CLIMATE NEUTRAL GROUP: AgriCarbon to Grow Ambition in Genuine Climate Change Projects

There is both a problem and opportunity across the agricultural heartlands of the world, where our food is grown and our emissions can be absorbed. The problem – the soil is quickly becoming inept and unproductive, and the amount of carbon being locked away is low. The opportunity – modern farming methods and new technologies can improve soil which leads to better growing conditions, improved yields, and importantly, increased sequestration of CO₂.

Regenerative agriculture is a much-needed nature-based solution that can play a vital role in addressing the global climate crisis and agriculture’s climate change vulnerability. But it is not easy. In South Africa – an agricultural powerhouse – farming practices have been developed over generations, and over-ploughing, heavy use of fertiliser and pesticide, and intensive production methods have left topsoil in a sorry state.

According to the WWF, 50% of the world’s topsoil has been destroyed in the past 150 years because of poor management. 95% of the world’s food comes from the uppermost layer of soil, and without strong and healthy topsoil we lose the ability to filter water and provide people with a vitamin-full diet. Topsoil must be rich in organic matter to perform the key functions that humans rely on. But it is disappearing faster than it is being redeveloped. And investments in improvement can often take years to show any result.

Protecting soil is key in the fight against climate change and regenerative agriculture will be a catalyst for real change.

To achieve sustainable change, farmers and the agricultural industry need more than hope and goodwill. Big money is required, and a structure to see projects implemented must be facilitated.

One part of the solution comes in the form of carbon credits – funding mechanisms that corporates, and individuals, can purchase to help offset their emissions, providing funding for certified activities that support community development, protect ecosystems or install efficient technology to reduce or remove emissions from the atmosphere.

In South Africa, a leader in the carbon credit and carbon tax space is Climate Neutral Group, an international organisation headed locally by Country Director, Franz Rentel.

He tells Enterprise Africa about the company’s AgriCarbon™ programme, a unique and innovative system designed to help generate carbon credits in South Africa through encouragement of improvement in farming practices while locking carbon away into the soil.

“In October 2019, Verra – the world’s largest carbon credit issuing body, released a new carbon credit methodology specifically for agriculture,” he says of the global standards organisation for climate action and sustainable development. “It was unique as it combined rotational grazing, cover cropping, no-till agriculture, and a range of regenerative agricultural practices all in one methodology. That was a catalyst for us, and in March 2020 we launched AgriCarbon which is our flagship carbon farming programme. It is the first in SA and one of the first globally that will issue carbon credits soon.”

A complicated process sees Climate Neutral Group glean data from farmers, capture and process that data correctly, run it through modelling tools, take soil samples from every field that is enrolled, engage with farmers about process, and a range of other activities. The purpose of the project is to create carbon credits locally through strict criteria. In the initial phase of the project, CNG partnered with agricultural sustainability organisations, Trace & Save and Intelact. This phase saw around 39 dairy farmers across the Eastern Cape and KZN, covering approximately 20,000 hectares and which, under Verra’s Verified Carbon Standard (VCS) methodology, has resulted in significant yields of around three tons of carbon per hectare, per year.

“That is a very good result from these farmers and we see huge potential around transforming the agricultural sector globally to make it more sustainable so that we can feed more people. We need healthy soil – it has been mismanaged for decades, all over the world,” says Rentel.

Climate Neural Group is expecting to issue the first payment to participating farmers in the middle of 2023 while opening up the third round of intake for new growers to join AgriCarbon.

“We are already looking to make changes in the South African agricultural space and we have already enrolled around 180,000 hectares in the past two years. The next sign-up window opens in June and we want to sign up a lot more farmers. We will soon have paid the farmers who signed up last year their money from the sale of the carbon credits, so that should attract more to sign up,” Rentel says, adding that the average pay out across the first tranche is R1 million per farmer – a significant figure which can go a long way on South African farms, including buffering against loadshedding.

“The better you have farmed, and the better your soil, the more carbon you will absorb and the bigger pay out you get.”

The credits generated in the initial phase of AgriCarbon have been sold to a soon-to-be-named multi-national company. This buyer has purchased these removal carbon credits to support their global decarbonisation strategy. Rentel was happy, as this organisation has deep roots in South Africa with diversified operations around the country.

GLOBALLY RELEVANT

Climate Neutral Group is headquartered in the Netherlands, focussing on carbon advisory and carbon offsetting. Founded in 2002, growing into SA in 2012, the company’s mission is to accelerate the transition to a low-carbon economy by helping companies measure, reduce, and offset their carbon footprint. Climate Neutral Group works with a diverse range of customers, from small businesses to multinational corporations, to develop and implement customised climate strategies that align with various goals and values.

The company also provides training and education to help businesses and individuals understand the impact of their activities on the climate and identify opportunities for reducing their carbon footprint. Additionally, partnerships have been built with local organisations and communities in South Africa to support sustainable carbon offset projects that have positive environmental and social impacts.

 50 people in the Netherlands, and 20 people in SA have produced fantastic results for Climate Neutral Group and the company was acquired in 2022 by the UK-based Anthesis Group. For Rentel, this is a positive for the future with Climate Neutral Group offerings complemented by a larger global operation.

“They acquired because they wanted to expand their footprint in Benelux and Africa, and they didn’t have any offerings in the carbon credit advisory space. They also did not do carbon credit development. As CNG, we have a carbon credit certification scheme where we can add a logo to products that are carbon neutral. They wanted this capability and it made complete sense to join forces,” says Rentel.

A global shortage of carbon credits is helping the South African arm of the business to grow quickly as the country is home to so much potential. Rentel, a Namibian/South African native, returned to the country from the Netherlands in 2012 to help CNG realise the significant opportunities he knew were available.

“In 2019, we were able to sell our whole portfolio of carbon offsets to some of the big emitters, for use under the South African Carbon Tax. Through our extensive global network, we managed to source more credits so that we could satisfy the demands of our clients up until end of 2022. However, currently we have sold out all our stock and unfortunately there are very few South African carbon offsets left on the market. That is why we have had to throw ourselves into finding new projects that can be developed and we can get carbon credits from,” he explains.

At the end of December 2022, only around 6% of the world’s biggest businesses said they would decarbonise without using offset projects, according to Net Zero Tracker. This demonstrates the need for responsible, sustainable project development globally, and this is where CNG can thrive.

“The market opportunity in South Africa is so huge as there is such a high demand for carbon credits. Sasol alone need five million tons of carbon credits per year. The whole market sits at around eight million tons per year. The supply is only a few hundred thousand tons per year, if that. The result is that the carbon credits will trade for five to 10% under the applicable carbon tax rate. If you are developing a project locally, it’s a great market to be in as someone will always buy your credits. You also know where the price will sit and there are no surprises there. You also have a relatively good line of sight over where prices are developing. The playing field is good for local projects,” details Rentel.

“The problem is finding projects locally that could qualify,” he adds, reminding of the strict criteria that projects have to meet as part of the South African carbon tax scheme as well as Verra methodologies.

DIVERSIFIED OPERATIONS

With AgriCarbon the immediate focus, Rentel and CNG are busy as clients demand more credits. But, as further integration with the Anthesis Group is achieved, more services will become available locally, and the company will be able to provider a wider sustainability portfolio as more and more clients look for guidance.

The main driver is the commitments made in the 2015 Paris Agreement as well as consumer demand switching to brands and businesses that can back up their climate change promises with real action.

“Right now, we have been fully focused on carbon credit development and we are selling these credits to big corporates locally and globally. Our team in the Netherlands can look at operations in the supply chain for big companies and help to reduce emissions, that is not the core focus in SA. We are looking at getting more into consultancy in the near future – not just carbon and carbon tax, but broader sustainability advisory. Most of the work we are doing is finding the projects that could qualify for carbon credits and we do the all the paperwork and calculations and get it through the audit and managing all of that,” explains Rentel.

An attractive proposition for clients and potential clients, as well as participants, as CNG takes care of all the costs. “Typically, if you’re looking at something like a biogas plant, we take care of the carbon and the project owner takes care of the engineering and development. In agriculture, we have to be a lot more involved. We have to advise on farming practices and increasing carbon yield and much more. That is why it is essential that we work with service providers in the agricultural sector who know farming and know farmers,” Rentel adds, stating that there are large opportunities in South Africa across industries including waste-to-energy, low carbon transport, and renewable energy. “The whole greening of the transport sector – that is a major opportunity for developing carbon credits.”

AFRICAN EXPANSION

Longer-term, continental coverage is an important goal for CNG. The African market is home to significant growth potential from a business perspective but also with carbon credit development.

“Africa has been neglected on the global carbon markets for some time,” highlights Rentel, “and there is a big opportunity to develop and gain African carbon credits, and that is a space we want to be active in.

“Internationally, there are more companies active in our space, and that is good. We would certainly like to see ourselves as a leading supplier in the space, from South Africa and in Africa,” he declares.

Removal projects, where carbon is actively taken out of the atmosphere – like AgriCarbon and other nature-based projects such as forestry and blue carbon – are brilliant in nature and, crucially, the carbon credits sell for high prices internationally. Africa is a wide-open market for this type of development – South Africa alone is home to around 95 million hectares of agricultural land.

“It is very much worth it when you see the impact that is created by these projects and how it impacts the farmers. We will definitely continue to scale AgriCarbon further into Africa focusing initially on commercial farmers and gradually branching out into the small-holder farming sector. Sub-Saharan Africa alone is home to 38 million small scale farmers.” ensures Rentel.

“Our vision is to have one million hectares signed up by the end of 2025. That would equal around two million cumulative tonnes of carbon. And that also means we would be getting closer towards R250 million annual revenue as a SA operation, and that is significant,” he furthers.

“The longer-term trend is very strong. Overall, the market is growing strongly as companies look to meet the Paris targets. Carbon credits will be a necessary tool to help in that. They cannot be the only tool, but as part of a mix, they are a very valuable tool.”

CNG is becoming an important player in the South African market, and its influence will grow further as carbon credits and carbon tax becomes more widespread and compliance becomes more intense. Thankfully, CNG has more than two decades of experience behind it, making it the perfect partner for growth and development in this complicated and challenging industry. Recognised as a problem solver and opportunity taker, CNG is now a quickly growing business.

“McKinsey estimates that demand for carbon credits could increase by a factor of 15 or more by 2030, and by a factor of up to 100 by 2050. Overall, the market for carbon credits could be worth upward of $50 billion in 2030. Our vision is to be one of the leading providers of nature-based carbon credits globally with a big focus on Africa,” concludes Rentel.

And AgriCarbon will play a big part in not only CNG’s growth but also the advancement of soil improvement. Some estimates suggest that the world’s remaining topsoil will be completely depleted in 60 years – meaning just 60 more harvests – unless changes are made. Encouraging and rewarding those changes is CNG’s longstanding goal.