Our Take: Plowing Into the Future - Harnessing Soil in Carbon Markets

There are currently around 170 different types of carbon credits trading on carbon markets around the world, including both compliance markets and the voluntary carbon market (VCM). One of the most interesting types of credits, and a type that has received a lot of attention in the past year, are credits tied to soil carbon. Although soil carbon credits are a distinct type of credit, measuring and monitoring soil carbon is also important for other types of crediting projects such as sustainable agriculture and grassland management.

However, unlike more prevalent carbon credits such as those generated from clean cookstoves or renewable energy, there remains speculation about the legitimacy of soil carbon credits and their classification as a credible credit type. In this article, we will review that matter.

Figure 1 – 170 types of carbon credit projects in 2022 / Source: Ecosystem Marketplace: The State of the Voluntary Carbon Markets, 2022

Soil Carbon and Carbon Credits

Soil carbon refers to the amount of carbon stored in the soil in the form of organic matter. It plays a crucial role in maintaining soil health, fertility, and overall ecosystem function. Healthy soils with high levels of organic carbon can improve water retention, nutrient availability, and support diverse microbial communities.

Traditional agriculture practices, such as extensive plowing, monoculture farming, overuse of synthetic fertilizers, and lack of cover cropping, have led to a degradation of soil health and the amount of soil carbon stored in the ground. However, sustainable agricultural and land management practices can sequester carbon in the soil, leading to improved levels of soil health and contributing to climate change mitigation. As a result, soil carbon has gained attention in the context of carbon markets.

Farmers and landowners who adopt practices that enhance soil carbon sequestration, such as no-till farming, cover cropping, and agroforestry, may be eligible to earn carbon credits using approved carbon credit methodologies. These credits can be sold to companies or organizations seeking to “offset” their hard-to-abate carbon emissions. The idea is to create economic incentives for practices that not only sequester carbon but also promote sustainable land management.

Agriculture: Greenhouse Gas Emissions and Carbon Sequestration Potential

Agriculture is one of the world’s most vital sectors.

It is a pivotal driver of economic growth, contributing approximately 4% to the global gross domestic product (GDP) and reaching up to 25% in some developing countries. Additionally, agriculture is a major employer, providing jobs for about 25% of the global workforce, with the percentage rising to 80% in low-to-middle-income countries.

Agriculture is also a massive emitter of greenhouse gas (GHG) emissions.

In 2019, global net anthropogenic CO2 emissions were around 36.8 GtCO₂. When adding in other common GHGs like methane (CH₄) and nitrous oxide (N₂O), the 2019 total equals 59 GtCO₂e, give or take around 6.6 GtCO₂e.

The “Gt” equates to “one gigaton” or “one billion metric tons.” The “e” in GtCO₂e means the measurement is expressed in terms of the warming potential of CO₂, allowing for a comparison of the impact of different GHGs like CH₄ which is a typical gas emitted from agriculture practices.

In the context of agriculture, about 22% of global GHG emissions (including CO₂, CH₄, etc.) came from agriculture, forestry, and other land use (AFOLU) in 2019. That is equivalent to around 12.98 GtCO₂e.

In the US, the total GHG emissions reached 6.34 GtCO₂e in 2021. Agriculture contributed 10% of these emissions, totaling 634 MtCO₂e (Mt = million tonnes) (Figure 2). The agriculture sector’s emissions primarily stem from livestock, agricultural soils, and rice production. Notably, activities related to agricultural soil management, such as fertilizer application, livestock manure deposition, and nitrogen-fixing plant cultivation, were the largest contributors to U.S. N₂O emissions, comprising 75% of the total in 2021.

Figure 2 – Total U.S. greenhouse gas emissions by economic sector, 2021 / Source: EPA – Sources of Greenhouse Gas Emissions

On the flip side, there is substantial potential for mitigation and adaptation through improvements in AFOLU. Improvements include different combinations of reforestation, afforestation, reduced deforestation, bioenergy, and accumulating carbon in vegetation and soils. The most recent Intergovernmental Panel on Climate Change (IPCC) Assessment Report (AR6) on Climate Change in 2023 illustrates that these AFOLU improvements can be readily expanded on a large scale in the near term across most regions, with high confidence in their effectiveness.

One notable mitigation option lies in carbon sequestration in agriculture, presenting a significant potential contribution to net emission reduction. By the year 2030, this approach is estimated to have a projected impact of 3.5 GtCO2e per year – that is over half of the United States’ annual GHG emissions.

Simply put – soil carbon warrants attention in carbon markets due to the substantial role agriculture plays globally and the carbon sequestration potential associated with healthy soils.

Soil Credits in the Carbon Markets

The first soil carbon methodology for the VCM was released in 2012. Since then, soil carbon methodologies have become steadily more common.

As of mid-2023, over 40 active protocols were relevant to AFOLU projects in the US. Eighteen of those have successfully generated carbon credits from domestic carbon projects. Twenty-seven protocols are directly associated with agriculture, including 7 related to soil carbon. Among the 27, 11 concentrate on activities related to croplands, such as optimized nitrogen management and soil carbon sequestration. Grasslands protocols are distributed between land use and agriculture projects, with two focusing on preventing emissions from converting grasslands to croplands, and the rest addressing improved grassland management.

Various carbon accounting methodologies (Figure 3 shows a sample) across AFOLU projects consider biomass and soil organic carbon as significant carbon pools. For example, methodologies for grassland conversion avoidance and cropland/pasture carbon enhancement primarily use soil carbon stock changes as a key indicator.

Figure 3 – Existing land-use and agriculture methodologies in the voluntary carbon market including soil carbon, 2021 / Source: CGIAR – Scaling Soil Organic Carbon Sequestration for Climate Change Mitigation

Over the past ten years, registries have issued over 326 million carbon credits to projects in the US, spanning both the California compliance market and the VCM. Forestry-related projects constituted the majority of credit issuance volume, comprising 58% (Figure 4).

Figure 4 – Carbon credits issues by scope for projects in the United States, 2013-2022 / Source: USDA – Report to Congress: A General Assessment of the Role of Agriculture and Forestry in U.S. Carbon Markets

Carbon credits from agricultural and land use projects were notably fewer, representing only 3% of the total credit volume between 2013 and 2022, with the majority of those generated for use in California’s compliance market (Figure 5).

Figure 5 – Agriculture, forestry, and land use carbon credits by issuance: compliance and voluntary markets in the United States, 2013-2022 / Source: USDA – Report to Congress: A General Assessment of the Role of Agriculture and Forestry in U.S. Carbon Markets

On a global scale, annual credit issuances produced by regenerative agriculture projects for the VCM are also extremely low (Figure 6).

2014: 20,000 credits
2017: 110,000 credits
2022: 20,000 credits
Q1 2023: 90,000 credits

Figure 6 – Annual regenerative agriculture credit issuances (VCS, GS, ACR, CAR, BioCarbon) / Source: Quantum Commodity Intelligence

Soil Carbon Credit Roadblocks

While projects focused on soil carbon and sustainable agriculture can be beneficial, there are several challenges and concerns associated with them. Some of these include:

Measuring, monitoring, reporting, and verification (MMRV) challenges: accurately measuring changes in soil carbon is complex and can be expensive. Variability in soil types, climates, and measurement techniques can make it challenging to ensure the reliability of reported carbon sequestration levels.
Additionality: the concept of additionality is crucial for carbon credits, meaning that the project’s activities must result in emissions reductions or removals that would not have occurred without the project. For example, additionality could involve a farmer adopting a regenerative agricultural practice such as cover cropping. However, for it to be additional, the farmer could only implement cover cropping because the money generated from carbon credits allowed him to do so.
Baseline determination: determining a credible baseline (the scenario against which emissions reductions are measured) is challenging and subject to uncertainties, making it difficult to assess the true impact of a project.
Permanence concerns: soil carbon sequestration projects face issues related to the permanence of the stored carbon e.g., how long the carbon will stay stored in soil. Changes in land use, management practices, or natural events such as wildfires could lead to the release of stored carbon back into the atmosphere, undermining the long-term effectiveness of the credits.
Leakage risks: leakage occurs when emissions are displaced from one area to another due to a carbon project. For example, if a farmer changes their practices on one plot of land to earn carbon credits, but then intensifies agricultural activities on another plot, the overall emissions may not decrease.

Soil technology firms, including Soil in Formation, LaserAg, and Yard Stick, aim to enhance the MMRV aspect of soil carbon credits. They provide on-site or handheld devices capable of swiftly and accurately measuring vital soil health parameters, such as soil organic carbon, pH, and moisture levels directly in the soil. The collected data is then transmitted to a cloud-based database for storage and analysis. These companies strive to ensure that their devices align with the intricate requirements of major soil carbon protocols.

If successful, these technologies have the potential to lower project costs, enhance estimates of carbon sequestration and storage, and help determine accurate and dynamic baselines, thereby strengthening soil carbon projects.

The Future of Soil Carbon Credits

Soil carbon, and by extension soil carbon credits, are getting a variety of governmental boosts across the world.

In July, the U.S. Department of Agriculture (USDA) unveiled a $300 million investment from a $20 billion fund for climate-smart agriculture. This initiative, stemming from President Biden’s Inflation Reduction Act, aims to enhance carbon emission measurement techniques in farming and forestry. The USDA plans to establish standards, create a soil carbon monitoring and research network, enhance data infrastructure, and improve models for measuring GHG outcomes, addressing current agriculture sector data collection challenges. The focus is on systematic and updated data to be shared through new national networks.

US lawmakers recently introduced ‘The Coordination for Soil Carbon Research and Monitoring Act’, a bipartisan bill aiming to empower the federal government in supporting research and monitoring of soil carbon sequestration. The bill proposes closer coordination among federal agencies to provide detailed evidence for emissions reductions in soil carbon projects. It suggests the establishment of an ‘Interagency Committee on Soil Carbon Research’ led by the White House Office of Science and Technology Policy. The bill emphasizes strategic planning for soil carbon research, development, and deployment, addressing measurement methodologies, monitoring technologies, and community needs.

Last week, the European Parliament approved a new “Carbon Removal Certification Framework”to address concerns about missing regional carbon removal targets. This framework outlines the quantification, monitoring, and verification of projects generating carbon removal credits. It introduces provisions for certifying carbon storage and carbon farming projects, emphasizing the biodiversity co-benefits of carbon farming. The EU will establish a registry for carbon removal projects to ensure transparency and prevent fraud.

The upcoming COP28 talks in Dubai will review UN-endorsed recommendations on carbon dioxide removals (CRD), crucial for projects like soil carbon and bioenergy with carbon capture. Despite approval by the Supervisory Body (SB), an UN-appointed panel, achieving consensus at COP28 remains uncertain due to the complexity of CDR issues. The discussions, under COP28’s Parties to the Paris Agreement (CMA) strand, require agreement among members of the SB on defining permanence, penalties, and safeguard mechanisms. The SB has confirmed the development of a document on methodologies, to be presented at COP28, signaling the need for negotiator approval for Article 6.4 to become operational and attract investor confidence.

VCM initiatives like the Integrity Council for the Voluntary Carbon Market (ICVCM) will also impact soil carbon credits in one way or another. ICVCM recently introduced their Core Carbon Principles (CCPs), which are global standards for carbon credit quality. The ICVCM will evaluate carbon-crediting programs based on CCP criteria, issuing CCP-approval labels to build trust and facilitate investment in high-integrity carbon credits. The fate of soil credits in relation to CCP decisions for agriculture is still pending, and only time will reveal the impact on these credits.

While trial is still out on decisions for some of these initiatives, their success could greatly support the growth and improvement of soil carbon projects.

Soil Carbon Credit Projects

Another positive note for soil carbon projects is that they are receiving increased financial support and attention, marking a positive trend for their development.

One of the world’s biggest GHG polluters, US oil major Chevron, is investing in a four-year soil carbon capture pilot project in Western Australia. Chevron will contribute funding to Carbon Sync, a Perth-based firm leading the 80,000-hectare soil carbon farming pilot project in Western Australia’s southwest.

Carbon developer Tasc recently registered a soil carbon project in South Africa under Verra’s updated VM0042 Methodology for Improved Agricultural Land Management. The project is one of the first soil carbon projects in southern Africa and aims to encourage improved agricultural land management and ecosystem restoration in South Africa’s grassy biomes, mitigating GHG emissions through soil carbon sequestration and reducing methane emissions from livestock. It is expected to result in annual emission reductions averaging just under 600,000 tCO₂ and a total estimated 18 million tCO₂e over the project’s 30-year lifetime.

US consultancy CarbonSolve has secured legal rights and outlined a benefit-sharing plan for its soil carbon project in the Kenyan rangelands. CarbonSolve, the author of Verra methodology VM0032, is actively working on a soil carbon project in southern Kenya. The company recently signed an agreement with the Olgulului Group Ranch, a consortium of local landowners, to develop the project with a concentration on transforming grazing practices. Finally, Danish agtech company Agreena’s soil carbon initiative recently announced that it spans 2 million hectares across 17 European countries, equal to the size of Slovenia, or 2.8 million European football fields. Over 1,000 farmers utilize AgreenaCarbon’s digital platform, facilitating planning, tracking, and validation of regenerative agricultural practices while accessing carbon market revenues.

They have been able to scale their program, and incorporate technologies for MRV, along with remote sensing and artificial intelligence. Farmers in the program commit to regenerative practices, and AgreenaCarbon quantifies GHG reductions and carbon removals using a Verra methodology and remote sensing.

Conclusion

Despite challenges and uncertainties, soil carbon credits hold promise as a motivation for agriculture to convert to more sustainable practices and as a result, more impactful levels of carbon sequestration and storage. Yet, soil carbon credits find themselves in a similar precarious position as the VCM – in a moment of “wait and see” as more attention is focused on efforts to build integrity and stronger guidelines. COP28, along with improved governmental direction, could lead to greater clarity on the use of soil carbon projects. Additionally, advancements in measurement technologies and increasing financial support offer potential solutions to scale and enhance soil carbon projects. One thing is certain though – as global awareness continues to grow and spread about the importance of soil health, carbon projects could play a crucial role in mitigating climate change and fostering more resilient agricultural systems.