Reducing greenhouse gas emissions from agriculture: the role of emissions trading

In this project, a comparative law study is carried out to examine how the European emissions trading system can be adapted in order to reduce greenhouse gas emissions from agriculture

The main climate action instrument in the EU is its emissions trading system (EU ETS). Currently, agricultural greenhouse gas (GHG) emissions are not regulated under the ETS. Introducing stricter legal instruments to reduce agricultural GHG emissions and to increase carbon removal on agricultural land seems inevitable for the EU to achieve its commitments under the Paris Agreement. This was also acknowledged in COP28 which took place in Dubai in December 2023. During COP28, the heads of state adopted a soft law declaration on sustainable agriculture, resilient food systems and climate action in which they ‘commit to expedite the integration of agriculture and food systems into our climate action and, simultaneously, to mainstream climate action across our policy agendas and actions related to agriculture and food systems’. In the most important decision adopted at COP28, the First Global Stocktake Decision, also dubbed the UAE Consensus, states were called upon to accelerate and substantially reduce non-carbon-dioxide emissions, including in particular methane emissions by 2030. Agriculture is an important source of non-carbon dioxide emissions, especially methane and nitrous oxide (N2O), both of which are stronger, but shorter lived, greenhouse gasses than CO2 (30x and 250x stronger respectively). In a research project made possible through funding from the Netherlands Research Council NWO, researchers of Tilburg Law School assessed whether, and under what conditions, the EU ETS has a role to play in forcing the agricultural sector to reduce their GHG emissions. We did an ex-post assessment of three of the very few instances in the world of regulatory and market-based approaches to integrating agriculture into emissions reduction schemes in Canada, California and Australia, followed by an ex-ante assessment of inclusion of agricultural emissions under the EU ETS, either indirectly, through allowing on farm offsets for example for increased sequestration, or directly, through requiring farmers and/or other actors in the agricultural sector to surrender allowances for their direct emissions. We mainly focused on legal considerations.

Bringing methane and nitrous oxide emissions from livestock keeping and synthetic fertilizer use respectively under the EU ETS, through obliging meat and dairy processors and synthetic fertilizer producers to surrender allowances for the on-farm emissions associated with their products, appears to be the most viable starting point. In addition, a voluntary, but highly regulated, carbon credits scheme could also be introduced to stimulate farmers to reduce their own emissions and transition to a net zero and overall more climate resilient and environmentally friendly farm. Such credits can be offered to the private carbon market and be bought up by Member States governments and the European Commission.

These new instruments to reduce the most important agricultural GHG emissions should be embedded in a broader policy framework to help farmers transition to more sustainable agriculture, for example by recycling the money raised in the ETS back to farmers, by deploying the carbon border tax adjustment mechanism, and by stimulating supermarkets and consumers to buy products from sustainable farms in the EU.