Evaluation of Result-Based Payment Schemes for Carbon Farming in Latvia

The agricultural sector is a significant source of greenhouse gas emissions; however, carbon farming practices offer substantial potential for carbon sequestration. As the European Union moves towards more outcome-oriented climate policy, result-based payments may provide an additional incentive for measurable climate benefits. This study assesses the financial competitiveness of potential gross result-based carbon farming payments relative to existing action-based Common Agricultural Policy support and identifies the carbon remuneration levels at which result-based payments become competitive. A case-study farm in Latvia was analysed using farm-level management data, literature-based annual soil organic carbon stock change rates and a calculation framework based on the accounting logic of the draft Carbon Removal Certification Framework methodology. Two scenarios were assessed: a maximum potential scenario and a conservative scenario accounting for uncertainty associated with the combined effects of carbon farming practices. At a commercial carbon remuneration reference value of 35 EUR Mg CO₂eq⁻¹, estimated result-based payments reached 260.89 EUR ha⁻¹ yr⁻¹ and 158.22 EUR ha⁻¹ yr⁻¹, respectively, compared with an action-based Common Agricultural Policy benchmark of 178.00 EUR ha−¹ yr−¹. The corresponding financial competitiveness thresholds were approximately 23.9 EUR and 39.4 EUR Mg CO₂eq⁻¹, respectively. Thus, at the commercial reference value, the maximum potential scenario was financially competitive, whereas the conservative scenario remained below the Common Agricultural Policy benchmark. The results indicate that financial competitiveness depends strongly on both carbon sequestration outcomes and remuneration levels. A hybrid approach combining action-based Common Agricultural Policy support with result-based remuneration may provide a more balanced incentive, particularly given uncertainty in soil organic carbon outcomes and additionality constraints affecting early adopters. Since the analysis relies on literature-based estimates and excludes direct soil organic carbon measurements, implementation costs, transaction costs and actual Monitoring, Reporting, and Verification or certification costs, the results should be interpreted as indicative gross payment estimates rather than as a complete assessment of farm-level profitability.