01What is a carbon credit?
A carbon credit is a certificate that represents one tonne of carbon dioxide (CO₂) that has been kept out of the atmosphere, either because emissions were reduced or because carbon was removed and stored, for example in soil or trees.
Credits aren’t only about CO₂. Other greenhouse gases are converted into CO₂-equivalent (CO₂e) according to how strongly they warm the climate. As Michael Lilje, Founder and CEO of Orizon Agriculture, explained at the Agri X Fusion Red Meat Value Chain Collaboration Summit, one tonne of nitrous oxide is equivalent to 265 tonnes of CO₂, and so represents 265 carbon credits.
Crucially, credits are certified. An independent body checks the project against a published set of rules, called a methodology, before any credits are issued. That certification is what gives a credit its credibility, and its value.
To make small changes, change the way you do things. To make big changes, change the way you see things.Gabe Brown, quoted by Michael Lilje
02Why does the market exist?
Many companies and governments have committed to reducing their emissions, but some emissions are difficult or impossible to eliminate in the short term. Carbon credits let them offset those residual emissions by paying for reductions or removals somewhere else.
That demand comes through two broad channels. Compliance markets are created by regulation, for example tax-based systems such as South Africa’s carbon tax, allowance or “cap-and-trade” schemes such as the European Union’s Emissions Trading System, and industry rules such as CORSIA for international aviation. The voluntary carbon market is where organisations buy credits to meet their own climate commitments, without a legal requirement to do so.
In both cases, the money flows to projects that reduce emissions or store carbon: tree planting, renewable energy, biochar and, increasingly, regenerative agriculture.
03How does it work, step by step?
Michael described the cycle in four steps. First, buyers (companies and governments) want to offset residual emissions. Second, their funding is channelled to projects that reduce emissions or sequester carbon. Third, those projects, including regenerative agriculture, change practices on the ground. Fourth, the results are verified independently against a methodology, and certificates (credits) are awarded and sold back to buyers.
For a farm, that usually means working with a project developer. The developer registers the project with a carbon registry, arranges soil sampling and measurement, manages audits and verification, and sells the credits. The farmer changes practices on the land and keeps the records that prove it. Revenue from the credits is then shared between the developer and the farmer.
04Why it matters for livestock farmers
Grazing land can store a significant amount of carbon in the soil when it is well managed, and regenerative grazing can also improve the veld itself. Michael shared results comparing ultra-high density grazing with selective grazing on the same soil and slope: 4.1 tonnes of grass per hectare against 2.3, 9.7 kg of grass per millimetre of rain against 5.5, a carrying capacity of under 1.5 hectares per large stock unit against more than 5, twice the palatability, and far fewer invasive bankrotbos (slangbos) plants: 15 per 200 m² against 156.
Practices that can qualify in grazing projects include high-density grazing, multi-species grazing, and reducing baling and burning. On croplands, they include cover crops, no-till or minimum tillage, and the use of manure or compost.
The money can be real. Orizon’s first pilot submission generated about 160 000 credits for 22 farmers across 16 000 hectares. At R240 to R330 per credit, that represents an estimated R38 to R53 million invested into regenerative agriculture, of which R27 to R37 million goes to the pilot-phase farmers.
05Beyond credits: how emissions are counted
Other speakers on Panel 3 of the Agri X Fusion Red Meat Value Chain Collaboration Summit added important context. Dr Riaan du Preez explained that the way livestock emissions are counted matters enormously: a simple Tier 1 calculation multiplies animal numbers by a standard footprint, while a more detailed Tier 3 approach can credit improvements such as lower disease and mortality, which can turn the picture positive. Prof Cobus Oberholster cautioned that the industry tends to overemphasise carbon markets and underemphasise decarbonisation itself, and Dr Tobias Doyer made the productivity case: maximise output per hectare and per animal, and the footprint per unit of food falls.
06How to get started
- Learn the basics first. Carbon is new to most livestock farmers, so understand what credits are and how projects work before anyone approaches you with a contract.
- Engage early. Because of a principle called additionality, credits generally reward changes made after a project starts. Practices you adopted before signing may not count, so speak to developers before you change how you farm.
- Compare more than one developer, and get the answers in writing.
- Choose a long-term partner. Contracts typically run for 20 to 40 years or more. Make sure the developer understands the practical realities of farming and isn’t idealistic about regenerative agriculture.
- Keep good records. You will need to provide farm data and keep a record of your activities, as these underpin verification.
07What to check before you sign
Michael’s list of questions every farmer should ask: What percentage of the credit revenue do I receive, and after which deductions? Who pays for soil sampling, audits and registration? Which registry and methodology will be used (for example, Verra’s Verified Carbon Standard)? How long is the contract, and can I exit? What happens if I sell or lease out the farm? And what is the developer’s track record: have farmers actually been paid?
The payout percentage matters most. Some developers pay farmers only 30 to 50% of the credit revenue; Michael’s view is that 65 to 70% should be the minimum. On an illustrative 1 000 ha of veld earning R500 per hectare per year over 30 years, total credit value would be R15 million. At a 40% payout the farmer receives R6.0 million; at 70%, R10.5 million. The difference is R4.5 million.
Watch for three other red flags. Avoid paying upfront for soil sampling and other costs: developers should put their money where their mouths are. Insist on registry-certified credits, because there is no shortcut to quality and the market demands it. And remember that the credits belong to you: be wary of offers of products or discounts in exchange for your credits, where the buyer claims them against its own emissions and you receive only a small share of their value.
08How industry can help
Michael closed with a call to the wider value chain: spread awareness so farmers understand carbon before a contract arrives, encourage them not to rush into long-term commitments without independent advice, and help them compare options on payout, costs, contract length and credit ownership.
As he put it, quoting Gabe Brown: “To make small changes, change the way you do things. To make big changes, change the way you see things.”
Key takeaways
- One carbon credit equals one tonne of CO₂ (or equivalent) reduced or removed, independently certified.
- Buyers offset residual emissions through compliance and voluntary markets; the money funds projects like regenerative grazing.
- Engage early: changes made before you sign may not qualify.
- Compare developers, get terms in writing, and look for a payout of at least 65–70% with no upfront costs.
- The credits belong to the farmer.
Collaborators
Figures and guidance are from Michael Lilje’s presentation and are illustrative. Farmers should seek independent advice before signing any carbon contract.