How farm businesses can benefit from reducing greenhouse gas emissions

Farm businesses have many avenues to reduce their greenhouse gas (GHG) emissions, including soil management, farming and breeding practices, and the recycling of manure and organic waste. Sollio Agriculture is currently investigating how farmers can benefit by earning carbon credits for adopting these practices.

There are two ways for farms to benefit from their GHG emission reductions: the carbon offset market (offsetting) and direct compensation through initiatives to reduce carbon footprints in agricultural value chains (insetting). For farmers to benefit, their GHG reductions must be valuated—quantified using recognized protocols and then verified to ensure accurate valuation.

How compensation is calculated

Quantifying and valuating GHG reductions requires farms to have good data documentation capabilities and a robust digital archiving system.

The constraints associated with quantifying and verifying emissions differ between offsetting and insetting, but in all cases the aim is to quantify GHG reductions on farms and pay the farmers.

For example, the transaction and risk management costs of valuing GHG reductions in the carbon offset market can result in a discount of 40% to 60%. In other words, if a farm reduces its GHG emissions by 1,000 tonnes of CO2 equivalent under a recognized protocol, it will receive an amount equivalent to the sale of 400 to 600 tonnes of CO2 equivalent after verification and transaction.

There are other factors to consider when choosing the most appropriate method for valuating GHG reductions. Access to the carbon offset market is transitional, meaning that it allows the GHG reductions resulting from a farmer’s adoption of a new practice or technology to be valuated based on a benchmark established by a recognized protocol. Once the new practice or technology becomes the benchmark, the GHG reductions can no longer be credited.

It should also be noted that the value of offset credits is volatile and depends on the nature of the market and the protocols. For example, regulated carbon markets in Québec and Canada often have higher values, but the protocols are more restrictive than voluntary carbon markets, which are known to be more flexible.

Lastly, insetting approaches allow for more predictable and sustainable compensation for farms that adopt new practices or technologies. They can also be part of a strategy to reduce the GHG emissions of these farms’ business partners.

Sollio Agriculture’s role in valuating GHG emission reductions

Sollio Agriculture’s crop production research farm and corporate responsibility team are currently investigating ways to valuate GHG reductions in agriculture through carbon markets and other types of initiatives.

AgConnexion—Sollio Agriculture’s integrated digital platform for its customers and retail networks—already has the technological capability to support such initiatives.

In response to the farmers and retailers in its network showing an interest in these types of initiatives, Sollio Agriculture is exploring how best to promote and support the implementation of best practices, such as the awarding of credits in cash.

Sollio Agriculture is committed to helping farmers benefit from their efforts to reduce their GHG emissions and is working to structure the collection of the agronomic data needed to feed the quantification protocols that underpin these initiatives.

Work currently in progress shows that offsetting and insetting can be combined in an on-farm carbon strategy, but Sollio Agriculture’s first objective is to assess the potential of the different approaches and develop a viable economic solution.

Source: The original version of this article was published in French in Coopérateur magazine.