The next crop is carbon: how farm revenue and climate policy are being rewritten

Several farmer protests over the past two years, in the streets of Brussels and across Europe, have delivered one message: the Green Deal’s environmental ambition, and its conditionality-based system of subsidies, were outrunning what farmers’ balance sheets could bear. That pushback has since forced a reality check on the EU agrifood policy drawing board about what farmers can actually afford to implement, and where financing comes from. The result is not a retreat from environmental ambition, but a change in how it is being framed, namely environmental measures increasingly need to demonstrate an economic benefit for farmers. Carbon farming is the clearest expression of that shift. Despite its technical complexities, open questions on certification methodologies, and a grey area over its use for offsetting, it is being built out as a potential new source of revenue for farmers.

Why revenue and policy are converging

Three parameters are shaping how agri-environmental files get framed in Brussels at the moment. Competitiveness and strategic autonomy have been at the centre of the conversation since the beginning of this institutional mandate, driven by overcapacity and trade tensions with the US and China. Farmers themselves are dealing with cost volatility, input availability, yield uncertainty, and worsening climate and pest pressure, threatening the balance sheet year after year. Finally, growing concerns about regulatory costs and red tape are what is driving the wave of simplification proposals across the policy agenda.

This is changing how environmental ambition in legislation is ultimately sold. Climate arguments alone don’t carry proposals the way they used to, as they now need to pass the test of economic opportunity. Mirroring this shift, carbon farming is a decarbonisation tool that the agriculture sector may need as it transitions, but it is being pitched as a novel income stream for farmers, despite the underlying questions on how this would work in practice.

Building the supply side through the CRCF as the mechanism

The Carbon Removals and Carbon Farming Regulation (CRCF) is the EU’s framework for turning carbon farming into a recognised market opportunity. Following the framework’s entry into force back in December 2024 and the November 2025 Implementing Regulation setting the operational rules for certification schemes, the agriculture piece in this framework came in mid-2026, with the Delegated Act establishing certification methodologies for carbon farming. The framework now recognises a number of practices, including Agriculture and agroforestry on mineral soils, afforestation, and rewetting of peatlands and organic soils- now have the stamp of credible EU-certified practices, under quality criteria (QU.A.L.ITY – i.e. quantification, additionality, long-term storage, sustainability) designed to guard against the additionality and permanence problems that have undermined confidence in soil carbon credits. The certification infrastructure now exists, although it is still to be seen whether it translates into meaningful income for farmers, and whether it gains economic attractiveness in the value chain, which will heavily depend on demand for these credits, including whether and how they can ultimately be used to offset emissions.

The regulatory pull and economic push carbon farming still needs

We could argue that farmers’ rewards for carbon farming practices fit within only one channel that is operative today, and even that comes with a caveat. Under the current CAP (2023-2027), Member States can already fund practices that would fit under the carbon farming umbrella through eco-schemes. The Commission’s post-2027 CAP proposal is expected, in principle, to maintain this support under a new voluntary instrument (beyond the Farm Stewardship sustainability incentives baseline), the agri-environment-climate actions (AECAs). However, two structural changes in the CAP proposal complicate the picture as mandatory environmental ring-fencing would be removed, and what are currently 100% EU-funded eco-schemes would shift to a co-financing basis with Member States. Whether this allows for scaling up carbon farming practices remains to be seen, particularly as  the post-2027 CAP structure is still being negotiated.

Two further channels are emerging, but neither is settled. The first is public demand: Member States could potentially purchase carbon credits to meet their national climate targets. This depends on the Commission’s expected proposal, due before the end of 2026, merging the Effort Sharing Regulation and Land, Land-use change and Forestry Framework (LULUCF) into a single framework covering sectors excluded from the Emissions Trading Scheme (ETS). The agrifood sector will likely be a key focus of this proposal, as several Member States are struggling to meet existing emissions targets.  Even then, this channel depends on whether Member State climate compliance ends up tied directly to land-sector performance.

The second is a private corporate market, built around voluntary offsetting. However, this remains a speculative scenario as the question of whether companies will be able to use carbon farming credits to offset corporate emissions remains unanswered and polarised.

This is the regulatory landscape carbon farming sits within: one funding channel exists but is being restructured, while two more could strengthen the business case considerably but have yet to materialise. The strength of the carbon farming business case will ultimately depend on whether these policy frameworks create enough demand for farmers to see a meaningful return, in turn making sustainable soil management practices financially rewarding for their carbon sequestration benefits and ultimately contributing to the agriculture sector’s decarbonisation.

A work in progress

Farm revenue and decarbonisation are moving along parallel legislative routes designed to intersect, rather than being treated as competing priorities that add burden to the farming community. For now, there is no binding decarbonisation obligation on farmers, and the current political agenda is deliberately avoiding one. The certification infrastructure is in place, but the CAP structure that is meant to fund uptake of carbon farming practices is becoming more complex. With the shift towards a co-financing model potentially straining sustainability-driven income streams for farmers, there is still no guarantee that carbon farming will deliver a sufficiently attractive return for farmers.

That answer has gotten harder to reach. The Commission’s recently published proposal of the reform of the EU Emissions Trading System gives compliance-market access to industrial carbon removals through a central-purchasing mechanism, while excluding soil-based carbon farming from that pathway until at least the 2034 review. This leaves carbon farming in an interesting position: the tools to certify it as a source of carbon removals are being put in place, and policymakers are exploring ways to create demand, but the market that would make those removals financially attractive to farmers is still taking shape.

That gap reflects where EU climate and agricultural policy stand now, still calibrating how much weight to place on land-based carbon removals, and how far to rely on economic incentives rather than new obligations on farmers. Carbon farming may well be a decarbonisation tool the sector will eventually need, but for now, the case for it rests on economics rather than compliance. For agrifood operators, the framework worth watching closely is not carbon farming certification itself, but the still-contested question of how credits will be used once bought.