The future of an Agri-ETS in the EU

Agriculture faces growing scrutiny over its modest emissions reductions. The concept of an agricultural emissions trading system (Agri-ETS) has emerged as a focal point of debate.

The farming sector is a significant contributor to greenhouse gas (GHG) emissions in the EU, with methane – largely from livestock – accounting for 66% and nitrous oxide – primarily from soils – making up 30%. Despite the EU’s aim to reduce GHG emissions by 55% by 2030 under its European Climate Law, agricultural emissions have declined by only 5% since 2005, with projections showing a meagre 7% reduction by 2030 without further measures. [1]

To close this gap, the European Scientific Advisory Board on Climate Change advocates for decisive action. In a report published in January 2024, they recommend the introduction of emissions pricing for agriculture and land use by 2031, allowing time for careful design to address sector-specific challenges. [2]

The push for reform is not new. In 2021, the European Court of Auditors criticised the EU for failing to apply the “polluter pays” principle to agricultural emissions and suggested carbon taxes or cap-and-trade systems as potential solutions. [3]

Responding to this, the Commission held a technical meeting in June 2023 to explore ways to apply this principle to the land use sector, with discussions centring on emissions trading mechanisms. [4]
The Strategic Dialogue’s final report [5], published in September 2024, acknowledged the need for robust policies to curb greenhouse gas emissions in agriculture but stopped short of endorsing Agri-ETS. Instead, it recommended the Commission to further collaboration with stakeholders and offered design principles for a potential system:

• Sector-specific design: Agri-ETS should account for the diversity of EU agriculture, including varying farm sizes, regional climates, and practices, to ensure equity and practicality.
• Cost management: Administrative and compliance costs must not unduly burden farmers, and emissions beyond greenhouse gases should also be addressed.
• Direct emissions reduction: The system should prioritise reducing emissions directly, avoiding over-reliance on offsets. Costs should be distributed across the value chain to minimise impact on farmers and consumers.
• Social equity: Special attention is needed for less affluent households, which could be disproportionately affected by rising food prices.
• Revenue allocation: Funds generated should support low-income households, aid in transitioning the agri-food sector, and finance nature-based carbon sink restoration.

The European Environment Bureau (EEB) supports emissions pricing but cautions against relying solely on Agri-ETS. In its recent position paper [6], the EEB proposed targeted approaches to emissions reduction, including:

• Addressing fertiliser-related emissions through the inclusion of producers’ scope 3 emissions under ETS1.
• Tackling peatland and livestock emissions through Common Agricultural Policy (CAP) reforms and mandatory climate targets.
• Supporting sustainable diets and agroecological transitions through capacity-building and financial incentives for farmers.

The EEB as well as other stakeholders stress the need for a comprehensive policy framework that combines emissions pricing with regulatory measures and incentives.

CAP reform is seen as vital to redirect subsidies from harmful practices toward public goods and sustainability goals.

The European Commission faces the challenge of balancing ambition with feasibility. Agriculture Commissioner Christophe Hansen expressed scepticism about Agri-ETS, stating during his November hearing, “I am not convinced this is the right approach”. Meanwhile, Climate Commissioner Wopke Hoekstra remains supportive, underscoring that all sectors must contribute to climate neutrality. [7] [8]

The coming year will likely be critical as policymakers, farmers, and environmental organisations work to shape the EU’s approach to agricultural emissions. Whether through an Agri-ETS or alternative strategies, agriculture must play a pivotal role in achieving climate neutrality by 2050.

[1] https://www.eea.europa.eu/en/analysis/indicators/greenhouse-gas-emission...
[2] https://climate-advisory-board.europa.eu/reports-and-publications/toward...
[3] https://www.eca.europa.eu/Lists/ECADocuments/SR21_16/SR_CAP-and-Climate_...
[4] https://webcast.ec.europa.eu/workshop-in-the-context-of-the-study-on-app...
[5] https://agriculture.ec.europa.eu/document/download/171329ff-0f50-4fa5-94...
[6] https://eeb.org/wp-content/uploads/2024/10/Agri-ETS-Position-Paper.pdf
[7] https://elections.europa.eu/european-commission/en/hansen/
[8] https://elections.europa.eu/european-commission/en/hoekstra/