This report examines the risks and opportunities of different proposed EU policies to mitigate climate change using carbon farming measures. The proposed policies include an Agricultural Emissions Trading System (AgETS), Mandatory Climate Standards (MCS), and public procurement programme, all building on the EU Carbon Removals and Carbon Farming Regulation. Our analysis focuses on the implications of integrating temporary CRCF units from carbon farming into the policies; that is, the integration of certified CRCF units generated through carbon farming activities that increase the amount of carbon sequestered in natural sinks or reduce CO2 emissions from soils and are subject to significant non-permanence risks. Next to mitigating climate change, these carbon farming activities can also help achieve other EU environmental policy objectives, such as biodiversity enhancement and climate adaptation. Further, they can promote soil health, farm resilience, and generate new sources of income for farmers.
The use of the Carbon Removals and Carbon Farming (CRCF) Regulation to promote carbon farming poses risks and challenges. The CRCF promotes carbon farming based on a result-based crediting approach, where farmers receive CRCF units in return for generating certified mitigation. This regulation aims to create financial incentives for mitigation action at the level of the individual farmer. However, the characteristics of carbon farming, such as the impermanence of the resulting carbon storage, pose challenges for using crediting as a policy instrument to promote mitigation action. Moreover, weaknesses in the proposed CRCF carbon farming certification methodologies could be expected to result in CRCF units of low-quality, due to inadequately addressing non-permanence risks, non-additionality, and other issues. In particular, the risk of non-permanence is not appropriately addressed, due to lacking liability and replacement requirements to account for the temporary nature of the mitigation as well as not accounting for non-permanence risks of peatland rewetting. The mitigation is also at risk of being non-additional, due to insufficient additionality assessments and double funding from the Common Agricultural Policy (CAP). This would result in significant overestimations of emission reductions or removals. These risks are higher for measures involving management changes (e.g. crop rotations and the resulting soil carbon sequestration) than those based on land-use changes (e.g. peatland rewetting or agroforestry systems). CRCF certification methodologies should be improved through stringent additionality and quantification, as well as strengthened liability requirements to manage non-permanence risk. Due to the low expected quality of temporary CRCF units, they are inappropriate to use for offsetting emission reductions elsewhere; their use as offsets risks environmental integrity The foreseen review of the CRCF Regulation by July 2026 (Article 18(4) of the CRCF Regulation) to align it with Article 6 of the Paris Agreement and best practice in the voluntary carbon market should be taken as an opportunity to strengthen the requirements which CRCF units must adhere to.
Promising new agri-food climate policies that establish price-based incentives for agri-food emission reductions are under consideration by the European Commission. The proposed compliance policies – an agricultural emissions trading scheme (AgETS) or mandatory climate standard (MCS) – could establish incentives for reducing emissions in the agri-food sector in a cost-effective manner. The draft policy designs leave, however, critical details undefined: effective agricultural compliance policies require ambitious targets, limited free allocation, and practical approaches to ensure low participation costs for farmers and cost-effectiveness.
In this study, we consider the specific question of whether temporary CRCF units should be integrated into the proposed agri-food climate policies. We conclude that allowing farmers or other obligated agri-food actors to use temporary CRCF units of low expected quality as offsets to meet their climate obligations would undermine the proposed agri-food policies. Accordingly, we recommend that the agri-food climate policies should exclude low-quality temporary CRCF units. An alternative policy under consideration, a public procurement programme for CRCF units, would be likely to offer weaker incentives for agri-food emission reductions than the compliance policies due to its voluntary nature and potentially limited public funding. However, this public procurement scheme has some advantages, if exclusively publicly funded, it would exclude offset uses and therefore – even in the case of low-quality CRCF units – avoid any environmental integrity risk. Yet, the quality of temporary CRCF units would remain important to ensure cost-effectiveness. Further, considering the climate, environmental, and social benefits of carbon farming measures, such a scheme would be well aligned with the principle of public money for public good. While a purchasing programme that blends public and private financing could enable a larger budget due to multiple sources of funding, and therefore have higher impact, such a programme should limit claims to exclude offsetting and only permit contribution claims to avoid environmental integrity risks arising from the low expected quality of CRCF units.
We also consider coherency of the CRCF and agri-food policies with the Common Agricultural Policy. The CRCF and agri-food policies overlap considerably with the CAP. We identify three models for how the CAP and carbon farming under the CRCF could interact: as separate systems; as combined systems with CAP supporting farmers with CRCF activities; or as nested systems where CRCF units are generated via the CAP. Under all models, overlaps in the measures funded under the CAP and the CRCF create problems, as they pose significant risk of double funding. While the CRCF and CAP funding could be structured to make this double funding generally permissible under EU law, it would make the resulting temporary CRCF units non-additional, posing environmental integrity and cost-effectiveness risks. The additionality requirements of CRCF certification methodologies should be strengthened to address this, including considering only awarding units equivalent to the fraction of mitigation resulting from CRCF funding.
Targeted activity-based payments, where farmers are paid for implementing measures (rather than the results of those measures), offer an alternative way to promote carbon farming. Because they do not give rise to the environmental integrity concerns of carbon crediting approaches, these approaches are well-suited to carbon farming measures with high risks of non-permanence, non-additionality, or disproportionately high monitoring, reporting and verification costs relative to expected benefits (such as soil carbon sequestration on mineral soils). Importantly, activity-based payments also reduce cost, complexity, and risk for farmers. The current implementation of activity-based payments within the Common Agricultural Policy (CAP) has been criticised as relatively ineffective at mitigating climate change due to weak environmental ambition. The revision of the CAP after 2027 offers potential to implement more effective targeted activity-based payments for climate and environment outcomes, building on some positive examples from National CAP Strategic Plans. Given the uncertain scale and shape of the CAP for the period 2028 to 2034, this report also identifies other potential funding sources for activity-based payments to promote carbon farming measures. Promising options exist at the EU, Member State, and private actor level, including building on existing Member State examples, utilising AgETS auction revenues for activity-based funding, a just transition fund for agriculture, and a revision of the CRCF into an activity-based scheme, among others. These alternatives illustrate that there are opportunities to promote carbon farming beyond a result-based CRCF or the CAP.
