What’s Driving the Demand for Agricultural Carbon Credits?

09. August, 2021

The agricultural carbon marketplace is emerging. The buyers are all in, making commitments to available carbon credit and trying to find more. Their interest in credits is part of their larger strategy to reduce their own emissions and offset the ones they can’t reduce. On the carbon credit supply side, the marketplace is increasing credit production to meet this growing demand. The early adopters have charted the way. Now, more farmers are entering the carbon market. 

On June 23, 2021, Indigo brought a group of corporate leaders and farmers together to talk about why the demand for carbon is so hot and whether it’ll stay that way (watch the Carbon Farming Connection event). Those corporate leaders left the audience of farmers and the carbon-curious with a few main points:

  • Increasing sustainability and climate stabilization are key priorities of almost all large corporations and organizations.
  • Investors, employees, and consumers are driving the pressure to make meaningful progress in reducing and offsetting carbon footprints.
  • Quality, registry-verified credits are necessary for the success of the carbon marketplace. 

Climate as a Corporate Mission

“At the C-suite level right now, the conversation is that sustainability is the mandate in these companies. It is  no longer a question of if we do it. It’s that we need to do it. How do we do it? And it’s no longer a question of when we’re going to do it. It’s now.”

Those strong words came from Etienne White, the Vice President of Brands for Good at Sustainable Brands. She leads a coalition of top brands dedicated to helping each other align consumer behavior and  sustainable practices. White went on to say that major companies, such as PepsiCO, General Mills, Target, and Visa, are participating as a joint effort to accelerate progress.

It’s an urgency that was echoed by all the panelists and some farmers. Adam Chappell, an Arkansas farmer, said: “If you haven’t made the change to regenerative practices as a farmer, then in my opinion, you’re behind the curve.”

And that’s exactly what companies are afraid of...being behind the curve when they’re facing growing pressure to be ahead of it.

Investor and Employee Pressure

The carbon marketplace is trying to keep up with an increasing demand. Much of that demand is coming from investors, employees, and corporate  leaders trying to stay ahead of the climate crisis by both reducing and offsetting their emissions.

It’s become so important that Jed Lynch, the Head of Americas, Sustainable and Impact Banking at Barclays, says it’s now part of their lending decisions. “We’re looking at our lending book critically and making sure we’re supporting companies on the transition to a low-carbon economy,” he said. That transition is something the workforce is requiring of their employers. Jeremy Hanson is the Co-Lead of Global Sustainability at Heidrick & Struggles. He recruits board members, CEOs, and senior leaders for companies around the world. “We can’t hire and retain the employees we want in a very tight labor market right now unless we care about this, and they’re very discerning about asking us questions about our commitment,” said Hanson. 

Quality Carbon Credits Only, Please

As the demand for carbon offsets grows, so does the demand for quality carbon credits—credits that are verified by a 3rd party and include data that prove carbon sequestration or emissions reduction occurred. “Quality really goes to our confidence as buyers that when you say you’re sequestering a metric ton of carbon, we can see the evidence for that. And our suppliers and our investors are asking us for that,” said Hanson.

The bottom line is this: No company wants to have purchased a credit that didn’t really offset their carbon emissions. It’s bad for business and bad for the environment. But as one farmer asked, if companies are successful at reducing emissions, will carbon credits go away or lose value? Not according to Lynch. He says, “Just the way the math works and the scale of the problem means that carbon credits will always be part of the solution.” He went on to add that some industries, like energy, will always have a footprint because of the nature of their business. 

The farmer audience asked tough questions about practice changes like adding cover crops and going no-till, which would be required for them to create a credit that someone can buy. And it’s not just because change is hard, it can also have some upfront transition costs. Those costs can be offset by the revenue that participating in the carbon marketplace can generate.

As Arkansas grower Adam Chappell said, carbon has become a new kind of crop: “Diversity on the farm is a great thing, and another product for me to sell is great for me.”

For many carbon credit buyers, their commitment to agricultural carbon credits is motivated by supporting the how farmers can benefit from the new revenue and decreased on-farm costs. Says Katie Wallace, Director of Social and Environmental Impact at New Belgium Brewing: “We’re very thrilled at the opportunity to support and bring financial revenue to our suppliers as part of this transition. It has to work that way for growers in order for it to work for any of us.”