Australian farmers and rural land owners are being told that they will be given powerful and direct incentives to store carbon in the land under the federal government’s new climate policy. But is that really true?

Both as a researcher and as a revegetation practitioner who’s looked into the practical costs of complying with the expanded Carbon Farming Initiative under the Emissions Reduction Fund, what I’ve seen to date makes me concerned that – paradoxically – the one thing this initiative will not to do is encourage carbon farming. In fact, Australia’s climate policies and systems have been, and continue to be, stacked against the land sector.

What is carbon farming?

The Carbon Farming Initiative is a national, voluntary offset scheme that awards carbon credits for sustainable land management, such as:

• managing livestock to reduce methane emissions (from burps);
• crop management (to avoid methane and nitrous oxides, such as from fertilisers)
• savannah fire management (to reduce methane and nitrous oxide emissions); and
• avoided deforestation, reforestation and managed regrowth to encourage sequestration of carbon dioxide.

It currently works in conjunction with Australia’s carbon price, allowing the biggest polluting firms to invest in the land to help meet their obligations.

With the carbon price looking set to be scrapped by the new Senate, the government’s plan is to fold the Carbon Farming Initiative into its new A$2.55 billion Emissions Reduction Fund.

In a recent speech, Environment Minister Greg Hunt said that there’s not much point in having the most rigorous, gold-plated carbon sequestration rules in the world if it means that nobody participates.

But, in fact, red tape and high costs remain the order of the day, and the lowest carbon cost projections under the Emissions Reduction Fund make it even harder to farm carbon.

A big emissions task, without a big enough budget

For Australia to meet our 2020 Kyoto Protocol emissions target, we need to purchase or cut a total of 421 million tonnes of greenhouse gas emissions.

Cutting 421 million tonnes at the lowest cost possible will only suit projects with a quick payback and rapid execution.

At an average abatement price of just over A$5 per tonne (which is what market analysts Reputex found would need to be to be within the Emissions Reduction Fund’s budget) carbon farming projects will simply not get a look in.

Take a rainforest replanting project in far north Queensland that my business is currently working on, as part of a broader research project involving several universities.

Revegetation costs vary across Australia, but within Queensland’s Wet Tropics it’s typically A$25,000 to A$60,000 per hectare. For this particular project, we think we can get them down to A$8000 a hectare – making revegetation far more affordable.

But under the Carbon Farming Initiative, there are far more costs that need to be taken into account. Its reforestation methodology then requires onerous audits not required of other sectors such as the energy sector.

Land sector auditors are compelled to re-measure trees and validate the government’s modelling at a cost to the landholder of around A$15,000-A$25,000 per audit. Compare this to non-land sector audits – such as checking the emissions of a smoke stack – where audit costs are comparatively small for a ball-park assessment. Under the Emissions Reduction Fund, land sector projects will require a minimum of three audits.

With costs of A$40 a tonne of CO₂ suggested by the Australian Farm Institute, our project might break even in a decade. At A$5 a tonne, we wouldn’t break even this millennium.

Storing carbon in soil

The impediments for storing carbon in soils are, if anything, worse. The draft soil methodology for sequestering carbon in grazing systems requires landscape mapping of erosion and deposition sites, baseline and follow-up soil sampling by nationally qualified technicians, as well as audits that will likely re-test the soil samples and the government models.

The methodology is emblazoned with caveats warning (at least three times) that management actions are not guaranteed to build soil carbon, reflecting the uncertain underlying science. The methodology seems designed to subsidise the research underpinning soil carbon sequestration at the landholders expense. And all this for a maximum of 2.0 tonnes of CO₂-equivalent per hectare!

So it is no surprise that of the mere 135 Carbon Farming Initiative projects listed by the Clean Energy Regulator, 18 have credits issued through storing carbon. There are 0.67 million credits for reforestation and 0.86 million credits for avoiding deforestation. Most carbon sequestration credits have been issued to local councils capturing methane gases emitted from rubbish landfills, and 0.5 million credits for early season burning mostly on indigenous lands.

That there is any appetite at all for sequestering carbon in trees or soils is testament to landholders’ stewardship ethic, and the now-dashed prospects of a reasonable carbon price under an emissions trading scheme.

Stalled investment

In an environment now characterised by low ambition and uncertainty, and a hostility to the land sector, credits issued by the Clean Energy Regulator have dropped 72% from 2.2 million in the last quarter of 2013 to 0.6 million in the first quarter of 2014. This stalled carbon project environment is underscored by the fact that the CO2 Group (now called Commodities Group), which has been the largest provider of carbon sink plantings, has shifted to aquaculture.

Adding insult to injury, project start dates under the Emissions Reduction Fund will also be adjusted to 1 July 2014. For anyone working in this space, this will be the third shift: from a start date of 2007 under the Rudd government’s proposed Carbon Pollution Reduction Scheme, to 2010 under the original Carbon Farming Initiative and now 2014 under the Emissions Reduction Fund. There will likely be many landholders who planted trees in good faith over the years who will now find themselves exposed and permanently out of pocket.

The recently released Carbon Abatement Contract discussion paper reveals another show stopper: carbon farmers would need to purchase carbon credits from elsewhere if they were impacted by a natural disturbance such as a cyclone.

In a country defined by natural disturbance, this potentially doubles the costs for the land sector. This is fundamentally a problem with the short-term nature of the Emissions Reduction Fund that does not allow for carbon levels to reach pre-disturbance levels as is currently the case.

The Environment Minister has said that the Emission Reduction Fund will be far more effective at reducing Australia’s emissions than the current carbon price. But Reputex’s recent modelling forecasts that the Emissions Reduction Fund will be able to purchase between 30 and 120 million carbon credits, meaning a likely shortfall of more than 300 million tonnes of greenhouse gas emissions.

Australia’s current carbon price has already reduced emissions by nearly 40 million tonnes. In a world moving towards carbon pricing and emissions trading schemes, we’re the only country dismantling a working carbon price to replace it with what is a feeble voluntary scheme, which will struggle to purchase even a quarter of Australia’s abatement task, and make carbon farming all but invisible.