Carbon farming bracing for a bumper harvest

The carbon market is bracing for a surge in demand following the Albanese government’s new legally binding climate target and laws to force the nation’s biggest emitters to cut their pollution, many of which will buy credits to meet their obligations.

While the mum and dad farmers who will undertake projects to generate carbon credits, such as growing trees, are unlikely to sell credits directly to the likes of AGL, the nation’s biggest polluter, agents are bracing for a multi-decade surge in demand for their services.

The carbon market is bracing for a boom in emissions offsets projects.

Alex Ellinghausen.

“There used to be only two certainties in life, death and taxes. Now there’s an additional one – and that is carbon responsibilities,” said John Connor, a former head of the Climate Institute think tank who now heads up the Carbon Market Institute, which represents companies that generate, buy, and sell carbon credits to companies seeking to reduce their carbon footprint.

“Companies and individuals are taking responsibility for their emissions and that’s only going to get more urgent,” Connor said, noting the climate push has locked long-term growth into the carbon market for centuries to come.

Demand for carbon offsets in Australia has historically been driven by the private market, as businesses seek to satisfy community and investor pressure for climate action by making voluntary purchases to counter their emissions. But for the first time in Australia, big polluters will from July be forced to cut their emissions. Under the incoming safeguard mechanism, the federal government will compel the nation’s 215 biggest emitters to cut their carbon footprint by 4.9 per cent a year to 2030.

Climate Friendly chief executive Skye Glenday. 

Skye Glenday is chief executive of Climate Friendly, which gives technical advice to landholders who set up carbon farming projects as well as trading some of the carbon credits they generate. She said demand had built slowly but surely since the company was founded in 2003 and was now starting to surge.

“By 2020 we achieved our first target, which was to deliver 20 million tonnes of abatement, and now we’re trying to scale that up to quite an ambitious target of 100 million tons by 2025,” she said. Climate Friendly has helped set up 160 carbon farming projects.

The federal government runs a scheme to verify Australian Carbon Credit Units [ACCUs] and the majority of the offsets registered so far have come from what’s dubbed human-induced regeneration, where landholders either plant trees or reduce livestock grazing pressure to encourage more growth – which in turn captures carbon from the atmosphere and converts it to vegetation.

There is massive scope for growth. With around 70,000 agricultural properties in Australia, less than 2000 of them (1.7 per cent) have registered carbon farming projects.

While Climate Friendly is largely focused on technical advice, and helping participants negotiate the complex rules to register their projects, many farmers are sceptical of the business model of some carbon companies.

Some companies simply buy up farms and turn the entire property over to carbon farming, while others operate as middlemen, or aggregators in the carbon trade, buying and bundling credits off smaller projects and selling them to buyers looking for large-scale offsets – taking a cut of up to 30 per cent for their services.

Farmers for Climate Action, one of the largest agricultural lobby groups with 7500 members, fear the lack of limits on carbon offsets under the safeguard mechanism could result in big polluters buying up valuable farmland for greenhouse abatement, potentially affecting food production and putting small family farmers out of business.

Hugh Grossman, executive director of market analyst RepuTex, said 95 per cent of the carbon credits that Australian companies are using to claim a net reduction to their greenhouse emissions are coming from international projects, which sell offsets between $5 to $20, compared to ACCUs that sell for up to $40. The higher price of ACCUs generally reflects the perceived integrity of the credit as a genuine offset to emissions.

Grossman said companies not captured by the safeguard mechanism are increasingly voluntarily purchasing offsets to cut their carbon footprint – but are largely buying on price, not quality.

The safeguard mechanism is calibrated to reduce pollution by a total of 205 million tonnes of emissions by the end of the decade. To meet the mandate, companies can reduce their emissions or offset them by buying ACCUs.

When combined with the growing voluntary buy-ups of carbon credits by companies seeking to reach net zero, the suppliers of offsets are eyeing boom times ahead.

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