Definitions and Categorization of Rewarding Mechanisms for Climate Smart Farming

Farmers need rewarding mechanisms in the pursuit of the green transition in agriculture. These rewarding mechanisms can be sourced from public or private entities, and can take the form of regulatory responsibilities, voluntary public money, R&D, voluntary carbon markets, and price premiums/labelling.

On EU agricultural land, there are various climate action systems, including emission reduction, carbon sequestration, and climate adaptation. There are two types of rewarding sources: public and private. Public rewarding refers to financing from the international community, EU, State, or regional level, while private rewarding includes funding from companies, private groups, and consumers through carbon markets or price premiums.

There are several ways to reward land users and farmers for their environmental activity, with two main types: result-based and action-based results. Action-based rewarding provides farmers with compensation or incentives for carrying out specific agricultural methods, while result-based rewarding is linked to a confirmed outcome. The timing of rewarding can be either ex-ante, a financial prelude to climate action, or ex-post, following the farmer’s climate action. Combinations of timing are also possible.