For smallholder farmers to adopt regenerative agricultural practices that support the healthy longevity of their sites, they often need incentives. Frequently, these are financial and give the farmer extra motivation to take on additional, short-term work for long-term gain. But where will these incentives come from? A series of digital trainings on carbon finance suggests that voluntary carbon markets with tradable carbon credits could be part of the answer.
“Unfortunately, in the current climate, it’s cheaper and easier to destroy the environment than to regenerate it,” said Kofi Debrah, founder of OKO Forests, a Ghana-based project focused on smallholder farmers and a speaker in the first training. “So, carbon credits are a key part in helping us to transform that attitude.”
The first of the training webinars, held 4 August 2022 and organized through the Global Landscapes Forum Carbon Finance Learning Program, aimed to improve knowledge of carbon finance and opportunities to finance nature-based solutions, including land-use project types and business models that may be suitable for carbon credits. Some 50 participants from 24 countries took part, many of them local project developers.
Bianca Gichangi, coordinator of the Eastern Africa Alliance on Carbon Markets and Climate Finance, explained to the webinar that net zero means reducing emissions to as close to zero as possible with any residual emissions balanced out by high-quality measures taken to remove greenhouse gas (GHG) from the atmosphere. Such measures might include planting and protecting good quality forests that absorb carbon dioxide.
Corporations, individuals and governments alike can finance emissions-reducing projects by purchasing carbon offsets, also known as credits, said Gichangi. “Private sector actors find carbon markets, as a financial instrument, an efficient and cost-effective way of reducing emissions,” she said. A carbon offset is based on how much less greenhouse gas is emitted than would have been the case before the project existed. This means activities such as sustainable farming and forestry can earn carbon credits equivalent to the volume of emissions they reduce, explained Gichangi.
Carbon project types in the land-use sector can include a variety of activities such as tree-planting, improved forest management, efforts to avoid deforestation and carbon sequestration in agricultural soils, said Till Neeff, carbon finance specialist at the Food and Agriculture Organization of the UN (FAO).
Debrah’s OKO Forests project, for example, aims to mitigate climate change and improve incomes by building holistic and scalable agroforestry systems, improving farming practices, and regenerating forests and landscapes.
A project or initiative may find an entry point to carbon trading by participating in what’s known as the voluntary carbon market. As the name suggests, this market is driven by private actors and initiatives rather than governments or regulators (and therefore stands in contrast to mandatory, regulated markets such as those set by the E.U. through its emission trading system).
Strong monitoring methodology is crucial for successful carbon trading systems and must be based on internationally recognized standards, such as those offered by the UN Framework Convention on Climate Change (UNFCC), speakers said. Some examples include the Green Climate Fund, the Architecture for REDD+ Transactions (ART) and Verra, a nonprofit organization that operates a leading carbon crediting program in voluntary carbon markets.
Different standards can apply, depending on whether one is working in voluntary markets compared with compliance markets; or, whether one is seeking results-based payments – for example, from the Green Climate Fund.
“This can be confusing because there are so many different carbon standards,” said Neeff. “But as you get into it, you can see which standards apply to what markets.”
A crucial first step in project development is often a feasibility study to establish if a project can access carbon markets. Such a study should include the choice of methodology for carbon accounting, developing preliminary estimates of carbon credit potential and project design recommendations, said Neeff. Final steps should include a workplan that guides the project toward registration under a carbon standard and issuance of carbon credits.
For many, the impact of a project can be measured by the increased income of its participants, according to the course. “Without really tackling poverty, success is not possible,” said Debrah. “Farmers need incentives because they need to eat, they need to pay their children’s school fees.”
Following the training session’s presentations, group exercises among the participants looked at diverse case studies – some from participants themselves – involving a range of landscapes, from semi-arid to deforested mangrove to agroforestery areas. Conclusions included concerns that financing remains a significant problem for many projects with a reliance on grants and partnerships to support the validation and certification process.
The webinar series on carbon finance continues with sessions in October, November and December 2022, and aims to increase understanding on key carbon finance concepts, while highlighting opportunities for local action.