*CA-CoP* *CONSERVATION AGRICULTURE COMMUNITY OF PRACTICE*

*for sustainable production intensification*


Dear Subscribers,


Please see herebelow a post by Professor Alan Matthews, Trinity College,
Dublin, Ireland, based on his presentation at the Green Carbon Conference
on 3 April 2014 in Brussels, organized by ECAF and IAD.


*Amir Kassam *

*Moderator*

-------------------

CAP Reform: Incentivising soil carbon sequestration <http://capreform.eu>
------------------------------

*Incentivising soil carbon
sequestration*<http://capreform.eu/incentivising-soil-carbon-sequestration/>

Posted: 04 Apr 2014 07:45 AM PDT

Soil contains a huge amount of carbon, twice as much as in the atmosphere
in the 0-30 cm layer alone. However, continuous cultivation over a long
period has reduced stocks of soil organic carbon (SOC, which I will
abbreviate here to soil carbon), often to dangerously low levels. The
EU’s *Joint
Research Centre
estimates*<http://ec.europa.eu/dgs/jrc/downloads/jrc_reference_report_2012_02_soil.pdf>that
some 45% of the soils of Europe have a low or very low organic matter
content (0-2% organic carbon). The main mechanism for soil carbon loss is
associated with ploughing, due to increased decomposition of SOC due to
soil aeration and soil aggregate destruction, increased aggregate turnover
and a reduction in aggregate formation.

Reversing this process to build up soil carbon stocks has thus the
technical potential to sequester a lot of carbon. The practices to do this
are now well known: they include the use of winter cover and catch crops;
crop rotation; adding legumes or N-fixing crops; reduced or zero tillage;
and incorporating crop residues and other organic matter. However, the
effectiveness of these practices in rebuilding carbon may vary depending on
soil type and climatic conditions (see *this
article*<http://t-stor.teagasc.ie/bitstream/11019/398/1/SUM-2009-165R1-RC%20_2_.pdf>among
many for a review).

From a climate policy perspective, where the objective is to keep the
carbon concentration in the atmosphere below a certain level, a tonne of
carbon sequestered has the same value as a reduction in one tonne of carbon
emissions. Thus it makes sense to try to incentivise soil C sequestration,
assuming that the costs of doing this are below the social cost of carbon.
As there may be debate about the appropriate price of carbon, a practical
rule of thumb is that soil C sequestration should be encouraged whenever it
is cheaper than the least expensive measure currently being used to meet
climate policy targets.

In a presentation given to the *Green Carbon: Making Sustainable
Agriculture Real <http://www.greencarbon-ca.eu/>* conference organised by
the European Conservation Agriculture Federation (ECAF) in Brussels
yesterday, I looked at the options for maintaining and restoring soil
carbon, particularly in light of the changes in the CAP regulations agreed
at the end of last year. I examined five options in particular:

(a) counting soil carbon changes towards EU targets under climate change
policy
(b) regulation, to require farmers and other land managers to maintain
existing soil carbon or a minimum level of soil carbon
(c) cross-compliance conditions in Pillar 1
(d) voluntary agri-environment-climate measures in Pillar 2
(e) offset schemes linked to the Emissions Trading Scheme

My conclusion was that incentives under EU climate policy are not foreseen
in the medium term. As regards agricultural policy, although there are some
positive elements in the new regulations, on their own they are unlikely to
make much of a difference. There is a need for more innovative thinking.

One possible approach would be to allow emission reductions in the Land
Use, Land Use Change and Forestry (LULUCF) sectors, including soil C
sequestration, as offsets in the EU Emissions Trading System. While
arguments can be made against this approach, it seems to me to have some
positive advantages which make it worth considering further.

*Incentivising soil C sequestration under climate policy*

The Commission recently *published its
proposals*<http://ec.europa.eu/clima/policies/2030/index_en.htm>for
climate targets to 2030. It proposed an overall reduction in GHG
emissions in 2030 relative to 1990 levels of 40%. The communication noted
the incomplete accounting of emissions in the agriculture and land use
sector. Currently, non-CO2 emissions from agricultural production are
counted under the Effort-Sharing Directive (ESD) in the non-ETS (Emissions
Trading System) sector. They count towards each member state’s limit on
non-ETS emissions over the 2013-2020 period. However, LULUCF emissions and
removals are excluded from EU targets but included in the EU’s
international commitments under the UNFCCC process.

The paper commented

Further analysis will be undertaken with the aim of assessing the
mitigation potential and most appropriate policy approach which could, for
example, use a future Effort Sharing Decision governing the non-ETS GHG
emissions or an explicit separate pillar, or a combination of both.

New *LULUCF accounting
rules*<http://europa.eu/rapid/press-release_MEMO-12-176_en.htm>entered
into force in July 2013, following the agreement within the UNFCCC
at Durban in November 2011 on new accounting standards for soils and
forests. The new legislation phases in mandatory accounting for grassland
and cropland management at the level of member states.. Accounting for the
draining and rewetting of wetlands will remain voluntary, as in the
international context. It requires member states to report on their actions
to increase removals and decrease emissions of GHG from activities related
to forestry and agriculture. Importantly, the regulation makes clear that
LULUCF targets will only be set once the accounting rules have been
validated.

*Regulatory approaches*

The distinction between regulatory and incentivising approaches to soil
management is essentially about defining property rights to the soil, and
thus is highly controversial. The Commission put forward a *proposal for a
Soil Framework Directive*<http://ec..europa.eu/environment/soil/index_en.htm>in
2006 which would have required landowners to take responsibility for
soil degradation. It would have obliged member states to ensure that any
land user whose actions affect the soil in a way that can reasonably be
expected to hamper significantly the soil functions set out in the
Directive, including acting as a carbon pool, is obliged to take
precautions to prevent or minimise such adverse effects.

However, the proposal was prevented from advancing further by a blocking
minority in the Council, including Britain, France, Germany, Austria and
the Netherlands. While the argument that soil protection should not be an
EU responsibility under the subsidiarity principle was used, the fact that
these countries are home to the most intensive farming in Europe also
played a role in their opposition. National soils legislation may provide
some legal protection in some countries but I do not know how comprehensive
such protection is.

*Protecting existing carbon stocks*

However, some pseudo-regulatory protections are included under CAP rules as
part of cross-compliance rules on keeping land in good agricultural and
environmental condition (GAEC). One example is the protection of existing
carbon-rich soils from ploughing.

Under the previous CAP rules, protection of wetland and carbon-rich soils
was included as a cross-compliance standard (GAEC 7). Environmental NGOs
expressed alarm during the legislative process on the new CAP rules that
this GAEC standard was in danger of disappearing. In fact, it has been
moved into the basic text and it is now part of the permanent grassland
eligibility condition for the green payment in Pillar 1. This change in
positioning has implications for the penalties that farmers face if they
decide to ignore the restriction (cross-compliance penalties as a GAEC
standard, the loss of the green payment as a green payment requirement). In
addition, the wording has become more specific.

Member states now have an obligation and an option. The obligation is to
designate permanent grasslands which are environmentally sensitive in areas
covered by the Habitats or Birds Directives, including in peat and wetlands
situated in these areas, and which need strict protection in order to meet
the objectives of those Directives. The option is, in addition, to decide
to designate further sensitive areas situated outside areas covered by
these Directives, including permanent grasslands on carbon-rich soils.

Farmers are not allowed to convert or plough permanent grassland situated
in these areas designated by member states. If member states really take
the opportunity to designate all potential carbon ‘hot-spots’, this could
potentially be an effective measure in limiting future carbon emissions
from soils.

*The GAEC soil standards*

Three other GAEC standards in the new regulations are relevant to soils and
soil carbon. GAEC 4 requires maintenance of a minimum soil cover. GAEC 5
requires minimum land management reflecting site-specific conditions to
limit soil erosion. GAEC 6 requires the maintenance of soil organic matter
through appropriate practices including a ban on burning arable stubble.
These standards repeat what was included in the previous 2009 CAP
regulation following the Health Check and indeed go back to 2003 and the
introduction of cross-compliance.

Member states have the flexibility to interpret how to implement these
standards. This flexibility is, in principle, desirable to account for the
heterogeneity of agricultural conditions across Europe. However, the
criticism is made that member states in the past have interpreted these
standards in a lax way and that they have not really been enforced.
Certainly, the *latest JRC report on
soils*<http://ec.europa.eu/dgs/jrc/downloads/jrc_reference_report_2012_02_soil.pdf>documents
that the reduction in the carbon content of the EU’s soils has
not yet been halted.

It is the Commission’s role to evaluate that cross-compliance standards are
adequately transposed and enforced in member states. At a minimum, its
reviews of national GAEC standards should be published to enable the public
to assess the extent to which member states are fulfilling their
obligations.

*Pillar 1 greening measures and soil carbon*

The innovation in Pillar 1 of the CAP in the new regulation is the
introduction of a green payment. Farmers are required to follow three
practices beneficial for the environment and climate, or follow equivalent
practices, in order to be eligible for the new green payment. The three
measures are crop diversification, maintaining ecological focus areas on
their land, and maintaining the share of permanent grassland.

The equivalent practices can be undertaken either as part of an
agri-environment measure under Pillar 2 or as part of a national or
regional environmental certification scheme. The equivalent practices must
yield the same or a higher level of environmental benefit. Member states
can decide whether to allow the option of claiming eligibility through an
environmental certification scheme and, if so, whether to make it
compulsory or not.

EFAs are primarily intended to encourage biodiversity even if they may also
have benefits for soil carbon. Crop diversification is beneficial for soil
carbon but as so few farms will be required to change current practices to
abide by this measure, it is not considered further.

The main greening condition with relevance to soil carbon is therefore the
requirement to ensure that the ratio of permanent grassland to the total
agricultural area does not decrease by more than 5% compared to 2015
levels. If this level is exceeded, then individual farmers who converted
grassland will be required to reconvert it. Although the explicit statement
of this latter requirement is new, it applied de facto in the past where a
member state was likely to breach the ceiling.

The requirement is deemed fulfilled if the absolute level of permanent
grassland is maintained. The obligation can apply at national, regional or
the appropriate sub-regional level or even at holding level if a member
state wishes. Member states shall notify the Commission of any such
decision by 1 August 2014.

The updating of the baseline to 2015 from 2003 (for the old member states)
and 2004 (for the new member states) constitutes a small change from the
previous regulation. This will have a different impact on member states
where the ratio has been decreasing compared to those where it has been
increasing. The former get the chance to wipe the slate clean and decreases
in permanent pasture between 2003 and 2015 are ignored; the latter will
have a higher reference standard to adhere to in the future.

Maintaining permanent grassland avoids the release of soil carbon which
would occur on first ploughing. However, there is the potential for
substantial leakage if this grassland is used for ruminant production with
the potential for continued non-CO2 emissions as a result. This may be
offset if grassland soils are able to act as a carbon sink but the soil
under arable use continues to lose carbon. Overall, whether protecting the
permanent grassland area, in general, is a cost-effective way of achieving
a reduction in GHG emissions remains to be proven, in my view. It may also
run counter to the flexibility needed for agriculture to adapt to climate
change in the decades ahead.

*Pillar 2 agri-environment measures and soil carbon*

The measure in Pillar 2 with the most potential to address soil C
sequestration is the agri-environment-climate measure (Article 28) which is
compulsory for member states (other relevant measures include support for
organic farming, afforestation and renewable energy). This measure aims to
preserve and promote the necessary changes to agricultural practices that
make a positive contribution to the environment and climate.

In the previous rural development programming (RDP) period, a number of
countries and regions incentivised cropland management practices which had
the effect of improving soil C stores in the soil. The *synthesis report of
the mid-term evaluations*<http://ec..europa.eu/agriculture/evaluation/rural-development-reports/synthesis-mte-2007-2013_en.htm>of
these programmes noted that climate change impacts were assessed as
positive for 42 RDPs (just under half of all programmes) and that some 28
RDPs had tried to quantify these impacts at least partially. However,
evaluations of the other half of RDPs did not measure the climate change
impacts at all.

Potentially, there is scope to use this measure to encourage specific soil
C sequestration measures. The efficiency of the measures adopted, however,
will depend greatly on the contract design. The simpler measures are those
which pay farmers a per hectare payment in return for following farm
practices (above the cross compliance baseline) which can help to sequester
soil carbon. More complex measures would pay farmers on the basis of each
additional tonne of carbon sequestered above an agreed baseline. While more
costly to verify and monitor, US experience suggests that the cost per
tonne of carbon sequestered might be four to five times lower using the
second approach, suggesting that there could be a high pay-off to devising
simple monitoring, reporting and verification (MRV) procedures.

However, it is not clear that ‘payment by results’ is permitted under the
regulation. The relevant Article 28 states that:

Agri-environment-climate payments shall be granted to farmers … who
undertake, on a voluntary basis, to carry out operations consisting of one
or more agri-environment- climate commitments on agricultural land to be
defined by Member States…. Payments shall be granted annually and shall
compensate beneficiaries for all or part of the additional costs and income
foregone resulting from the commitments made.

Paying for tonnes of carbon sequestered (or for the number of wild flowers
in a farmer’s field, for that matter) does not seem covered by the way the
regulation is phrased.

Another problem is that soil C sequestration schemes can run foul of the
requirement in agri-environment schemes that the level of payments must be
related to the additional costs incurred by the farmer in adopting the new
practices. Conservation agriculture (which advocates minimum soil
disturbance through no-till systems and permanent soil cover as well as
crop rotation) has the possibility to sequester considerable amounts of
soil carbon (even if the scientific literature disagrees on whether this is
always and inevitably the case). However, advocates of conservation
agriculture also emphasise that the system can improve farmers’ margins
without an additional payment (largely due to reduced fuel and machinery
costs). Under AEM rules in Pillar 2, it may be difficult therefore to
reward farmers for practices which sequester soil carbon.

Again, one solution would be to pay farmers directly for the carbon
sequestered in their soil but, as we saw above, the rural development
regulation is not designed to allow this economically efficient solution.
Another solution might be to focus only on those aspects of the
conservation agriculture system where increased costs are incurred (e.g.
the establishment of a catch crop) and to ignore those elements (such as
no-till) where cost savings might be expected to occur. The European
Innovation Partnership for Agricultural Productivity and Sustainability
which has a focus on land management may also have a role to play in
helping to incentivise good practices.

*Developing a carbon compliance offset market*

Given the limitations of the previous approaches, it seems worth
considering trying to incentivise private funding for soil carbon
sequestration by developing a compliance carbon offset market. Examples of
such markets exist in other parts of the world, for example, the Australian
Carbon Farming Initiative and the Alberta Carbon Offset project.

Under a cap-and-trade emissions trading system, offsets are a reduction in
GHG emissions/increase in sequestration realised by an unregulated party
that can be used to counterbalance emissions from a regulated party.
Offsets are allowed in the EU’s Emission Trading Scheme under the Joint
Implementation/Clean Development Mechanisms for carbon offset projects in
developing countries.

Because LULUCF is not covered under the ETS or ESD, it could be linked to
the ETS by allowing LULUCF offsets to count towards compliance. This would
be separate from any voluntary carbon offset market that might develop as a
result of demand from large companies seeking to improve their carbon
performance – for example, the World Expo in Milan in 2015 is seeking to
buy voluntary carbon offsets to offset its carbon emissions when it is in
operation.

The big advantage I see in developing a compliance carbon offset market is
that it would encourage the development of protocols for the measurement,
reporting and verification (MRV) of soil carbon changes. We need to see a
lot more ‘learning by doing’ in developing appropriate methodologies for
MRV for LULUCF activities.

It would also be politically popular as it would potentially benefit both
the ETS sectors and farmers. The ETS sectors would benefit to the extent
that they gain access to a cheaper source of carbon emission reductions.
Farmers would benefit because they gain access to another stream of income.
Many of the initial projects might be in the forestry sector, but Alberta’s
experience suggests that agricultural offsets can also be competitive.

There might be criticism that allowing such offsets in the ETS dilutes the
level of ambition in reducing emissions in the ETS sector. But the point is
to reach the overall EU emissions reduction target at the minimum cost. The
ETS and the ESD are just instruments to achieve this end. Climate policy is
not an exercise in sado-masochism. Provided that the emissions reduced in
the LULUCF sector are genuinely additional to what otherwise would have
been achieved, they are just as valuable as emissions reduced in the ETS
sector itself.

There would be some issues to watch out for, including the need to avoid
‘double-counting’ when reporting on international commitments. There are
also thorny issues in designing carbon offset contracts in the land use
sector, such as addressing permanence, saturation and leakage as well as
ensuring additionality, but these have been addressed in other
jurisdictions. It is precisely the experience we would gain in learning how
to address such issues which would add value to the exercise.

The ECAF conference presentation can be viewed
*here*<http://www.slideshare.net/amtthews/matthews-ecaf-presentation-april-2014>
.

*This post was written by Alan Matthews.*

Photo credit: *Geograph* <http://www.geograph.org.uk/photo/2909765>, used
under a Creative Commons licence
Related posts:

§ *Is EU agriculture
carbon-efficient?*<http://capreform.eu/is-eu-agriculture-carbon-efficient/>

§ *Agriculture in the Commission’s climate policy to
2030*<http://capreform.eu/agriculture-in-the-commissions-climate-policy-to-2030/>

§ *+++ Breaking news: world's peat lands under threat from EU biofuels law
+++*<http://capreform.eu/breaking-news-worlds-peat-lands-under-threat-from-eu-biofuels-law/>

§ *Carbon efficiency and trade
policy*<http://capreform.eu/carbon-efficiency-and-trade-policy/>

§ *What Durban means for EU
agriculture*<http://capreform.eu/what-durban-means-for-eu-agriculture/>



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