Temporary carbon units from carbon farming and EU agri-food climate policy

With Europe’s climate ambitions placing growing expectations on the agricultural and land sectors, our new report analyses how carbon farming – that is, practices that result in the temporary storage of carbon in natural ecosystems or the reduction of soil emissions - can be enhanced, without compromising environmental integrity.

This new report, by Ecologic Institute and Öko-Institut, explores how potential future EU policy instruments - such as the under consideration Agricultural Emissions Trading System (AgETS), Mandatory Climate Standards (MCS), and public procurement programmes - can promote carbon farming while maintaining high environmental standards. The study highlights both the opportunities and the pitfalls of linking these policies to the Carbon Removals and Carbon Farming Regulation (CRCF) by integrating temporary carbon farming units certified under this framework – and investigates alternative approaches to promote carbon farming.

Carbon farming: opportunities and risks

Carbon farming measures such as soil carbon enhancement, agroforestry, and peatland rewetting not only mitigate climate change but also deliver other important environmental benefits such as enhancing biodiversity. However, their climate impact can be reversed, resulting in only temporary mitigation. In addition to these reversal risks, several weaknesses in the current draft CRCF certification methodologies regarding proposed rules for dealing with non-permanence, ensuring additionality and quantification approaches risk generating low-quality units. Without stringent liability rules, quantification standards, and additionality checks, these units could overstate climate benefits. Ultimately, using such low-quality units for offsetting purposes risks undermining mitigation claims and threatening environmental integrity.

Avoiding offset pitfalls in agri-food climate policies

The European Commission is currently considering new market-based agri-food climate policies, such as an AgETS. The report evaluates whether temporary CRCF carbon farming units should be integrated into the proposed agri-food climate policies. We conclude that integrating temporary CRCF units as offsets within proposed agri-food climate policies would likely undermine their effectiveness. Accordingly, we recommend offsetting to be excluded and that the use of CRCF units be limited to contribution-based approaches that channel funding toward carbon farming without claiming equivalent emission reductions elsewhere. While a public procurement programme for temporary CRCF carbon farming units may offer weaker incentives for delivering mitigation impacts, it could still provide value if it avoided offset claims.

Links between the CRCF and the Common Agricultural Policy

A major challenge identified is the overlap between measures funded by the CRCF and by the Common Agricultural Policy (CAP). This creates risks of double funding and non-additionality, which could undermine the credibility of EU mitigation claims. We explore models for how the CAP and CRCF can interact, including the risks and potential for hybrid models that combine the predictability of CAP payments with the performance incentives of CRCF finance, and the need for clear legal and administrative safeguards.

Targeted activity-based payments offer an alternative approach to promote carbon sequestration in natural sinks and emission reductions from soils through carbon farming. They reward farmers for implementing specific climate-friendly practices; a simpler and lower cost approach well-suited to some types of carbon farming activities. Looking ahead to the post-2027 Common Agricultural Policy (CAP) reform, we highlight opportunities for implementing activity-based payments – both within and beyond the CAP.

Study “Temporary Carbon Units from Carbon Farming and EU Agri-food Climate Policy” by Oeko-Institut and Ecologic Institute