Better carbon trading outcomes for farmers and government

NRM organisations’ support of the Australian Government’s Emission Reductions Fund is helping to boost farmer engagement and profitability, generate co-benefits, and reduce the negative impact and risk of non-delivery of emission-reduction projects. We can do more.

Carbon trading projects can deliver benefits to farmers at the same time as meeting government targets.

Opportunities

  • Greater involvement of regional NRM organisations can increase farmer participation in carbon trading.
  • Increased farmer participation provides a path for reducing transaction costs, sharing risks across landholders, and can help farmers bundle small parcels of carbon credits that are more attractive for a buyer.
  • NRM involvement will support good land management practices on farms that abate greenhouse gases, increase farm profitability and secure co-benefits that can deliver landscape scale change.
More than 80% of Australia’s emissions reductions contracted under the Emissions Reduction Fund (where the Australian Government purchases carbon credits) are coming from more than 245 projects in the land sector.

Farmers can offer more, and benefit more – and NRM organisations can help

The carbon market requires relatively large parcels of carbon credits so that the economic returns cover the risks, and the transaction and compliance costs. Many individual carbon projects may not be generating these volumes of credits therefore excluding many farmers, despite their willingness to participate.
The need to manage risk and commercial return has meant that commercial project developers are not able or willing to work with landholders with much smaller project activities. This means that the opportunity of multiple farmers being rewarded for their small-scale land management, or set aside / diversification opportunities on their properties is not being realised. Consequently, there is a role for a carbon aggregator to bundle small parcels of carbon credits to a marketable size or for a regional approach to support landholders to work together to develop projects of sufficient size.
The support of regional NRM organisations provides a pathway for reducing transaction costs and sharing risks across landholders. It may also be possible to use available funds to invest in projects to create carbon credits which can be sold to enable the establishment of a revolving door funding model to invest in further activities.

Carbon co-benefits – avoiding the pitfalls

Many carbon projects deliver benefits additional to greenhouse gas reductions. Many more could deliver a greater level of environmental, social and economic co-benefit. NRM regional organisations can help design projects to maximise the co-benefits and increase recognition of these benefits for
financial gain.
Helping regions to support carbon projects with clear environmental and social co-benefits will help address potential negative outcomes and increase community support for the Emissions Reduction Fund. This will include working with commercial carbon project developers and will preserve the integrity of the reverse auction, but encourage projects that would not be viable on the economics of the Emissions Reduction Fund alone. For example, in western NSW and Queensland, many Emission Reduction Fund projects have avoided vegetation clearance or allowing invasive native species to regenerate. In these regions, increased native vegetation may affect grazing productivity outcomes and may negatively affect erosion and feral animal control. This can also affect neighbouring properties and may lead to complications, such as higher fire risks. Some projects may have negative productivity and environmental outcomes and may therefore not be achieving real changes in emissions reductions.

Involving NRM organisations

Including regional NRM organisations in the delivery of the Emissions Reduction Fund will increase the involvement of smaller property owners and projects, while increasing the social acceptance /license for Australia’s approach to emission reductions.
Reef Credit Initiative.
This is an innovative, market-based approach to drive improvement in water quality in the Great Barrier Reef catchments. Farmers and other land managers can earn income through activities that improve water quality and reduce the environmental impact on the Reef. The initiative is a partnership between Terrain NRM and other Reef catchment NRM organisations and the private sector (GreenCollar) and was launched in August 2017 by Queensland’s Minister for Environment and Heritage Protection, the Hon. Dr Stephen Miles.
Credits are issued to projects based on expertly designed methodologies that calculate or model the reduction of sediment and/or nutrients and pesticides flowing onto the Great Barrier Reef due to land management change activities such as revegetation, riverbank stabilisation, reduction of nitrogen runoff and general system repair. Reef Credits can then be sold to government, industry and other organisations with an interest in saving the Great Barrier Reef. Keith noted that the approach delivers on the ecosystems services concept and helps develop the role of regional NRM organisations as “honest brokers”.