In a landscape once hailed as a transformative solution for climate change, the agroforestry carbon farming sector is grappling with significant challenges. The first half of 2024 has seen these services raise a mere $9.7 million, a staggering drop to just one-tenth of the $100 million garnered during the same period in 2023. This downturn raises questions about the viability and future of carbon farming initiatives, which aim to support farmers and foresters in adopting sustainable practices that sequester carbon and generate tradable carbon credits.
Agroforestry carbon services operate by helping landowners implement regenerative practices that capture atmospheric carbon, with the ultimate goal of trading these credits on the voluntary carbon market. However, the process is complex, requiring rigorous measurement, reporting, and verification (MRV) before credits can be certified and sold. Despite the promise of these initiatives, engaging farmers has proven to be a significant hurdle. A 2024 Purdue survey revealed that only 8% of farmers have discussed carbon capture contracts, primarily due to concerns over low returns on investment (ROI).
The industry has also been marred by controversy, particularly surrounding carbon certification and offset providers. High-profile investigations into companies like South Pole and Verra, which faced allegations of issuing fraudulent carbon certifications, have cast a shadow over the credibility of the carbon market. Such scandals, alongside a broader economic downturn characterized by high inflation and supply chain disruptions, have contributed to a turbulent period for agroforestry carbon services. The agrifoodtech funding landscape reflects this shift; after peaking at $51.7 billion in 2021, investments fell to $32 billion in 2022 and plummeted to below $16 billion in 2023.
Despite these setbacks, there are signs of resilience within the agroforestry carbon services sector. In the first half of 2023, carbon-focused companies in categories such as “Farm Management Software, Sensing, and IoT” and “Ag Marketplaces and Fintech” collectively raised nearly $100 million. However, that figure has drastically declined in 2024, highlighting the sector’s struggle to maintain momentum amid tightening funding conditions.
Some companies in the carbon services space have managed to secure seed funding in 2024, signaling a glimmer of hope. Notable among these is Downforce Technologies from the UK, which raised $4.2 million in June for its data-driven land management solutions aimed at improving soil health and carbon levels. German startup Seqana secured $2.3 million for its soil organic carbon monitoring platform, while Indonesia’s Jejakin raised $2.7 million to support climate tech projects.
Looking back at 2023, the largest deals in the agroforestry carbon services sector reflect the potential that still exists. Agreena from Denmark raised over $50 million for its soil carbon platform, which facilitates the verification and sale of carbon credits generated by farmers. EarthOptics, also based in the United States, raised $27.6 million to enhance sustainable agricultural management through actionable soil data. These successes illustrate that while the sector faces significant challenges, there remains a foundation of innovation and investment.
Venture capitalists had initially identified carbon as a promising investment category for 2023, but many have since reassessed their strategies in light of the industry’s turmoil. Michael Lavin of Germin8 Ventures noted that the landscape of MRV companies and the carbon economy could undergo significant changes in the coming years, emphasizing the need for adaptability in this evolving market.
As the agroforestry carbon services sector navigates these turbulent waters, the focus on engaging farmers and ensuring the integrity of carbon credits will be critical. The industry must address the challenges of low ROI and skepticism stemming from past controversies to regain the confidence of both farmers and investors. While the road ahead is fraught with difficulties, the potential for sustainable agriculture and climate solutions remains a compelling narrative that continues to attract interest and investment.