Will agriculture be included in the EU ETS?

In 2023, some progress was made towards addressing the challenges of including agriculture in the EU ETS. The sector is not covered by the cap-and-trade system yet, despite it being a significant CO2 emitter. Key steps were taken to explore solutions for applying the polluter pays principle to agriculture, notably at the 2023 workshop on agriculture inclusion in the EU ETS and the following stakeholder surveys. These initiatives aimed to gather insights and perspectives from various actors to find strategies for integrating agriculture into the EU ETS framework. 

‍

• European Emissions in the Agriculture sector
• The EU 2023 agenda on integrating agriculture into the EU ETS 
• What are the next steps to implement agriculture in the EU ETS? 

‍

European Emissions in the Agriculture sector 

How much carbon does agriculture emit in Europe? 

Agriculture contributes to 11% of the EU's greenhouse gas emissions, while occupying 38% of the EU's land area. There was a decline of 15% in emissions between 1990 and 2000, but since 2005, emissions have stabilized, with only a 2% reduction by 2021. Forecasts for 2030 suggest a decrease of 4% at the EU level compared to 2005 levels, but if supplementary measures are implemented, there can be an 8% reduction. Emissions trends from agriculture are different among EU member states, with notable decreases in Croatia, Greece, and Slovakia, while increases were observed in Bulgaria, Estonia, Hungary, Ireland, Latvia, and Luxembourg.

Why do we need to reduce carbon emissions from agriculture in the EU? 

Agriculture emissions in the EU are falling short of climate targets outlined in the European Climate Law -  projections suggest the need for substantial reductions to meet goals set for 2030 and beyond. Climate change is already affecting agriculture, with significant impacts on yields and economic losses observed across EU Member States, showing the critical need to build resilience in food systems to address both environmental and economic challenges.

The EU 2023 agenda on integrating agriculture into the EU ETS 

What is the 2023 technical workshop on pricing agricultural emissions?

A technical workshop was conducted as part of the exploratory study "Applying the polluter-pays principle to agricultural emissions," commissioned by DG CLIMA. The workshop had several objectives: 

• informing stakeholders about the ongoing study's options, 
• gathering diverse stakeholder perspectives through a panel discussion,
• initiating an online public stakeholder survey to collect additional input. The survey was open from June 15th to July 28th, 2023.

Who participated in the 2023 technical workshop on pricing agricultural emissions?

The majority of participants were from Belgium, Germany, Denmark, the Netherlands, and France (with 53, 35, 27, 26, and 22 attendees, respectively). Also, representatives from non-European countries, including the US, New Zealand, and the UK, were also present, as they are involved in the European agricultural sphere.

‍

What were the main takeaways from the 2023 technical workshop on pricing agricultural emissions?

The workshop discussions centered on the necessity of a better monitoring, reporting, and verification (MRV) systems, and considered various options and forms of emissions trading systems (ETS) that can apply to agriculture. There were mixed responses regarding those potential approaches, with some sector representatives advocating for separate targets and incentives for emission reductions and carbon removals. The main concerns were around fairness and social redistributions. 

‍

‍

What was the 2023 survey on including agriculture in the EU ETS? 

Who were the respondents of the 2023 survey on including agriculture in the EU ETS? 

The majority of organizations responding to the questionnaire have international activities. Most of them are large structures with more than 250 employees. 

‍

Do agriculture sector representatives want to be included in the EU ETS? 

In your opinion, how effective is putting a price on GHG emissions (i.e carbon pricing) from the agriculture sector to incentivise GHG emissions reduction in that sector? 

⅓ of respondents believe that implementing a carbon price for agriculture could be highly effective, while 28% consider it somewhat effective. Academic and research institutions (75%) and public authorities (67%) mainly indicated that inclusion in the ETS would be somewhat effective.Mostly non-EU stakeholders were unsupportive of the idea.

‍

‍

What are the next steps to implement agriculture in the EU ETS? 

No precise action after the 2023 discussions

While the workshop and survey did not give concrete outcomes, they have laid the groundwork for a quicker integration of agriculture into the EU ETS with clear scientific and social mechanisms in the years to come. Despite the lack of immediate solutions, these initiatives have begun the needed discussions among all the stakeholders involved. 

There was no mention of agriculture in the 2040 EU climate targets

In its 2040 climate roadmap, the EU executive did not include any specific targets regarding agriculture. While an earlier draft highlighted the possibility of a sector-specific target, the farmers' protests at the time and the pre-election political environment made it a “sensitive topic to touch upon” in the February 2024 announcement. 

Still “ideas that we have to explore”

The topic came back in March 2024, still framed as “an idea under exploration”. Discussions centered on approaches to integrating agriculture into emissions trading systems (ETS), including its incorporation directly into the existing ETS or the establishment of a separate ETS, similar to the one planned for the building and transportation sectors. This theme was a focal point at the Carbon Farming Summit held in Valencia in March 2024.

The potential forms mentioned that the ETS for agriculture can take are: 

• On-farm ETS covering all greenhouse gas emissions: This approach encompasses all agricultural emissions, including net LULUCF emissions from croplands and grasslands, with farms of all types being subject to obligations.
• On-farm ETS targeting livestock emissions: This option concentrates on emissions related to livestock production, particularly from enteric fermentation and manure management, with obligations applying to livestock and mixed farms.
• On-farm ETS for peatlands: This option addresses emissions from drained peatlands used for agriculture, with obligations imposed on farms situated on such lands.
• Upstream ETS: This approach focuses on emissions from feed production and imports, as well as nitrous oxide emissions from fertilizers and urea application, with obligations placed on fertilizer and feed producers and importers.
• Downstream ETS: This option targets emissions from enteric fermentation and manure management, with obligations falling on meat and dairy processors.

‍