Why agriculture is left out of the carbon market – 01/12/2024 – Market

The exclusion of agribusiness from the regulated carbon market in Brazil is not just justified by the size of the ruralist group in Congress. Today, in fact, according to experts, it is very difficult to measure the exact balance of the sector’s greenhouse gas emissions; It’s no surprise that agriculture is excluded from all existing carbon markets in the world.

Almost nowhere, however, is the sector as representative of the balance of national emissions as in Brazil. If emissions from deforestation promoted by farmers are considered, agribusiness is responsible for 74% of the country’s greenhouse gas (GHG) emissions, 80% of which comes from beef production, according to the Climate Observatory.

This is the main argument of those in favor of introducing the sector into the system – including the Minister of Finance, Fernando Haddad.

Also, almost nowhere is agriculture as representative in the economy as in Brazil, where it is responsible for a quarter of GDP (Gross Domestic Product). In China, for example, owner of the largest carbon market in the world, agriculture accounts for 8% of GDP.

For these reasons, the rapporteur of the bill approved in the Chamber at the end of last year, deputy Aliel Machado (PV-PR), tried in various ways to include the sector in the system, without success. Agriculture had already been left out of the project approved in the Senate months before. The discussion now returns to the senators.

For experts, there are technical reasons for this exclusion.

The Brazilian Greenhouse Gas Emissions Trading System, as the market will be called in Brazil, provides emission limits for each company. Those that manage to emit less than the established amount will gain tradable quotas, while those that are unable to comply will need to purchase quotas.

Therefore, if agriculture entered the market, rural producers would also need to comply with emissions limits.

Today, the main direct source (without considering deforestation) of emissions from the sector is animal belching, which releases methane into the atmosphere – a gas 86 times more harmful than CO2 in 20 years. This emission occurs during the process of food digestion by animals.

To include producers in the target system, it would be necessary to calculate the amount of emissions from each property. But there are currently no accessible and accurate ways of doing this.

The IPCC, a UN scientific panel, provides a way to calculate emissions from livestock. The calculation considers, for example, an average of how many kilos of methane each animal emits, based on its weight and age.

For researchers, however, the form cannot meet the full diversity of the Brazilian herd.

This is because the release of methane by animals depends, above all, on their food. Embrapa (Brazilian Agricultural Research Company), for example, has studies that indicate the ideal grass height for the entry and exit of animals into pastures, maximizing carbon absorption by the soil and, consequently, reducing emissions from livestock. .

“Suppose there are two producers with ten hectares and five cows each. One of them has a super nice pasture and feeds the cattle, while the other throws the cows into the pasture and leaves. In this case, how does the government, using the average, will it distinguish the emissions of the two? That’s precisely why the average of cows and pastures doesn’t work. One day we’ll get there, but today we don’t know how to do it with the precision that the carbon market needs”, says Shigueo Watanabe, senior researcher at the Talanoa Institute.

Cristiano Alberto, a researcher at Embrapa, thinks similarly. According to him, thanks to these averages – which are constantly improved by Embrapa – it is possible to estimate, in general, the volume of emissions for the entire sector in the country. The difficult thing, he analyzes, is separating farm by farm.

“It is difficult to estimate methane emissions from cattle because this varies depending on the quality of the material they eat. If it is poorly managed and old pasture, it emits a lot of methane. Furthermore, if cattle take a long time to gain weight, they will all your life emitting methane. But, if you gain more methane in the short term, you will emit less”, he explains.

Including the current IPCC methodologies in the carbon market, according to these experts, would harm small producers. “This process is different from a factory chimney, where it is possible to measure exactly how much oil and gas is being burned,” says Watanabe.

In fact, the carbon market was in principle developed for industries. In the European Union, where this system has existed since the beginning of the century, agriculture remains outside, even though recently some countries have been trying to tax the sector’s emissions – much smaller, by the way, than Brazil’s.

“Like in Brazil, the agricultural sector is very powerful in Europe. That’s why almost all countries that want to reduce emissions look first at other sectors, especially electricity and transport. Furthermore, agro involves food security, but this does not means that nothing should be done,” says Milan Elkerbout, international climate policy researcher at Resources for the Future, a Washington-based institution.

In the Netherlands, the government has been trying for at least five years to create regulations to reduce GHG emissions from agriculture – one of the solutions raised by the country is even buying farms and decommissioning them. But, in return, it has been experiencing dozens of protests.

Currently, the most advanced country on this issue is New Zealand. In August last year, the government announced that it will begin taxing the sector’s emissions from the fourth quarter of 2025 and forced rural producers to calculate their emissions by the end of 2024. For now, the mechanism will operate separately from the energy market. New Zealand carbon.

As expected, the sector reacted. Federated Farmers (the sector’s main representative in the country) said the government’s plan is “insensitive to the realities of rural New Zealanders”. The sector argues that taxation should be established only after the creation of methodologies capable of quantifying how much carbon plantations (including grass) can absorb – thus, it would be possible to subtract emissions from absorptions, which would reduce the tax burden on them.

In Brazil, this argument is shared by the CNA (Confederation of Agriculture and Livestock of Brazil), which wants rural producers to enter the regulated market as suppliers of carbon credits arising precisely from this sequestration. Under resistance from environmentalists, the PL approved by the Chamber already allows this sale, even though it does not stipulate how these credits would be traded on the regulated market.

The technology for measuring, however, is still under development. “Currently, we make macro estimates that do not meet the carbon market. The numbers we see today were not measured, they were estimated based on factors”, explains Cristiano Alberto, from Embrapa.

For this reason, he analyzes, there are currently no conditions for agriculture to enter the regulated carbon market. “The way this discussion was conducted was prudent. It is a huge opportunity for agriculture, but it is necessary to improve the tools a little so that things can start”, he says.