Scaling up carbon farming across Europe will require substantial investment to support the agricultural transition towards climate neutrality. However, while funding currently comes from multiple public and private sources, the available resources remain insufficient, individually or collectively, to meet the scale of investment required. Against this background, a new CAFAMORE report examines the current carbon farming market, the potential of different financing mechanisms and the role of public policies in addressing the funding gap.

Authored by Corentin Khosrovaninejad, Simon Martel and Clothilde Tronquet (I4CE) with contributions from project partners from Agrosolutions, Ecologic Institute, Agricarbon and Wageningen Research, the report focuses on two main sources of private financing: the Voluntary Carbon Market (VCM) and agricultural value chain schemes. It also explores how European policies could help stimulate demand and address existing barriers.

Despite growing interest in agricultural carbon farming projects, the analysis highlights that the VCM is unlikely to finance European carbon farming at scale on its own. Voluntary demand remains structurally limited, and many European projects have yet to generate significant volumes of verified credits. Meanwhile, demand is increasingly shifting towards carbon removals and higher-integrity credits. Agricultural value chain schemes offer another promising financing opportunity, particularly through price premiums linked to corporate climate commitments. However, their expansion faces challenges related to limited downstream willingness to absorb additional costs, uncertainty around carbon claims and the higher costs of European carbon farming.

In this context, the report highlights the importance of public policies in creating more predictable demand. While the EU Carbon Removals and Carbon Farming (CRCF) Regulation establishes a common certification framework, it does not guarantee financing. Initiatives such as the CRCF Buyers’ Club could help stimulate demand, although more structural measures may be needed to provide long-term investment certainty.

Overall, the authors conclude that combining public funding, value chain finance, voluntary carbon markets and potential future regulatory mechanisms could provide a pathway towards financing carbon farming at scale. Its findings will inform CAFAMORE’s subsequent work on quantifying financing opportunities and funding gaps, and exploring business strategies to support European carbon farming. Find the full report here.