Carbon payments reach smallholders

Nearly 300 Ethiopian smallholder farmers have received proceeds from the first sale of soil carbon sink certificates under the five-year ETH-Soil project. Coordinated by the German Biomass Research Centre (DBFZ) and funded by Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), the initiative links certified soil carbon sequestration with direct rural income.

For carbon sinks established by 2025, each participating farmer is receiving an average payout of 1,700 Ethiopian birr (ETB), equivalent to roughly one-third of an unskilled worker’s monthly wage. This is not yet transformative income. However, it provides a new cash stream that is tied to climate-aligned practices rather than commodity price cycles.

Payments are funded through the commercial sale of Artisan C-Sink certificates, which monetise verified soil carbon gains from improved fertility management. At least 60% of certificate revenue flows directly to smallholders, with the remaining share ring-fenced for training, data collection, quality control and independent auditing. This revenue split is central for investors in climate finance, as it couples social impact with clear budget coverage for monitoring, reporting and verification.

The ETH-Soil project promotes biochar-based fertilisers and integrated soil fertility practices to restore degraded land, increase crop yields and sequester carbon in soils. As a result, it sits at the intersection of Ethiopia soil carbon policy, climate finance and agribusiness, rather than operating as a stand-alone development pilot.

Biochar as a hedge against imported inputs

Ethiopia’s agricultural sector has long depended on imported synthetic fertilisers, leaving smallholders exposed to global supply shocks and foreign exchange volatility. Recent disruptions linked to global crises, including the war in Ukraine and tensions in the Gulf region, have highlighted this vulnerability and raised the strategic value of local nutrient sources.

In response, the Oromia region has increasingly embraced alternative soil fertility practices. The ETH-Soil project has shown that green manuring, vermicomposting of organic waste and biochar-based fertilisers can be used year-round, reducing dependence on imported inputs. Biochar, produced from biomass, is replacing expensive agricultural lime in highland areas. It helps retain nutrients during heavy rainfall, improves humus formation and raises soil pH on acidified land.

Pilot plots on roughly 31 hectares of heavily degraded land recorded yield increases of 11–30% for cereals such as wheat, barley, maize and teff versus conventional synthetic fertiliser regimes. Beans and potatoes performed even better, with gains of 9–68%. Meanwhile, soil quality improved. In Kofele district, biochar applications lifted pH from around 5 to between 5.8 and 5.9, while the material’s porous structure enhanced phosphate availability and increased soil organic carbon.

For farmers, the economic effect comes from three linked channels: higher yields, lower spending on imported synthetic fertiliser and new income from carbon certificates. For policymakers, the project supports a broader national shift toward nutrient recycling and domestic production of organic fertilisers from waste streams, in line with Ethiopia’s climate and food security goals. Oromia’s regional government has begun to expand biochar-based fertiliser technologies into other soil programmes backed by Germany, the European Union and the World Bank, signalling growing institutional endorsement.

For investors, ETH-Soil positions Ethiopia soil carbon as a nascent asset class. The project shows that certified soil carbon sinks can underpin investable revenue models, that localised biochar and compost plants can displace imported inputs, and that climate-linked payment mechanisms can strengthen smallholder productivity.

The next phase to watch is whether these early pilots scale into portfolio-sized opportunities in carbon credits, decentralised fertiliser production and blended finance vehicles anchored in verified soil carbon outcomes.

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