The cost of implementing practices is one of the most recurring obstacles when discussing sustainable agricultural transition.
Today, thanks to labels such as the Low Carbon Label, it is possible to finance the transition using Carbon Credits. These credits, generated at the end of a project, correspond to a reduction of one tonne of CO2 equivalent. These Carbon Credits can be purchased by contributors external to the food value chain.
Alongside the purchase of Carbon Credits, players in the agri-food industry can also pay a sector-specific premium to farmers. This remuneration aims to recognise the efforts made by farm operators.
However, the question that arises now is: what are the objectives and stakes for all parties involved in the accurate calculation of costs for practices related to low-carbon projects?
The cost of transition for farmers
For farmers, the main challenge in calculating the costs of transition is to obtain an accurate representation of the expenses incurred. This assessment provides a solid basis for decision-making and for determining whether launching a low-carbon project is viable or not.
By having a clear idea of the costs associated with implementing low-carbon practices, farmers can assess the profitability of their project. The ultimate goal is to limit risks for farmers by avoiding commitment to projects that are too ambitious to achieve the set objectives.
The cost of practices for contributors
Accurate cost calculation for the transition also ensures transparency when purchasing Carbon Credits. By financing low-carbon projects through the purchase of Carbon Credits, contributors demonstrate their willingness to act transparently and responsibly. By being aware of the real costs of low-carbon projects, it is easier for sellers to justify the price of Carbon Credits to contributors.
French Carbon Credits are often criticised for being too expensive. However, by knowing the real costs of projects, the assignees (responsible for selling the credits) can justify the price of Carbon Credits to contributors.
The cost of the transition for the food industry
Due to their SBTi objectives, financial institutions can reduce their scope 3 by following the reductions made by actors in their supply chain.
Under pressure from consumers, food processors can adapt their specifications to include carbon performance criteria for the agricultural products they purchase.
To encourage farms to transition to a more sustainable agricultural model, actors in the agri-food industry can pay a sector-specific premium.
The precise calculation of practice costs aims to objectively determine the amount of this premium and to have an accurate representation of the cost of reducing Scope 3.
It is clear that the stakes are numerous and significant for the various stakeholders in the food value chain.
Having a precise amount of the costs of low-carbon practices for each project aligns the interests of all stakeholders. For example, this can help avoid too low a price for carbon credits or an excessively high industry bonus amount.
In addition to fostering alignment among all stakeholders, the cost of transition plays a crucial role in the success of low-carbon projects by helping farmers make informed decisions and find adequate financial support.
Low-carbon food: a major challenge, multiple benefits
Sources
Low-carbon label, large-scale farming method https://www.ecologie.gouv.fr/sites/default/files/M%C3%A9thode%20LBC%20Grandes%20cultures.pdf
The economic and environmental performance of agroecology, https://www.strategie.gouv.fr/publications/performances-economiques-environnementales-de-lagroecologie
