Climate Farmers, an early architect of Europe’s soil carbon credit system, has surprised the regenerative agriculture world by walking away from carbon markets.

“We’re stepping away from the carbon markets,” said Ivo Degn, cofounder of Climate Farmers in an interview, “not because the mission was wrong, but because the market wasn’t built to support regeneration.”

Their move comes at a moment of reckoning for the global food system. With increasing climate volatility and financial stress on farmers, regenerative agriculture has emerged as one of the most promising—yet misunderstood—paths forward. According to a recent study by the European Alliance for Regenerative Agriculture (EARA) though, the science is catching up with the promise.

EARA’s research, covering 78 regenerative farms across 14 European countries, shows these farms outperforming their conventional peers across productivity, resilience, and input efficiency. The long-held belief that high-input, chemical-heavy agriculture is the only way to feed Europe, let alone the world, is being seriously challenged, but just in theory but with data.

But if regenerative agriculture is proving both more productive and more sustainable, why isn’t it being better supported, especially by the carbon markets?

Degn believes the problem isn’t with paying farmers for ecological outcomes—it’s with how soil carbon is modelled, measured, and monetized.

“The best possible science when it comes to soil carbon is not great,” he said. Most current models account for only the top 30 centimeters of soil and ignore root exudates—key compounds that feed microbial life and drive soil regeneration.

This blind spot isn’t just technical—it’s foundational. “We don’t actually have outcomes,” Degn noted. “We have outcomes via practices.” Many protocols simulate results rather than measure actual change. Even direct soil sampling is unreliable, as carbon levels swing with rainfall. “A farmer can implement the best regenerative methods for five years,” Degn explained, “but if those years include prolonged drought, they’ll appear to have failed.”

This creates a system where not only is there is a disconnect between farmer action and payment, but where farmers are penalized not for bad practice, but bad weather. Degn added, “So we had to ask ourselves: Are we adapting the system to reality—or distorting reality to fit the system?”

Other players, like Soil Capital, have also worked to bring rigor and credibility to soil carbon finance but already eschew the carbon markets as a key route for farmer finance. Their model pays European farmers annually from within the food and beverage value chain based on verified improvements in soil health and emissions reductions. But even they acknowledge the limitations of carbon-centric approaches, especially across diverse landscapes and farm systems.

While carbon markets have expanded in infrastructure—complete with registries, verifiers, and certification protocols—they still rely on models that struggle to capture the complexity of soil ecosystems. The issue isn’t the science itself, but the oversimplified assumptions and limited datasets these systems are built on. And for many regenerative pioneers, the gap between promise and proof is too wide to bridge with offsets alone.

Climate Farmers helped develop Europe’s first internationally approved soil carbon methodology, and collaborated across the industry to push for higher standards. But the carbon market, Degn says, rewards scale over regeneration. “Integrity comes at too high a cost. The higher the bar for credibility, the fewer the projects that can meet it.”

Rather than building a business that works on paper but fails in practice, Climate Farmers is shifting focus. He adds, “This isn’t an exit. It’s a shift in how we approach financing regenerative agriculture. But until the market evolves, we’d rather focus our energy elsewhere than build a business that works on paper but fails in practice.”

Soil is more than a medium for crops, it is the living infrastructure of our food, water, and climate systems. Around 95% of all food production depends on healthy soil, yet more than half of the world’s agricultural land is degraded. According to recently published Howden research for the European Commission, this could lead to €60 billion in annual losses by 2025, rising to €90 billion by 2050.

Nature risk is now material. PwC has estimated that over 50% of global market capitalization is exposed to material risks due to ‘moderate’ or ‘high’ nature dependency. S&P Global reports that 85% of the world’s largest companies have direct operational links to ecosystems. This issue transcends agriculture—it is a systemic risk.

Degn argues that farmers are willing to lead the transition—if the system stops penalizing them for complexity. “Farmers are ready. They want to do the right thing. But everything around them—subsidies, regulations, finance, supply chains, culture—makes it harder.” Instead, he calls for a systems-level redesign: policies that reward complexity, not punish it; finance that de-risks transition; and metrics that reflect what truly matters—not just what’s easy to count.

Lisa Sachs, director of the Columbia Center on Sustainable Investment, agrees that financing of regenerative land use practices is critical, though she argues that carbon markets are not the appropriate means of finance. She says, “At its core, the voluntary carbon market model is conceptually flawed. Most carbon credits are purchased as offsets, to compensate for ongoing emissions elsewhere, and the entire system rests on the fiction that multi-gas/pollutant emissions in one place can be 'neutralized' by carbon-only removals or avoidance elsewhere.”

She also points to systemic flaws: “Many credits are for projects that are neither additional nor permanent — and are often structurally designed to exaggerate impact, reward over-crediting, and obscure accountability. The result is a system that allows continued growth in GHG emissions while producing minimal, and often perverse, environmental and social outcomes.”

Sachs argues that the voluntary market absorbs scarce financial and political capital that should instead fund strategic public financing frameworks saying, “Projects are shaped by and for a patchwork of developers, brokers, and platforms that extract value but rarely deliver systemic impact.”

Degn and his team are now focused on ecological metrics that reflect real outcomes. In the realm of public payments, Degn points to the EARA proposal to base outcome-based payments on simple but robust satellite metrics - combining proxy assessments of whole year photosynthesis, with whole year soil cover and whole year plant diversity as one promising direction. These metrics are simple, scalable, and better aligned with the ecological goals of regenerative agriculture.

They also reduce the need for invasive, expensive, and often inaccurate carbon quantification methods. “Soil must be covered, with living roots as much as possible,” said Degn. “Photosynthesis is a pretty good proxy for biodiversity, carbon sequestration, and water retention. It’s also easier to monitor and far less bureaucratic.” The idea is currently being tested in a study in partnership with EIT Food, launched on the 3rd of June, and could even form the basis for the next generation of the EU Common Agricultural Policy (CAP).

Degn remains committed to performance-based payments—but with better tools. Degn adds, “We just learned that carbon markets are an imperfect tool. But this could be one that works.”

The voluntary carbon market, currently valued at just $2 billion, is not only undersized—it’s fundamentally misaligned with the scale and nature of the transformation needed. Built for isolated interventions, it can’t support something as foundational and interconnected as soil. Soil isn't just about carbon—it's the base of water, climate, and biodiversity resilience. Trying to commodify it in fragments misses the point.

As Lisa Sachs argues, we need public investment strategies that fund whole-system regeneration—not more accounting tricks. Regenerative agriculture doesn’t fit in a carbon credit box., rather it demands bold, landscape-level coordination.

At the same time, such bold landscape restoration is impossible without farmers. They manage the land, steward the ecosystems, and carry the risk. That means we must find ways to fund regeneration at the granular, farm level—while aligning with larger ecological goals.

Climate Farmers’ shift isn’t a step back—it’s a step forward. If we want real climate solutions, we have to fund what truly matters, even when it’s hard to measure.

The message is clear: regeneration over offsets, soil over simulations. It’s time to build financial systems as interconnected, and as ambitious, as the ecosystems we’re trying to restore.