Offset ratios and temporary contract designs for climate integrity in carbon farming
AbstractIn this study, we examine how to enhance the climate integrity of carbon credits from carbon farming practices. The key requirements for climate integrity include permanence, additionality, and measurement and verification. Farmers are typically willing to make carbon contracts for a finite...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2024-03-01
|
| Series: | Carbon Management |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/17583004.2024.2329593 |
| _version_ | 1797229812751794176 |
|---|---|
| author | Sanna Lötjönen Kati Kulovesi Kristiina Lång Markku Ollikainen |
| author_facet | Sanna Lötjönen Kati Kulovesi Kristiina Lång Markku Ollikainen |
| author_sort | Sanna Lötjönen |
| collection | DOAJ |
| description | AbstractIn this study, we examine how to enhance the climate integrity of carbon credits from carbon farming practices. The key requirements for climate integrity include permanence, additionality, and measurement and verification. Farmers are typically willing to make carbon contracts for a finite time only in voluntary markets or with the government and receive carbon credits to sell as offsets. This contradicts the requirement of the permanence of carbon sequestered in soils. To solve this problem and to facilitate greater participation by farmers in carbon sequestration, we show how temporary contracts can be made to address the issue of permanence by using offset ratios. The notion of the offset ratio refers to the share of one emission unit that one unit of temporary sequestered carbon replaces. Thus, the offset ratio transforms temporary sequestration to permanent emissions reductions. We propose the use of a discounting method to calculate the offset ratio. The ratio varies with the carbon contract length, employed discount rate, and assumptions about the evolution of the soil carbon stock. We apply this approach to cultivating catch crops for carbon sequestration on a north‒south gradient in Finland, Denmark, and France. We show that the offset ratio approach works well for every selected country. Carbon farming contracts are profitable for farmers provided that revenue under the contract exceeds that in the baseline. Profitability is highly dependent on catch crop cost, annual increase in soil carbon, and the discount rate. We apply offset ratios to assess the climate integrity of some existing crediting programs and find that the discounting method yields a lower offset ratio in almost all cases yielding a lower number of credits than launched in these programs. |
| first_indexed | 2024-04-24T15:18:33Z |
| format | Article |
| id | doaj.art-caea2b9f2e8b4afa9934d7b36cbe5a7e |
| institution | Directory Open Access Journal |
| issn | 1758-3004 1758-3012 |
| language | English |
| last_indexed | 2024-04-24T15:18:33Z |
| publishDate | 2024-03-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Carbon Management |
| spelling | doaj.art-caea2b9f2e8b4afa9934d7b36cbe5a7e2024-04-02T08:49:19ZengTaylor & Francis GroupCarbon Management1758-30041758-30122024-03-0115110.1080/17583004.2024.2329593Offset ratios and temporary contract designs for climate integrity in carbon farmingSanna Lötjönen0Kati Kulovesi1Kristiina Lång2Markku Ollikainen3Department of Economics and Management, University of Helsinki, Helsinki, FinlandUniversity of Eastern Finland, Joensuu, FinlandNatural Resources Institute Finland, Jokioinen, FinlandDepartment of Economics and Management, University of Helsinki, Helsinki, FinlandAbstractIn this study, we examine how to enhance the climate integrity of carbon credits from carbon farming practices. The key requirements for climate integrity include permanence, additionality, and measurement and verification. Farmers are typically willing to make carbon contracts for a finite time only in voluntary markets or with the government and receive carbon credits to sell as offsets. This contradicts the requirement of the permanence of carbon sequestered in soils. To solve this problem and to facilitate greater participation by farmers in carbon sequestration, we show how temporary contracts can be made to address the issue of permanence by using offset ratios. The notion of the offset ratio refers to the share of one emission unit that one unit of temporary sequestered carbon replaces. Thus, the offset ratio transforms temporary sequestration to permanent emissions reductions. We propose the use of a discounting method to calculate the offset ratio. The ratio varies with the carbon contract length, employed discount rate, and assumptions about the evolution of the soil carbon stock. We apply this approach to cultivating catch crops for carbon sequestration on a north‒south gradient in Finland, Denmark, and France. We show that the offset ratio approach works well for every selected country. Carbon farming contracts are profitable for farmers provided that revenue under the contract exceeds that in the baseline. Profitability is highly dependent on catch crop cost, annual increase in soil carbon, and the discount rate. We apply offset ratios to assess the climate integrity of some existing crediting programs and find that the discounting method yields a lower offset ratio in almost all cases yielding a lower number of credits than launched in these programs.https://www.tandfonline.com/doi/10.1080/17583004.2024.2329593Carbon farmingcarbon creditoffset ratiopermanencediscounting methodQ15 |
| spellingShingle | Sanna Lötjönen Kati Kulovesi Kristiina Lång Markku Ollikainen Offset ratios and temporary contract designs for climate integrity in carbon farming Carbon Management Carbon farming carbon credit offset ratio permanence discounting method Q15 |
| title | Offset ratios and temporary contract designs for climate integrity in carbon farming |
| title_full | Offset ratios and temporary contract designs for climate integrity in carbon farming |
| title_fullStr | Offset ratios and temporary contract designs for climate integrity in carbon farming |
| title_full_unstemmed | Offset ratios and temporary contract designs for climate integrity in carbon farming |
| title_short | Offset ratios and temporary contract designs for climate integrity in carbon farming |
| title_sort | offset ratios and temporary contract designs for climate integrity in carbon farming |
| topic | Carbon farming carbon credit offset ratio permanence discounting method Q15 |
| url | https://www.tandfonline.com/doi/10.1080/17583004.2024.2329593 |
| work_keys_str_mv | AT sannalotjonen offsetratiosandtemporarycontractdesignsforclimateintegrityincarbonfarming AT katikulovesi offsetratiosandtemporarycontractdesignsforclimateintegrityincarbonfarming AT kristiinalang offsetratiosandtemporarycontractdesignsforclimateintegrityincarbonfarming AT markkuollikainen offsetratiosandtemporarycontractdesignsforclimateintegrityincarbonfarming |