With net zero targets getting closer and the phasing-out of the Basic Payment Scheme, discussions with land managers around opportunities for accessing income from carbon markets are growing. However, there is still some confusion around terms used to describe the elements that create and market this relatively new commodity.

Addressing the impact of carbon emissions on the climate, and the way in which land management and agriculture can play a key role in their mitigation, is extremely important in protecting the narrow range of atmospheric conditions that support human existence. The journey starts with understanding the language involved. Some of the most common terms are explored below; for a more comprehensive list, please check out our rural glossary.

Net zero: whilst sometimes used interchangeably with carbon reduction, net zero is an overall carbon profit and loss accounting exercise; a method to document compliance with regulations. Changes made within net zero should follow the carbon hierarchy of avoid, reduce, replace and offset.

Carbon avoidance and reduction: changing practices in order to eliminate completely (avoid) or reduce the carbon emissions created by an organisation both direct (scope 1) and indirect (scope 2 & 3) emissions. This should be the first step in any carbon reduction journey. 

Carbon sequestration: agricultural or land management practices that increase the amount of atmospheric carbon removed from the environment through any form of carbon capture, including habitat restoration or creation. The amount of credits generated are net of any emissions that arise as a direct result of the project.

Sequestration should only be used for balancing unavoidable carbon emissions after methods of reduction have been exhausted.

Additionality: whether for net zero or environmental benefit, any scheme introduced for sequestration or reduction must provide that benefit in addition to existing practices. The key to proving the additionality of the scheme is baselining: establishing a quantifiable record of the status quo to prove additional benefits. For more detail on additionality, read our blog here.  

Carbon credits created within your business from sequestration or reduction can be:

Inset: utilised within your enterprise to balance unavoidable carbon emissions. Inset carbon can be allocated elsewhere in a supply chain for a financial return. Insetting protects an enterprise’s ability to balance its carbon emissions both now and in the future.

Offset: sold to an enterprise external to you or your supply chain to balance their unavoidable carbon emissions in return for a financial payment. Offsetting can potentially provide a greater opportunity for financial returns but it poses a greater risk to an organisation’s ability to balance its own emissions. Understanding the intrinsic value of any carbon credits generated before selling them is crucial to a business’ net zero strategy

Further details on insetting and offsetting can be found here.

Opportunities and challenges of carbon markets

The global nature-based solutions market (e.g. carbon, biodiversity net gain, nutrient neutrality) is estimated to be worth $1.5 trillion annually by 2050. Whilst forecasts are subject to volatility from market trends and political influence, there is a wealth of opportunity available to land managers who can deliver tangible results to meet the climate crisis.

Verification of carbon markets will need to tackle issues such as: 

• Establishing a single national or international verification method for farmland carbon stocks
• Minimising the risk of ‘greenwashing’ (implying greater environmental benefits than will be delivered) 
• Investigating the long-term implications of land management changes 
• Establishing what happens beyond the estimated maturity of a carbon sequestration scheme 
• Ensuring rigorous checks are made with regard to an organisation’s carbon reduction before they can account for any sequestration measures
• Establishing robust scheme monitoring to ensure they deliver the reduction or sequestration credits sold and implementing contingencies if drought, flood or other natural challenges impact habitat creation or regeneration schemes

There is no doubt that this is an important area of your business to assess, both legally and as the responsible thing to do.

Further information

Contact Patricia Singleton and Jon Dearsley