Bridging the sustainability gap: carbon credit pre-financing
The farmer’s plight
The global agricultural sector is confronted with monumental challenges in the face of climate change, population growth and geopolitical uncertainties. Barely a week goes by without news of another natural disaster, while Russia’s war with Ukraine has set in motion a spiraling fertilizer, wheat and gas shortage, sadly highlighting the lack of resilience in the global interconnected food supply chain.
While climate breakdown is an abstract concept too monumental in scope for many to grasp, the cost of living crisis that’s started to bite in the West is now a catalyst for real change. The time has run out to talk up hypothetical concepts and vague plans. Lowering emissions, minimizing wastage, increasing yields whilst conserving wildlife and the environment are some of the key requirements to ensure our survival on this planet.
Farmers have the weight of the world on their shoulders, and unfortunately, many are unable to make positive changes to their ways of working due to financial constraints. Access to finance, for small hold farmers in particular, has been an age-old problem the world over. Jumping onto the carbon offsetting bandwagon could, in theory, solve many problems for farmers while at the same time kick-starting a sustainable revolution; unfortunately, getting onto that train is not easy in itself.
The carbon market conundrum
Carbon offset programmes have the potential to open up much-needed additional revenue streams for farmers in the form of carbon credits. At the same time, producing higher-quality food in a sustainable way helps farmers fetch better prices and reduces the burden on the environment. However, under today’s leading carbon credit quality framework it can take up to five years to become carbon certified and requires a lot of upfront investment, something many farmers are unable to even contemplate.
At the same time, the carbon offsetting market itself is unable to rid itself of the stigma of greenwashing. The question of additionality of carbon projects is a key concern alongside two other contentious areas - transparency and measurement. Would this wind farm have been funded regardless of it receiving investment through an offsetting programme? Have the promised number of trees really been planted, and if so, will they help or hinder biodiversity? As a customer booking a flight and agreeing to offset my emissions, how can I be certain that is actually what is happening?
Today’s carbon market is split into two opposing factions: on the one hand the tightly regulated, high-quality offsets that have high barriers of entry, and on the other hand those offsets of dubious quality, non-transparent and minimally measured. In order to increase the availability of high-quality offsets, removing the high entry barriers is key. One way of achieving this is through pre-financing carbon projects.
Pre-financing agricultural offsets
Agriculture is an industry incredibly well suited to be part of the carbon offset ecosystem. Unfortunately, many farmers currently do not have the funds to move to more sustainable farming practices, and therefore do not have the opportunity to get carbon certified. Meanwhile, for corporations to put ESG into the heart of their operating model is increasingly not an option but a necessity due to societal and economic pressures. That being said, companies looking to offset their residual emissions are struggling to find high-quality carbon projects that are additional, measurable, transparent and permanent.
What is needed is a bridge that connects the two; a pre-financing mechanism that allows farmers to onboard onto a carbon programme and receive income in order to adopt sustainable practices whilst being measured throughout the programme. This way carbon investors can be assured their offsets are additional, transparent, of high-quality and have the potential to improve the livelihoods of many farmers while boosting conservation efforts.
Whereas traditional financial mechanisms are often unable to meet the monetary needs of farmers, the emergence of blockchain and Web3 technology is enabling concerned individuals to come together quickly to finance a good cause that requires urgent attention. This is exactly what we are now witnessing with exciting developments in the carbon markets, where a number of blockchain-powered platforms have sprung up to bridge the gap, with pre-financing being a crucial ingredient to properly kick-start the market. Increasing the availability of high-quality offsets will drive the dubious offsets out and build a strong carbon market that is a win-win for everyone - farmers, corporates, governments, society and most importantly of all, mother nature.
Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.
About the author
Robin Saluoks is co-founder and CEO of eAgronom. He drives strategy across the entire business, turning his vision of transforming agriculture into a key weapon to fight climate change into reality.