At the beginning of March, the minister for agriculture, David Littleproud quietly announced the establishment of a $23.5 million Biodiversity Stewardship’s Carbon + Biodiversity Pilot. The program didn’t waste any time, calling for applications for funding in early April. Under the scheme, farmers will be eligible for a payment from the emission reduction scheme for carbon abatement, and payment from business for a carbon credit and biodiversity. The scheme is still in a pilot phase and is being trialled in six areas.
The minister announced that the fund would reward farmers for mixed plantings of trees and would establish a mechanism for domestic and international trading of carbon credits. Implicit in this framework is the idea that business will be able to buy carbon credits from farmers, giving them an additional source of income.
The risk with the scheme, according to economists, is that the price of carbon credits will reach heights that will make it more profitable to use arable land for carbon farming rather than producing food.
At the moment the government is opposed to a mandated carbon price which it equates with a tax on emissions (a carbon tax). The proposed mechanism is voluntary with businesses having the opportunity to opt in and invest in the carbon credits that farmers are producing. The only compulsion to do this is pressure from their own shareholders.
At the moment there is growing pressure from major investors, such as superannuation funds, for big business to adopt the zero-emissions by 2050 target. This means that there will probably be a thriving market in the farmers’ carbon credits.
There are some starry-eyed assumptions built into the policy. The first is that farmers will only use unproductive land for carbon sinks. This really depends on the carbon price. The assumption is that in the absence of a mandated emissions reduction target, participation will be desultory, and the price will remain relatively low. However, as we have noted, shareholder pressure is compelling big business to invest in carbon credits.
Current estimates put the carbon price necessary to achieve zero emissions by 2050 is in the vicinity of $US280 a tonne. At this price, large pieces of arable land, particularly where there are problems with access to water, are likely to be devoted to carbon sinks. This has grave implications for future productivity and growth.
Another problem is the prospect of double counting. Many farmers have adopted policies of zero emissions by 2050 and have planted carbon sinks in order to offset their own carbon production. An accounting mechanism will need to be established that separates these credits from those that are tradeable on the market.
David Littleproud has been spruiking the fact that business is keen to participate in the scheme, however, this proposition is still untested. Environmentalists are sceptical about business willingness to participate.
Another issue raised by environmentalists is the regulatory framework that will govern the assessment of carbon credits. They argue that there is no way of assessing that the designated vegetation will actually deliver the amount of emission reduction that business has paid.
These are issues that arose with the carbon trading schemes that were established in places like Europe earlier this century. Audits found that local authorities were certifying carbon credits that were vastly in excess of the actual carbon abated.
Nevertheless, Mr Littleproud said if 16 per cent of Australia’s farmland was revegetated, the carbon captured in plant growth could offset all agricultural emissions:
“With farmers rejuvenating their unproductive landscape, we (the farm sector) could be net zero.”
He is bullish about the prospects of a carbon trading scheme and says that it will enable farmers to stabilise their incomes as they move the target of $100 billion worth of exports by 2030.