Soils are a massive carbon sink, second only to the ocean in their carbon absorption power. And given that nearly 40% of the EU is farmed land, there’s a huge opportunity to sequester large amounts of carbon from the atmosphere.
The problem? There hasn’t been much of a financial incentive for farmers to increase the carbon sink potential of their land — and farming is already a low profit margin industry, so that really matters.
But where there’s a will, there’s a startup.
Copenhagen-based Agreena has just raised a $22.5m Series A for a platform where farmers can earn carbon credits for turning their land into carbon sinks.
Those credits can be sold on voluntary carbon markets (where companies rather than countries buy credits to offset their emissions). The credits give farmers on average a 20% boost on the profitability per hectare of land.
There’s millions of hectares of arable land and it’s about putting a currency on that land’s potential
The round was led by Kinnevik alongside Giant Ventures, Vaekstfonden (the Danish state’s investment vehicle) and agrictulture angel investors. Agreena’s grown fast; it launched in 2020 and raised a seed round last October.
It’s part of a wave of startups who’ve cottoned onto the sustainability — and financial — potential of carbon credits in farming. The price of these credits is skyrocketing; it increased threefold in six months last year, to $14 each.
Agreena faces competition from Soil Capital, a French-British startup, and eAgronom, an Estonian company which just closed a $7.4m Series A. The biggest name globally is Indigo, an American startup.
Turning farms into sinks
Simon Haldrup, founder of Agreena, says the company helps farmers overcome two barriers.
“One is the knowledge barrier, because this is new to a lot of farmers. And second, we help to commercialise their adoption of regenerative practices by giving them access to the voluntary carbon markets.”
Farmers can increase the carbon potential of their land by tilling it less. This is when farmers plough the soil between crops. Tilling can reduce the land’s water and nitrate absorption qualities, meaning the soil’s quality depreciates, and, critically for emissions sequestration, it also releases carbon into the air.
It’s also about the type of fertiliser they use and the "cover crops" they plant between food crops. Cover crops are plants which feed the bacteria and fungi in the soil, increasing the soil’s carbon levels.
Farmers input data on their land into Agreena’s platform, creating a baseline understanding of the land’s quality. The farmer then plans for the next harvest, committing to certain actions that increase the land’s carbon sink potential.
At the end of the harvest, satellite imagery and a third party verifier are used for Agreena to assign a certain amount of credits to the farmer for the changes they’ve made to their land.
“Farmers will earn approximately two credits, some more, some less, per hectare,” says Haldrup.
Once assigned those credits, the farmer can sell them on the voluntary market — usually to corporate companies looking to offset their emissions.
Haldrup estimates that a credit could be sold at about €15, meaning an extra €30 per hectare on average. Given that the average profit margin per hectare is about €150, according to Haldrup, that is a significant contribution. The extra profit can also offset the costs of transitioning to more regenerative agriculture.
Agreena monetises itself by retaining a 15% cut of the certificates it issues and selling that on the market.
Regulating the market
Agreena uses a third party verifier to check its credits. That’s not something that’s a given — the quality of carbon credits is a controversial topic at the moment.
The voluntary market has lacked regulation and people have been free to issue credits for uncertified projects which, in practice, don’t do much to help the environment (Finnish not-for-profit Compensate is good on this — they assess the credentials of projects).
Now some countries are starting to issue guidance on what can constitute a carbon credit on the voluntary market.
Haldrup welcomes regulation — it’s something that will bring more integrity to the market; could drive the price farmers can get for quality credits up; and will increase the importance put on developing proper carbon sequestration practices.
“There’s millions of hectares of arable land and it’s about putting a currency on that land’s potential,” says Haldrup. “And I think the significance of that move is still a bit of a secret to the public.”