2021 was a banner year for carbon markets. According to Reuters, the value of carbon dioxide (CO2) as a traded commodity grew by 164% to $851 billion in 2021. On the one hand, we’re beginning to see farmers and private landowners profit from the carbon- and GHG-reducing practices they implement across their operations, turning those GHG reductions into offsets that are then sold as credits, generating revenue that comes back to farmers and foresters. It is about time the Americans growing our food, feed, and fiber benefit from the carbon credits boom—they are, after all, the ones making investments in their operations to reduce GHG. Without food, agriculture, and forestry leading the way on GHG reductions, the world will never meet the existential threat of climate change.
At the same time, it is becoming clearer every day that the global accounting standards underpinning GHG measurement and reporting are biased against the very people making reductions. How?
Under current international carbon accounting standards, food companies and the larger food value chain cannot count carbon reduction offsets at the farm level if a farming family sells those offsets as credits to entities outside the value chain. For example, let’s say a fossil fuel company wants to “offset” its sizeable carbon footprint. Today, credits generated by crop or dairy farmers are plentiful, so they scoop up a bunch, which lowers their company’s GHG footprint. The fossil fuel company then markets all the good things they are doing to reduce their carbon footprint.
What about the food producer or food maker? Under current rules, once that offset is sold outside the value chain as a credit, it’s gone. That’s correct—once Scope 3 carbon reductions are sold out of the value chain, the current GHG accounting system says only the buyer of that reduction can claim ownership. Hence, the value chain loses the ability to claim it as a reduction in their GHG footprint, meaning the people doing all the work and making the investments see no measurable or reportable reduction of GHG in their operation. The food or fiber companies buying the grain or milk or timber from the producer cannot claim the reduction either, weakening the entire industry’s efforts to reduce emissions to meet its science-based targets.
This system is clearly unfair and has created significant unintended consequences where food and fiber companies and cooperatives may be less likely in the future to encourage and invest in certain GHG reduction technologies and practices in their value chain if those solutions cannot be accounted for in their Scope 3 emissions inventory.
Rather than continuing to support the current broken system tilted against food, agriculture, and forestry, we must fix it. In a recent set of comments to the UN High-Level Expert Group on the Net-Zero Commitments of Non-State Entities—a body formed by the UN Secretary General to look into these very issues of fairness in the marketplace—we proposed an additional, more transparent standard that measures environmental performance in the form of actual emissions in the value chain, allowing credits sold off the farm to be counted as reductions in the value chain and subtracting any offsets purchased in the value chain. With greater transparency, this process adds a safeguard against double counting of reductions while giving good actors clear ownership of their reduction efforts.
The ability to transparently report the value chain’s actual emissions will generate credible insights into its true performance and will generate additional incentives and momentum, yielding additional reductions and removal of GHGs.
At the end of the day, a fairer system, like the one we propose, will motivate the value chain to invest and support producers knowing that they can ultimately demonstrate, report, and have more ownership of their meaningful and measurable carbon reductions.
Matt Herrick is senior vice president of public affairs and communications for the International Dairy Foods Association (IDFA). Danielle Quist is vice president of regulatory affairs and counsel for IDFA. Together, they lead the IDFA Sustainability Initiative.
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