Keeping control of your carbon: How New Zealand farmers can get a fair deal in carbon removal programs

As corporate climate commitments grow in ambition and prevalence, many New Zealand primary sector exporters are considering the environmental impact of their supply chains.  Many of these businesses are now looking to the farms that make up their supply chains, as these aren’t just home to livestock — they are also critical for nature based carbon removals. 

Approximately 25-35% of New Zealand’s native forests are located on privately held land, which puts the farmers in a unique position: soon they will have the choice of who gets their meat and who gets their carbon.

The new carbon economy is creating more opportunities for farmers to generate revenue, diversify income streams, and build more resilient businesses. But not all carbon programs are created equal. Farmers need to be careful about the commitments they make, and understand where they stand in this new carbon exchange.

Here, we offer tips on how farmers can keep control over their carbon while maintaining strong relationships with their customers.

What is a supply chain carbon removal program?

For many companies, and primary sector exporters in particular, the vast majority of their carbon footprint comes not from their own operations, but rather, the activities of their supply chain. Scope 3 emissions (from supply chains) are 11.4 times larger than Scope 1 and Scope 2 emissions (owned and purchased) combined — and for agriculture, these figures are even higher.

Since food and agriculture are responsible for approximately a third of global greenhouse gas emissions, many companies in this sector are looking to develop carbon removal programs behind the farm gate. Rather than investing in carbon removal projects in foreign countries, these companies work with their suppliers and pay them for the carbon that is sequestered on their own land through their trees.

Getting access to high-quality carbon removals is not a nice-to-have for these businesses; it is increasingly becoming a necessary business expense. Most large businesses are under increasing pressure to decarbonise in order to meet market access conditions, customer supply requirements, and even regulatory demands.

In an ideal world, carbon removal programs can be designed to benefit everyone — farmers, exporters, consumers, and the planet. But not all carbon removal programs are designed this way, and some may be designed to benefit companies more than farmers.

Here’s a hypothetical example. Let’s say a meat company wants to implement a carbon removals program using the carbon removals within its own supply chain. It locates high-quality carbon removals on some of its farmers’ land, and persuades the farmer to get on board. Sounds great — but then, the company places an entire farm under a ‘carbon contract’ as a supply pool of carbon removals for future net-zero meat sales. There are two problems here: the farmer doesn’t get paid until the meat is sold, and at the same time, the farmer can’t join another carbon program because the whole farm is committed. If the meat company can’t generate demand for their low-carbon products, the farmer can’t switch programs. They’re locked out of the carbon market.

What’s happening here? The meat company is taking advantage of being a first-mover in carbon programs and locking up all the farmer’s carbon for their potential future use, without thinking about the farmer’s side of the equation.

This is just one example of a carbon program that isn’t particularly farmer-friendly, and unfortunately, poor design can take many forms. 

How to evaluate a carbon program

1. Knowledge is power

If you’re considering being part of a carbon removal program, it’s important to educate yourself first.

Tips for getting educated

→ Read up on the basics of carbon removals and carbon credit trading. Understanding how these processes work can ensure you get a fair deal. Understand the difference between offsets and insets, and the difference between supply chain carbon programs and New Zealand’s ETS (Emissions Trading Scheme).

→ Get independent advice from carbon experts and legal experts — if you can. A second or third opinion is always helpful when you’re dealing with uncharted territory and an opportunity you don’t want to miss out on. Join your local Beef + Lamb workshop, and subscribe to the CarbonCrop blog.

→ Talk to other farmers to find out about their experiences with carbon programs. They may have valuable insights and first-hand experiences you won’t find elsewhere. Talk to neighbours, catchment group members, and even farming peer groups (PMG, RMPP groups, etc.)

2. Ensure terms are clear and fair

Farmers should be aware of some of the key red flags of unfair carbon programs..

Tips for assessing program fairness

→ Look for clear and comprehensive terms. Terms should be clear and free of jargon and technical language. They should include payment terms, the duration of the contract, and obligations on both sides.

→ Hire a lawyer (ideally one who knows carbon) if you need to — it could make a major difference to your income and opportunities down the line.

→ Ensure you’re paid. Make sure you’re aware of when you’ll get paid. Could your payments be delayed by things beyond your control? Watch out for programs that delay payments or tie them to conditions beyond your influence, such as tying the sale of a carbon credit to the sale of your customer’s product. Some programs do tie payment to future demand (i.e. the net-zero product has to be sold before the farmer is paid). That’s okay, as long as the program is scaled with demand (i.e. starting with smaller areas of your farm) and not claiming all your carbon resources because they plan to grow demand in the future. Ensure the demand is already there before you agree to ‘full farm’ terms like these.

→ Know what you’re in for. Make sure you’re crystal clear on your obligations in the long term and what happens if something goes wrong that impacts your forest. 

→ Make sure you’re getting a fair rate. Because supply chain carbon removal programs are just starting up, there’s not a lot of information out there on what others are receiving for their carbon. Ask to talk to others who are already in the program.

→ Look out for restrictive clauses that limit your ability to participate in multiple programs or dictate how you manage your land and carbon.

3. Assess the impact on farming operations

Adding carbon removals to your farming operation can be a major change for your business.

Tips for assessing impact on operations

→ What are your “no regrets” areas you don’t mind giving over to a carbon program? Once your native forest is established or officially a forest, it is protected under the Forests Act and there may be considerations if you look to clear it. you can’t legally clear it.

→ Understand the consequences. Good carbon programs will have annual deforestation monitoring and penalties, so don’t commit areas of your farm you’re unsure of.

→ Get clear on long-term impacts. How does the program affect your farm’s long-term sustainability and operations? Is adding carbon removals something you want to do, both now, and in the future? Signing on as a provider of carbon removals will mean following specific instructions around conservation for a long time to come, so make sure this is something you’re willing to do.

→ Push for flexibility. Make sure the program allows for flexibility in your operations. Market conditions and climate regulations are evolving rapidly, and your carbon program should acknowledge and accommodate this.

4. Make sure the program allows for partnership and autonomy

The best supply chain carbon programs strengthen supplier-customer bonds, rather than straining them.

Tips for ensuring partnership and autonomy

→ Keep control of your carbon. Do you have ‘sovereignty’ over your carbon? That is, are you the original owner of the carbon removals, before they are traded to your customer? Do you get the autonomy to choose who you sell your removals to? Can you make decisions that are best for your land and business?

→ Avoid price lock-in. Are you being locked in to the same price long-term?

→ What’s in it for you? Is the program designed in such a way that you, the farmer, are treated as a partner rather than just a supplier within a broader system? Aside from carbon payments, how else are you being supported by your program? Co-funded planting programs?

5. Look for co-benefits and community impact

Carbon programs do far more than sequester carbon from the atmosphere. Nature-based programs in particular can have a number of ‘co-benefits’ to local species, ecosystems, and communities.

Tips for assessing co-benefits and community impact

→ First, take stock of any co-benefits. What are the additional benefits the program provides? This might include anything from boosting biodiversity, improving soil health, or contributing to local economies or community wellbeing.

→ Does the program engage with the wider community or offer benefits to local natural or social ecosystems?

→ Does the program prioritise forests on low productivity farmland (either native or exotic), or is it all carbon?

→ Trust your gut. Is this the sort of carbon program you’d be proud to talk to your neighbours about?

6. Keep your options open

The best carbon removal programs give farmers freedom to expand the impact of their carbon removals beyond this particular customer’s needs.

Tips for ensuring diversification

→ Avoid being restricted. Make sure the program doesn’t restrict your ability to participate in other carbon or environmental initiatives. Diversification can also help to limit your risk exposure and expand the potential opportunities of your carbon removals.

→ Future considerations. Has the carbon program considered what will happen if or when Ag Pricing comes in? What about biodiversity credits? 

→ Can you covenant your land and still be in the program?

Case Study: Lake Hawea Station

If you’re looking for a blueprint for your carbon journey, take a look at this video featuring Lake Hawea Station, a high country station that worked closely with New Zealand Merino customer, Allbirds, to deliver carbon removal credits for the world’s first carbon-neutral shoe.

Learn more about how Lake Hawea Station collaborated with Allbirds in this detailed case study, which explains how, with the help of CarbonCrop, they were able to:

• Set up four different carbon streams, allowing the station to sell to the ETS, the voluntary carbon market, Allbirds, and to their own climate-positive business

• Measure and monitor changes in carbon stock through the CarbonCrop platform

• Build trust and transparency throughout the supply chain
  

Read now

Stay informed and keep your options open

Ultimately, no one can decide whether the terms of a carbon program are fair to you — that’s really up to you and your business. We encourage farmers to stay informed about carbon markets and carbon removal programs, and stay flexible. The process of carbon sequestration is a slow one, but carbon markets are changing all the time.

If you’ve been approached by a customer to be part of a carbon program, take your time making sure it’s the right move for you. Just because you’ve got a good relationship with your customer, that doesn’t mean a particular carbon program should get an automatic green light. Talk to the right people, read up on what you need to know, and trust yourself that only you know what’s right for you and your land.

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