Food Systems and Carbon Markets: Underrepresented Farm Emissions
Agriculture carries enormous weight in global emissions. Food systems account for roughly a third of all greenhouse gases released each year. Yet the carbon markets designed to fund emissions reductions are not always targeting the biggest problem areas. Research from CGIAR, a network of agricultural research centres, highlights a mismatch between where carbon credits are being issued and where farm emissions are actually concentrated.
This gap matters for two reasons. First, carbon markets only deliver real climate benefits if they finance genuine reductions in the places that need them most. Second, farmers stand to gain new income streams and practical support for lower-emission practices, but only if market rules are built to include them fairly and measure results reliably.
For UK businesses working with agricultural supply chains, the picture is relevant. Many firms now rely on carbon credits to meet net zero commitments or offset residual emissions. However, if agricultural credits systematically avoid the largest emissions sources, the integrity of those offsets becomes questionable. Meanwhile, smaller producers who could benefit from carbon finance often face barriers that shut them out entirely.
Methane and fertiliser dominate farm emissions profiles
Roughly half of all agricultural greenhouse gases come from methane. Livestock systems and rice cultivation are the main culprits. Nitrous oxide from fertiliser use adds another substantial share. Consequently, any credible carbon market for agriculture needs to address these heavy-emitting activities directly.
Voluntary carbon credit issuance from agriculture has grown. The sector produced 0.7 million tonnes of CO2 equivalent in 2021. By 2024, that figure had reached 2.8 million tonnes. Nevertheless, CGIAR points out that the volume remains modest given the scale of emissions involved. More importantly, the projects generating credits do not always align with the sectors where emissions are highest.
Analysis of issued agricultural credits shows concentration in specific project types. Manure digesters, sustainable grassland management, and agroforestry account for much of the activity. These categories deliver real reductions and often suit certain farm types well. However, they may not always tackle methane from enteric fermentation in ruminants or nitrous oxide from intensive cropping systems, both of which represent larger shares of the total emissions footprint.
The result is a market that has grown but not necessarily in proportion to climate impact. Carbon credits flow toward projects that are easier to measure, verify, and package for buyers. Consequently, the largest emissions sources risk being underrepresented even as overall credit volumes increase.
How agricultural emissions complicate carbon accounting
Measuring farm emissions is inherently difficult. Greenhouse gases are released from soils, animals, fertiliser application, land use change, and supply chains. Each source behaves differently and varies with weather, soil type, crop rotation, and management practice. Therefore, creating a carbon credit that meets verification standards requires detailed monitoring and robust baselines.
This complexity raises transaction costs. Smallholder farmers, in particular, face high barriers to entry. They often lack the technical knowledge, upfront capital, and administrative capacity needed to participate. Land rights may be unclear or informal, which makes it hard to establish legal ownership of carbon benefits. Access to finance and insurance is limited, so farmers cannot always afford the upfront investment required before credit revenues arrive.
Project developers can help bridge these gaps. They provide technical assistance, handle verification processes, and manage relationships with credit buyers. However, their involvement adds another layer of cost and complexity. As a result, carbon finance tends to flow more easily toward larger commercial operations that can absorb these overheads.
CGIAR research has identified several institutional barriers beyond the technical challenges. Weak regulation in some jurisdictions leaves farmers and buyers uncertain about rights and obligations. Low sequestration potential on degraded land limits the volume of credits that can be generated. Timing mismatches occur because farmers need support now but credit payments often arrive later, sometimes years after practices are implemented.
UK supply chains and the reliability question
UK businesses increasingly face expectations around Scope 3 emissions. For food retailers, manufacturers, and hospitality firms, agricultural supply chains represent a significant portion of their total carbon footprint. Consequently, many companies look to carbon credits as part of their net zero strategies, either to offset residual emissions or to support climate action within their supply base.
The integrity of those credits directly affects the credibility of corporate climate claims. If agricultural credits systematically avoid high-emission activities, buyers may inadvertently fund projects that deliver less climate benefit than advertised. This risk is not hypothetical. Voluntary carbon markets have faced scrutiny over additionality, permanence, and leakage, particularly in forestry and land use sectors.
For procurement teams, this creates a due diligence challenge. Assessing the quality of agricultural carbon credits requires understanding not just the methodology but also whether the project addresses emissions sources that matter. A credit from a manure digester project may be well-verified and additional, but it does not offset methane from the beef herd itself unless the digester is part of a broader emissions reduction strategy.
Public sector suppliers face additional scrutiny. Procurement Policy Note 06/21 requires carbon reporting and net zero commitments from suppliers bidding for large government contracts. Buyers who rely on agricultural offsets to meet those commitments need confidence that the credits represent real, measurable reductions in emissions that would not have happened otherwise. Consequently, understanding the gaps in agricultural carbon markets becomes a procurement risk management issue, not just a sustainability talking point.
Climate finance for agriculture extends beyond carbon credits. Blended finance, payments for ecosystem services, tax incentives, and subsidy reform all play roles. However, carbon markets attract significant attention because they promise to channel private capital directly to farmers in exchange for verified emissions reductions. Therefore, ensuring these markets are inclusive and credible is important if they are to deliver at scale.
Finance flows and the smallholder exclusion problem
CGIAR research indicates that agrifood systems receive only about 4.3% of total climate finance. Within that small share, less than 20% reaches small-scale producers. This pattern reflects both market dynamics and structural barriers. Large commercial farms can more easily meet verification requirements, absorb transaction costs, and negotiate with project developers. Smallholders, by contrast, often operate on thin margins with limited access to capital, technology, and advisory support.
The exclusion of smallholders has both equity and effectiveness dimensions. Globally, small-scale producers manage a significant portion of agricultural land and contribute substantially to food security. If carbon markets systematically exclude them, the finance fails to reach communities that are both vulnerable to climate impacts and capable of implementing lower-emission practices when supported properly.
From a climate perspective, the exclusion also limits potential. Smallholder systems often have scope for emissions reductions through improved soil management, agroforestry, nitrogen efficiency, and livestock practices. However, realising those reductions requires upfront investment in training, inputs, and equipment. Carbon finance could help cover those costs, but only if market rules are designed to lower barriers rather than reinforce existing inequalities.
Project developers have experimented with aggregation models that group smallholders together to share costs and administrative burdens. These approaches show promise but require patient capital, strong local institutions, and tailored technical support. Without those enabling conditions, aggregation alone does not solve the fundamental mismatch between smallholder needs and carbon market requirements.
Summary of the main findings
- Food systems generate approximately one third of global greenhouse gas emissions, with methane from livestock and rice accounting for roughly half of agricultural emissions.
- Voluntary carbon credit issuance from agriculture grew from 0.7 million tonnes of CO2 equivalent in 2021 to 2.8 million tonnes in 2024, but the volume remains small relative to total emissions.
- Most issued agricultural credits come from a narrow set of project types, including manure digesters, sustainable grasslands, and agroforestry, which do not always align with the largest emissions sources.
- Agrifood systems receive only about 4.3% of climate finance, and less than 20% of that reaches small-scale producers, reflecting structural barriers to participation.
- Barriers for smallholder participation include weak regulation, unclear land rights, high transaction costs, limited access to finance and insurance, and the need for technical assistance and long-term support.
What businesses should consider when evaluating agricultural carbon credits
Companies buying agricultural carbon credits need to ask whether the projects behind them address the emissions sources that matter most. A credit from a well-verified project still carries limited climate value if it avoids tackling methane from livestock or nitrous oxide from fertiliser use. Therefore, procurement teams should look beyond certification labels and examine the specific emissions sources being targeted.
Understanding additionality is equally important. A reduction is only additional if it would not have occurred without the carbon finance. In agriculture, this test is complicated by policy subsidies, market trends, and existing incentives for efficiency. Buyers should scrutinise baseline assumptions and ask whether the project genuinely shifts practice or simply monetises changes that were already underway.
Permanence and leakage also require attention. Soil carbon can be released if land management changes again in future. Emissions reductions in one part of a supply chain may shift activity elsewhere, particularly if livestock production moves rather than reduces. Consequently, robust monitoring and long-term commitments are needed to ensure credits represent durable climate benefits.
For businesses with direct agricultural supply chains, supporting suppliers to reduce emissions at source often delivers more value than buying offsets. Our sustainable procurement support helps firms identify reduction opportunities, engage suppliers constructively, and build lower-emission supply chains that meet both commercial and regulatory requirements. This approach reduces reliance on offsets and strengthens supply chain resilience over time.
Firms preparing for carbon reporting obligations under frameworks like the Streamlined Energy and Carbon Reporting scheme or preparing for future requirements should ensure their carbon accounting reflects genuine reductions rather than relying solely on credits of uncertain quality. Our compliance services provide guidance on reporting standards, Scope 3 calculation, and credible reduction strategies that satisfy both regulatory expectations and stakeholder scrutiny.
Training internal teams to understand these nuances is valuable. Carbon markets, particularly in agriculture, involve technical detail that finance and procurement teams may not encounter in other contexts. Our SBS Academy offers practical training on carbon accounting, Scope 3 emissions, and sustainable procurement that equips teams to make informed decisions about offsets, supply chain engagement, and net zero planning.
Where to find reliable guidance on agricultural carbon markets
CGIAR publishes research and policy analysis on carbon finance for agriculture through its website. The CGIAR Initiative on Climate Resilience provides detailed reports on market trends, barriers to smallholder participation, and the role of carbon credits in broader climate finance strategies.
The UK government's Department for Energy Security and Net Zero offers policy updates on carbon markets, including the UK Emissions Trading Scheme and its potential expansion into agriculture and land use sectors.
For businesses seeking guidance on carbon accounting and reporting standards, the government conversion factors for company reporting provide the official methodology for calculating emissions from agricultural activities within Scope 3 supply chains.
The Institute of Environmental Management and Assessment publishes technical guidance on environmental and carbon management for UK businesses, including practical resources on supply chain emissions and offset quality assessment.