A recent report by RBC has called for Canadian standards to support carbon markets. Having delved into the complexities of voluntary markets over the past few years, I cannot help but recognize the challenges posed by an uncertain and ever-changing regulatory environment in Canada.
During my participation in the hearings of the Senate Committee on Agriculture and Forestry in Canada earlier this year, I shared similar views for stringent standards to underpin the evolving carbon market in Canada. I believe that an active carbon market could serve as a crucial tool, compensating farmers and enabling policymakers and financial institutions to support impactful activities. The crux of the matter revolves around achieving clarity – a path forward that aligns with both voluntary and compliant initiatives, receiving the endorsement of the federal government.
Agriculture plays a significant role in global greenhouse gas emissions, contributing approximately 10% to Canada’s overall emissions. It also holds immense potential as a carbon sink, actively retaining carbon instead of emitting it into the atmosphere. As the world confronts the urgent need to combat climate change, Canada stands at a crossroads with its expansive farmland emerging as a potent carbon sink. With the potential to sequester between 35 metric tonnes to 38 metric tonnes of carbon by 2050, Canada’s active farmland could play a pivotal role in offsetting a substantial portion of the oilsands’ current annual emissions, making up 40% to 45% of total emissions. The growing voluntary carbon market in the country, still in its nascent stage, could evolve into a C$4 billion behemoth by 2050, promising operators fresh revenue streams and delivering large-scale environmental benefits.
One aspect often overlooked is the invaluable contribution of farmers to environmental stewardship. Canadian farmers have been ahead of the curve, with many implementing climate-smart practices that predate the Paris Accord, sometimes by decades. The Canadian Agri-Food Policy Institute had previously highlighted the significant impact of adopting the no-till methodology on carbon losses in western Canada. This shift has notably transformed the provinces from a net carbon loss position to a net gain since 1981.
I often find myself passionate about this cause, for the science is clear, the benefits tangible, yet the recognition lacking.
For instance, Saskatchewan farmers sequestered 12.8 million metric tonnes of carbon in their soil in 2020. This achievement, more than all other provinces in Canada and equivalent to the environmental impact of removing approximately 2.78 million cars from the roads for a year, is in the national greenhouse gas inventory which is prepared by the federal government for the United Nations Framework Convention on Climate Change (UNFCCC) each year.
What is ironic is that despite the substantial environmental gains attributed to farmers’ adoption of sustainable practices, both provincial and federal governments have taken credit without reciprocating benefits to the farmers – be it in tax breaks or incentives. Additionally, the Greenhouse Gas Offset Credit System, introduced in 2022, also bars these farmers from participating in the growing carbon offset market. This is because the new regulations permit projects initiated after January 1, 2017, that have demonstrated verifiable and lasting reductions in greenhouse gas emissions as eligible for federal GHG credits. This is particularly unjust for a province like Saskatchewan, where 93% of cropland acres had already adopted conservation tillage (zero-till/minimum till) by 2016.
Saskatchewan’s Lieutenant Governor, Russ Mirasty, even outlined the vision for establishing a Saskatchewan-based carbon offset credit program in his 2020 throne speech. The program was envisioned to provide potential incentives to farmers adopting practices for sequestering or reducing greenhouse gas emissions. Regrettably, there has been no notable progress on this front to date.
Carbon markets can create opportunities for farmers, foresters, Indigenous communities, municipalities, and other project developers to earn revenues from greenhouse gas reductions and removals. For example, the Ecosystem Services Market Consortium, whose founders include food and agribusiness companies such as General Mills, McDonald’s and Cargill, is already paying a few farmers in the U.S. for their carbon sequestration practices.
However, the pioneers in Western Canada face a significant challenge, primarily due to the technical criteria of “additionality” and “permanence.” Given that they have long integrated these practices into their farming operations, to meet the additionality requirement, they must illustrate that their carbon sequestration efforts surpass standard industry practices. Yet, showcasing a distinct departure from their historical methods, especially if the adoption of zero-till farming occurred many years ago, poses a formidable challenge.
Another concern pertains to permanence. The carbon stored in the soil through zero-tillage practices could potentially be released into the atmosphere if tilling practices are reintroduced, creating a significant obstacle in demonstrating the lasting nature of carbon sequestration as required by carbon credit programs.
Nevertheless, studies like the Prairie Soil Carbon Balance Project reveal a continual positive carbon change in levels, even decades after transitioning to no-till or continuous cropping practices. Furthermore, these observed carbon gains penetrate deeper into the soil profile than initially anticipated, emphasizing the significant and enduring impact of sustainable farming approaches.
The question of permanence, especially in nature-based practices like no-till farming, should not be up for debate. The evidence speaks for itself — two decades of quantified carbon sinks and acknowledgment of climatic change recorded in the Paris Accord.
It is important to emphasize that, to receive rewards within a carbon market, producers must demonstrate a continual increase in carbon absorption over time. Additionally, effective sequestration of soil carbon is contingent on consistent management, as any alterations in land management practices have the potential to release carbon into the atmosphere.
The realization of a robust Canadian carbon market depends on the establishment of a comprehensive system for measuring, reporting, and verifying (MRV) soil carbon and emissions. This necessitates collaborative efforts between the private sector and the federal government. Both Agriculture and AgriFood Canada (AAFC) and Environment and Climate Change Canada (ECCC) should institute publishing standards for an initial MRV framework encompassing various climate-smart practices, such as cover cropping and no-tillage. However, finding a consistent and cost-effective MRV methodology remains a challenge and requires concerted efforts.
There is a strong case for the establishment of a domestic carbon exchange and a Canadian-made carbon registry. At present, we rely on external entities like Verra, Climate Action Reserve (CAR), and Gold Standard. Developing a homegrown registry would not only align with our values but also provide a robust platform for our businesses to prosper, bolstered by the credibility conferred by governmental support.
It’s imperative to halt the exportation of nature-based credits and focus on adding value domestically, nurturing a self-sustaining and globally influential carbon market.
The necessity for an MRV framework cannot be overstated, particularly in guiding producers to earn credits affordably. Simultaneously, it empowers buyers to confidently acquire credits or integrate them into an inset program. Governments ought to explore avenues to ensure stable market prices, offering farmers and investors a reliable and substantial return.
However, the pursuit of a consistent and cost-effective MRV methodology to measure the impact of climate-smart agricultural practices, including cover cropping and no-tillage, remains an ongoing challenge. A well-structured MRV framework is pivotal, providing producers with a clear path to earning credits affordably, and enabling buyers to make confident purchases or integrate credits into their programs. It’s a critical component for the sustainable development of our carbon market.
The July announcement by the U.S. to invest US$300 million to improve MRV of GHG emissions and carbon sequestration in climate-smart agriculture and forestry could serve as a template for Canada. The investment will enable improved data collection mechanisms and build algorithmic models to establish current and future emission baselines. It will also determine the protocols needed for soil testing, identify scalable and affordable remote sensing and soil sampling technologies, and establish a nationwide network of research to improve on-farm practices. Canada will need to match this funding proportionally to ensure producers can compete.
Good MRV comes with accurate and timely data, yet a mere 20% of North American farmland undergoes regular testing, with results dispersed across various channels. Traditional soil-testing methods, demanding labor-intensive processes and expensive chemical analysis, contribute to significant delays in result acquisition.
While modern technologies such as remote sensing and machine learning hold immense potential, farmers encounter challenges accessing affordable solutions, limiting their capacity to optimize efficiency and minimize environmental impact. Governments and technology companies must join forces, ensuring that essential technology is within reach for all farmers, regardless of their financial constraints.
While we advocate for the adoption of innovative technologies, it is also crucial to bridge the gap between technological advancements and affordability/accessibility for farmers, especially smaller ones. Technological solutions should not be a financial burden but a catalyst for change, making sustainable practices more accessible and scalable.
The current mishmash of provincial and federal policies creates an uncertain terrain for businesses, hindering growth and innovation. It’s time for a paradigm shift — a coherent system, a unified vision where federal and provincial entities work in tandem to establish clear and consistent policies — a system where businesses can confidently invest and build, free from the ambiguity that currently shrouds the voluntary carbon market.
The policies in place also seem to be plagued by a shortsighted “what-have-you-done-for-me-lately” mentality. Yes, improvements are needed, but let’s not forget to reward and recognize the strides made by farmers. We advocate for a carrot-and-stick approach — encouraging more adoption while appreciating and rewarding past achievements.
The vision for a sustainable tomorrow necessitates a holistic and collaborative effort. Recognizing and rewarding early adopters, evolving the carbon market, establishing coherent policies, bridging the technology gap, and shouldering global responsibility — these are the cornerstones of a thriving and sustainable future for Canadian agriculture.
The agri-food sector’s impact on climate change is both substantial and reciprocal. To secure a sustainable food supply chain, Canada must take a leading role. The cyclical relationship between the health of the planet and the agricultural sector necessitates a commitment to global responsibility. This underscores the urgency of creating a comprehensive strategy that aligns with international climate goals.
Rachel Hor is Founder and COO at CarbonTerra. An experienced and proven global technology and business leader, Rachel is passionate about climate sciences while having vast experience in the financial services space globally and has led technology transformation. Her recent work is focused on sustainability in various verticals. See all author stories here.
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