Introduction
Nature-based solutions (NbS) are a family of cost-effective climate change mitigation approaches that engage nature (i.e., avoided deforestation and sustainable land management practices) for climate change adaptation, mitigation, and biodiversity conservation while addressing societal challenges. NbS ensures systemic coordination of social and ecological outcomes, an essential approach in emerging and complex global challenges.
Carbon farming is one example of a nature-based climate mitigation solution. It refers to all agricultural activities within farming systems that contribute to climate change mitigation (avoidance, reduction, removal) through naturally occurring carbon sinks (water, soil, vegetation). The Kenya Agricultural Carbon Project (KACP) is an example of such a scheme. In the following, we can take a look at how this project engages farmers to generate carbon credits from the soil through Sustainable Land Management Practices (SALM) and how the sustainability of this kind of approach is threatened by high transaction costs.
Kenya Agricultural Carbon Project (KACP)
The Kenya Agricultural Carbon Project (KACP), initiated in 2009, is a carbon farming scheme developed, partly financed, and implemented by Vi Agroforestry in western Kenya. Vi Agroforestry is a Swedish NGO that works with smallholder farmers across parts of the world to drive sustainable livelihoods through climate resilience and food security. The organisation developed the KACP with support from the World Bank’s now-closed Biocarbon Fund. The Fund, which has been replaced with the Biocarbon Fund Initiative for Sustainable Forest Landscape (ISFL), supports smallholder farmers in reducing GHG emissions in land-based systems through sustainable policies and strategies. While Vi Agroforestry provides 32% of the project funds, other finance sources include the Swedish International Development Agency, which provides 38%, and the project farmers, who contribute 30% of project costs from the sale of carbon credits purchased by the World Bank through an Emission Reduction Purchase Agreement (ERPA). The first ERPA was signed from 2009 to 2017 to provide part of the up-front funding for the project. The project, which aggregates and benefits smallholder farmers in rural communities through cooperatives to access carbon finance as a co-benefit of sustainable agricultural land management practices, is currently undergoing the verification of carbon credits generated between 2017 and 2020.
Kenya Agricultural Carbon Project: Project Methodology and Activities KACP was designed and validated under the VM0017 Adoption of Sustainable Agricultural Land Management, developed by the World Bank Biocarbon Fund, as the world’s first Agricultural Land Management (ALM) methodology. The methodology, which was certified under the Verified Carbon Standard (VCS) by Verra, monitors and measures GHG emission reduction through activities in agricultural systems. Through this methodology, the project is estimated to reduce approximately 1,980,088tCO₂e within a crediting period of 20 years. Engaging nearly 30,000 farmers across 22,000 hectares of farmland, the KACP activities enhance soil organic carbon through carbon sequestration, improving agricultural productivity and resilience against climate variability. The sustainable agricultural practices implemented in the project include agroforestry, cover cropping, mulching, reduced tillage, and terracing as erosion control methods. The project also involves training farmers and facilitating their access to loan facilities to enable the uptake of these practices.
Kenya Agricultural Carbon Project: Successes
The Kenya Agricultural Carbon Project (KACP) was developed to tackle some of the most pressing challenges faced by smallholder farmers in the project area, including soil degradation, low agricultural yields, and climate vulnerability. Implementing sustainable land management practices helps restore soil fertility and boost crop productivity while contributing to climate change mitigation through increased soil carbon sequestration. These investments also prevent further degradation from traditional practices in the business-as-usual/without the project. This explains the additionality of the carbon project, i.e., in the absence of supporting communities to implement sustainable land management practices, soil degradation will be sustained, and carbon sequestration will not occur. Beyond the environmental benefits, the carbon finance approach adopted by the project helps farmers with an additional revenue stream from the sale of carbon credits, making sustainable farming both profitable and resilient. Here are some highlights of the many successes recorded for the project, demonstrating its impact on agricultural sustainability, carbon sequestration, and rural livelihoods. Enhancing smallholder farmers’ access to carbon finance and carbon markets: the small-scale nature of agriculture in many developing countries remains a barrier to accessing carbon finance and carbon markets. The high cost and technicalities associated with these projects are other factors that exclude the participation of resource-poor farmers. However, the Kenya Agricultural Carbon Project engages in a multistakeholder approach where farmers are aggregated through their membership in registered cooperative societies. Other actors, such as Vi Agroforestry, are the bridge between these farmers and technical actors like Unique Land Use, a German consultancy firm specialising in developing land use strategies, the World Bank as a financier, and Verra, the standard developer. This multi-stakeholder approach ensures the infusion of varying degrees of expertise to improve land use for climate change mitigation and other sustainable development outcomes.
Increased adoption of Sustainable Land Management Practices: A study conducted to assess the effect of the adoption of sustainable land management practices on the productivity of farmers in the project area reported that the level of adoption of composting, water harvesting, mulching, and terracing increased significantly within 3 years. The number of trees planted as part of agroforestry promoted in the project was 20% more than trees planted on farms not involved. These trees were also found to be of Nitrogen-fixing species, which better support carbon accumulation in the soil. The adoption of agroforestry and terracing as an erosion control method was also found to contribute to the productivity of maize among farmers. However, other factors such as ‘responsive soils’ and favourable climate may have also contributed to the increased productivity.
Improved Livelihood: One of the activities supported by the project is the Village Savings and Loans Association (VSLA). VSLAs are community-based, self-managed financial service-providing groups through savings and loans, as the name implies. In the Kenya Agricultural Carbon Project, where participating farmers are supported through the VSLA model, savings among participants were reported to increase significantly by over 70%. In addition, farmers’ income also increased from the sale of tree products, while the increase in maize yields contributed to higher food sufficiency. The project has also undergone different verification cycles (2009 – 2012, 2012 – 2015, and 2015 – 2017), during which over 300,000 tCO2e were verified, and the revenue generated from sales was distributed to project farmers.
Kenya Agricultural Carbon Project: Challenges
The Kenya Agricultural Carbon Project faced several challenges. Some of these challenges relate to the complexity of carbon credit verification, as well as the distribution of financial benefits to farmers. Other issues relate to the effectiveness of farmer participation and awareness. Other logistical difficulties, including the high cost of monitoring soil carbon levels, posed hurdles to scaling up the project. Understanding these challenges is important for refining future agricultural carbon initiatives and enhancing the effectiveness of similar projects in developing economies.
Lack of information: Farmers involved in the project only understood the possibility of increased yields as a benefit, but not the project’s contribution to climate change mitigation through carbon sequestration. This challenge resulted from excluding community actors in the project design phase. The participants were randomly selected through a computerised method and did not have prior information before being ‘included’ in the project. Lack of involvement and information can lead to misunderstandings about the project’s objectives and benefits. Also, when beneficiaries are not actively engaged in planning and decision-making, their commitment to the project’s goals diminishes, potentially hindering successful implementation and future participation in similar projects.
Uncertainties in methodology for measuring emissions reduction: KACP was the first project designed and validated under the VM0017 methodology, which the World Bank’s Biocarbon Fund developed to promote land-based activities in emissions reduction projects. Farmers were required to report (assess, monitor, and evaluate) their activities to project developers, while a computer-based model was used to estimate carbon stored in the soil from these activities. Relying on self-reported data from farmers poses risks of inconsistencies or inaccuracies, as reporting errors and lack of technical knowledge could affect data quality. However, since March 2024, Verra has inactivated the use of the VM0017 methodology by projects under its registry. As a result, among other actions, the KACP must transition to a new methodology before any VCU from project activities since 2020 is issued.
High Transaction Cost: In the beginning, it was estimated that the KACP would generate US$4.9 million if an estimated 1,236,373 VCUs were generated and traded at US$4 (if prices remain unchanged) throughout the project’s lifetime of 20 years. However, the project design document and Verra registry estimate a removal of 1,980,088tCO₂e within the same period. Out of the projected revenue of over US$4 million, 60% of the estimated emissions were projected to be forfeited as an unsold ‘non-permanence buffer’ required of the project to address reversal and other risks. It was, therefore, projected that the project’s lifetime revenue would amount to less than US$2 million (US$98,909 per annum), out of which project costs over nearly 10 years were estimated as US$1,460,000. Operating costs, including payment of project staff salaries, training, and logistical support, accounted for approximately 70% of this cost estimate, while project establishment costs, validation, monitoring, and verification accounted for 30%. It is unclear how carbon revenues promised to farmers were generated. However, the project monitoring reports for 2012 to 2015 and 2015 to 2016 reported that 1195 farmers received US$50,000 as ‘bonuses’ for the 2010 – 2012 monitoring period. This resulted in an extremely insignificant amount available directly for farmers. Carbon projects are generally associated with high transaction costs and revenue uncertainties because of the complex and variable pricing in voluntary carbon markets. This creates a substantial barrier to carbon market entry for resource-poor smallholder farmers and defeats the objective of incentivising participation since carbon revenues become too small. Knowledge sharing between existing and new project developers has been recommended as a cost-effective approach to minimising transaction costs, especially those associated with information acquisition. Transparency, standardisation, and regulation of benefit-sharing arrangements are also key to addressing this challenge and avoiding mistrust between actors.
Conclusion
In many parts of the world, the future of food security depends on smallholder farmers, who, despite their critical role, often remain resource-poor and unable to make significant investments in food production. While carbon finance is widely promoted as a potential win-win approach for achieving key sustainable development outcomes, including food security, the technical expertise required and the high costs of aggregation and participation have largely hindered smallholder farmers’ involvement in carbon projects and markets. These challenges limit their access to carbon and climate finance.
When effectively and efficiently implemented, nature-based solutions to climate change mitigation have the potential to support smallholder farmers in developing countries by improving farming practices, increasing productivity, and enhancing livelihoods while also contributing to global climate goals. The Kenya Agricultural Carbon Project (KACP) integrated carbon finance mechanisms into agriculture and served as a model for similar initiatives worldwide. However, challenges such as a lack of information, high transaction costs, weak transparency, and limited capacity threaten the long-term sustainability of these projects. Moving forward, strengthening regulatory frameworks, investing in capacity building, and ensuring inclusive project design—particularly through the principle of Free, Prior, and Informed Consent (FPIC)—will be essential for engaging smallholder farmers in carbon farming.
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