allowance would be the equivalent value of one tonne of CO₂.

The success of a potential AgETS would depend on its design. Yet the Commission will not exclude the possibility of introducing free allocation of emission allowances, which it views as key to secure initial buy-in to the system. While the risks of free allocation could be mitigated by introducing a phase-out period, under the Emissions Trading System covering emissions from the electricity and heat generation, industrial manufacturing and aviation sectors (ETS1), this phase-out has been continuously extended.

Today, around half of ETS1 allowances continue to be allocated for free, demonstrating that once free allowances are in the system, it is very hard to phase them out. They also tend to slow down decarbonisation and have cost members states hundreds of billions of euros in foregone revenue that could have been used to fund clean technologies through the Innovation Fund. In 2023, this foregone revenue amounted to around 40 billion euros.

The Commission will also not exclude Carbon Removals and Carbon Farming (CRCF) integration. In both the MCS and AgETS policy options, the CRCF would be crucial for facilitating policy implementation. 

For an AgETS covering meat and dairy processors, only farms that participate voluntarily will provide CRCF units, which would be purchased by the meat and dairy processors to prove their emission reductions. For an on-farm ETS, small farms (usually less than 5 hectares) may opt to participate voluntarily through the CRCF. 

Under a MCS, farms would again participate voluntarily and provide CRCF units, which would be used by agri-food companies to prove compliance with the set target. These units would also be purchased and sold from a centralised pool. 

Both options envisage monitoring, reporting and verification through a certification method, where the obligated entity would collect farm-level data and go through the process of CRCF certification. Note that CRCF units could also relate to emission reductions in livestock, which is currently not in the scope of the Regulation, but will be re-assessed for future inclusion in a 2026 review.  

These proposed uses of CRCF  give way to insetting or offsetting in what should be an emission reduction tool. The risks are well known: false equivalence, mitigation deterrence and business as usual. 

Even under a scenario where the CRCF were to create emission reduction units that directly mirror agrifood companies’ scope 3 emissions, equivalence would still be hard to establish, given the potentially poor quality of the CRCF credit and the difficulties in establishing a direct supply chain, and accounting uncertainties.

Despite these significant issues, the possibility for revenues created from the AgETS or the MCS to be used for funding carbon sequestration activities remained on the table. Nonetheless, the final workshop survey asked directly about design choices for the buying and selling of units, without offering the option to propose alternatives. 

Furthermore, the survey also asked for feedback on the trading of CRCF units, which was also arguably out of place as this subject was not discussed during the final workshop, which instead focused on the need for supporting tools given that neither of the policy options are sufficient to drive an ambitious transition and deliver other environmental and socio-economic objectives.

The Common Agricultural Policy (CAP) is clearly the giant elephant in the room. The Commission is, once again, watering down the environmental provisions in the CAP as part of its “simplification” (read: deregulation) agenda. These latest provisions build on the simplification measures already inducted in 2024 and have been introduced without the scrutiny of an impact assessment or public consultation. 

This is not the first time the Commission has taken such a step, with the 2024 simplification currently subject to an inquiry by the European Ombudsman.

The proposal allows even more flexibility for the implementation of the CAP’s conditionality framework, the Good Agricultural and Environmental Conditions (GAECs). This applies to GAECs 1 (maintenance of permanent grasslands), 2 (the protection of peatlands and wetlands) and 4 (establishment of buffer strips). It also awards greater leverage to member states for the management of CAP Strategic Plans, for instance, through the methodology for controls of conditionality. 

Criticism of this proposal has been widespread, highlighting the dismantling of vital environmental protections at a time when farmers are facing the severe impacts of our triple planetary crisis: climate, nature, and pollution (see here, here and here).

With DG CLIMA’s project, we have therefore landed in the absurd position of discussing incentives for climate action in the agricultural sector, on the one hand, while, on the other, the Commission is working to dismantle existing incentives for climate change mitigation in that same sector.

Consistently, the Directorate-General for Agriculture and Rural Development (DG AGRI) has been absent throughout this entire process, speaking only at the launch event. During the final workshop, the chair excluded the CAP from discussions on the grounds that it would monopolise the conversation. 

Yet, ambitious CAP reform ranks first among civil society’s demands (see here, here, and here) and the background paper for that workshop echoed the recommendations of the Strategic Dialogue, asking for a fairer, more targeted, approach of CAP funding, that is not allocated to practices detrimental to ecosystem services, and social and labour standards.

Overall, the policy options proposed by the European Commission, combined with the further dismantlement of the CAP, reveal a glaring lack of political will to actually reduce emissions in this top-polluting sector. 

None of the policy options under consideration are effective in ensuring the contribution of the agri-food sector to achieve climate neutrality, particularly if reliance on the CRCF is included. 

It is disappointing to see that, rather than set clear emission reduction incentives, the DG CLIMA project has mainly spotlighted CRCF use cases that lead to offsetting or insetting. Yet, relying on vulnerable and poor-quality units is a disservice to the climate. 

EU policymakers must grab the bull by the horns, introducing a sectoral target for agriculture, as part of the EU’s 2040 climate target, ambitious CAP reform, a shift in consumption patterns, and a Just Transition Fund for farmers.