Carbon Credits Won’t Finance Colombia’s Cacao Transition On Their Own
29 August 2026, Colombia: Carbon credits are often presented as a way to help farmers finance the transition to agroforestry. Trees capture carbon, farmers earn additional income, and climate finance makes more sustainable farming systems commercially viable.
Our research suggests carbon markets cannot carry that burden on their own.
In a paper currently under review, we examined whether carbon revenues could help cacao farmers in Colombia pay for the switch to agroforestry. The study focused on Caquetá and César and compared three types of cacao agroforestry systems: basic, intermediate and advanced.
The good news is that all three systems generated a positive net present value over 25 years in both regions. Cacao agroforestry can therefore be profitable over the long term.
But long-term profitability is not the same as affordability.
Farmers face income losses during approximately the first seven years. Cacao produces no yield in the first two years, while some of the largest returns (particularly from timber) may not arrive until year 20 or later.
Farmers must therefore cover establishment and maintenance costs years before receiving the full financial benefits. Of the 927 cacao farmers surveyed across 28 municipalities in Caquetá and César, approximately 70% did not have access to loans despite applying for financing to plant new crops and purchase inputs.
This creates the real barrier to adoption: farmers are being asked to absorb several years of costs and reduced income without affordable finance.
We tested whether carbon credits could close that gap and found that they could not.
Carbon revenues are too small
In Caquetá, which was the more favourable scenario, carbon credits increased the net present value of the advanced cacao agroforestry system by approximately US$180 per hectare over 25 years. The analysis assumed a 2022 carbon price of US$4.59 per tonne of CO₂ equivalent, in line with Colombia’s carbon-tax exemption scheme, and a 25-year crediting period. Transaction costs included validation, verification and certification, based on reference costs from national standards, particularly the BioCarbon Registry.
The added revenue is modest and does little to offset several years of upfront costs and lost income farmers experience during the early years.
In César, the result was worse. The tree species included in the systems had lower carbon-capture potential. Once registration and transaction costs were taken into account, carbon credits reduced profitability by approximately US$17 rather than improving it.
The difference between the two regions also shows why carbon-finance projections must be grounded in local conditions. Potential revenues depend on tree species, sequestration rates, carbon prices, project scale and transaction costs. A model that offers a modest benefit in one region may provide none in another.
The wider lesson is that carbon markets do not solve the financing problem that farmers actually face.
Farmers need support at the beginning of the transition, when they are establishing trees and waiting for cacao production to start. Carbon revenues are relatively small, uncertain and generally realised over a much longer period.
Designing agroforestry programmes around those future revenues risks transferring the financial burden to farmers. It can also damage trust if the income eventually received is lower or later than promised.
Post-conflict regions face additional barriers
These constraints are particularly important in post-conflict areas such as Caquetá and César. Land-tenure insecurity, limited institutional presence and exclusion from formal credit can make it even harder for farmers to invest in systems whose benefits accumulate over decades.
These constraints are particularly significant in post-conflict areas such as Caquetá and César, where insecure or informal land tenure can limit farmers’ ability to participate in long-term financing and investment mechanisms.
Participation in carbon markets and programmes such as Obras por Impuestos requires evidence of a legally recognised claim to the land. Under Colombia’s Decree Law 870 of 2017, eligible participants may be landowners, legally recognised possessors, or good-faith occupants without fault who can provide a purchase agreement. Farmers who cannot demonstrate one of these forms of tenure may therefore be excluded from such mechanisms, even where they are otherwise willing to invest in agroforestry systems.
We are not arguing that carbon markets have no role. Rather, their contribution needs to be understood as one part of a broader financing package that includes establishment grants, targeted subsidies and affordable long-term credit.
Colombia’s Obras por Impuestos mechanism may offer one such option. It allows eligible companies to direct part of their income-tax liability towards approved projects in conflict-affected municipalities. In practice, these projects can support the establishment phase of agroforestry systems by financing nursery propagation, tree planting, technical assistance and cash payments to participating smallholders.
This kind of support can help cover costs during the early years, before carbon revenues become available. Carbon credits may then provide a complementary longer-term income stream once trees mature and verification requirements are met.
Cacao agroforestry can be financially viable and reduce emissions while strengthening rural livelihoods. But farmers cannot finance today’s transition using returns that may arrive years or decades later. And while carbon credits can be part of the financing package, they should not be mistaken for its foundation.
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