Carbon Farmers of Australia Blog

Many farmers interested in the CFI are now asking the following questions:

Q. What is happening on 1 July, 2012? What do I have to do?

A. Nothing. On 1 July, 2012 the Clean Energy Future program starts. The top 500 emitters of Greenhouse Gas will be required to pay a price on the carbon they emit. This will increase some input costs for farmers as those companies forced to pay the price on carbon pass on some of the increase to their customers. Eg. power costs.  But the huge increases in power bills in recent times have nothing to do with the price on carbon because that won’t start until 1 July, 2012. The dramatic price hikes predicted to be inflicted by the ‘carbon tax’ were based on worst case scenarios used in the political campaign against the price on carbon. As well, companies like Fontera have said they would avoid passing on increased power costs to its farmers. Farmers do not have to pay for their emissions on farm, despite the fact that Australian Agriculture emits more than the transport industry.  Instead the  plan is that farmers will be paid to increase the carbon in the landscape and reduce their emissions of methane from animals and nitrous oxide from fertiliser and other sources.

Q. How do we get paid to reduce our emissions?

A. The Carbon Farming Initiative (CFI) is  a government program that enables farmers to earn carbon credits which they can sell on the carbon market. The credits can be bought by companies that need to or want to offset their emissions. This is why they are called an “offset” – they allow emitters to bridge the gap while they invest in the changes they must make to be part of a low carbon economy. Offsets earned in Agriculture are known as “Australian Carbon Credit Units” (ACCUs).  

Q. What do we have to do to earn ACCUs?

A. A wide range of activities may be used to earn ACCUs. They include reforestation and revegetation and surrender of permits to clear, reduced methane emissions from livestock - eg., using tannins as a feed supplement for ruminants, incorporating Eremophila (emu grass) into feed for ruminant livestock, and manipulation of gut flora in ruminant livestock - reduced fertilizer emissions, manure management, reduced  emissions of nitrous oxide – including application of urea inhibitors to manure, application of urea inhibitors to fertiliser - and increased sequestration of carbon in agricultural soils. The types of projects that may be permitted include planting native vegetation, restoring drained wetlands, applying biochar to soil, and flaring methane from livestock manure.

Q. How much can we make from the CFI?

A. Nobody knows. The Government has set a fixed price for carbon of $23/tonne for the “Compliance” market (the market made up of those companies listed in the top 500 emitters). This will rise by 2.5% each year until 2015 when the price will float.  Not all CFI ACCUs will be eligible for purchase on the Compliance market. Non-Kyoto-compliant CFI ACCUs are restricted to the “Voluntary” market (the market made up of those companies and individuals who want to go carbon neutral to reduce emissions) which is expected to attract lower prices. The Government has put aside $250 million to buy Voluntary ACCUs to support the market. The prices are hard to predict. However, ACCUs are bankable, so farmers can wait for the right price before selling.

Q. Do some activities pay more than others?

A. Yes. For every tonne of methane you can avoid emitting (eg., by changing the diet of your cattle or sheep) you may earn 24 tonne of CO2-e.  For every tonne of nitrous oxide you can avoid emitting (eg., by changing the method and the amount of fertliser you apply) you may earn close to 300 tonne of CO2-e. (We are waiting for a Methodology to be approved for both Greenhouse Gases.)

Q. Why do scientists say soil carbon can make only a modest contribution to the efforts to reduce Global Warming?

A. Not all scientists say that. The world’s leading soil scientist Dr Rattan Lal believes the world's farmers control the largest installation of a biological technology (photosynthesis in vegetation across 5 billion hectares worldwide) that can extract billions of tonnes of carbon from the atmosphere, interrupting the rapid rise of Global Warming. He says farmers can draw down the equivalent of 50ppm (parts per million of CO2-e) from the atmosphere for 50 years. It just so happens that it will take only another 50ppm to the atmosphere before we reach 450ppm (which will increase Global temperature by 2°C).  We need to buy time for low-emissions renewable energy to reach critical mass. Change land management to turn agricultural soils and vegetation into a vast global carbon sink .  Soil is fully deployed, has critical mass, and massive capacity. Let’s get on with it.

Q. How do we get started? Who do we talk to?

A. The CFI is in the start-up phase. One by one, the long list of offset activities is coming on stream as “methodologies” are written for them. A methodology is a set of rules that enables someone to take it off the shelf and follow it like a recipe to conduct the activity and earn offsets in a way that is genuine and reassures buyers that they are getting what they are paying for. There are only 4 ‘meths’ available at this time: environmental plantings of native trees would be most relevant to the majority of farmers; flaring methane from manure ponds in piggeries; managing methane emissions from landfill; and reducing emissions from savanna burning.

Q. Can we cut out the Middleman?

A. The Government believes that farmers should be able to manage the process themselves. However, they will need the services of some third party because offsets are typically sold in bundles of thousands of tonnes, orders that few landholders will be able to fill. An ‘ aggregator ’ s responsibilities can include parcelling orders, pool management, registry maintenance, measurement, trading, and educating. As much as farmers love to cut out the “Middleman”,  direct trading makes up a small fraction of produce sold. Experience in markets overseas tells us that landholders will have choice of aggregation services from their farmers’ association, natural resource management bodies such as CMAs, suppliers such banks, agents or agronomy services, and dedicated aggregation services. The role of aggregator is difficult and requires substantial database management capabilities. Based on overseas experience, the cost of aggregation, insurances, etc. varied between 10% and 30%. Landholders will most likely choose to aggregate with the best price/lowest risk provider. (E., A farmers’ group could choose to form a cooperative to engage an aggregator.)

Q. Do we have to take land out of production in order to raise carbon levels in our soils?

A. No. The best process for increasing soil carbon levels involves active farming. Carbon farming includes all forms of grazing management, biological and biodynamic farming, composting, pasture cropping, soil inoculants, etc. And agroforestry and integrated use of trees can have a significant impact on production. Seasoned carbon farmers have discovered that they can plant 20% of their land to trees and maintain production while gaining many benefits, including increased biodiversity, landscape resilience, and lower levels of evaporation.

Q. Will they ask for the money back if we earn credits for increasing carbon in our soils or trees and subsequently lose it?

A. No. If you lose soil or tree carbon due to bushfire or drought or any other reason beyond your control, you will not be asked to pay the money back. The Program automatically puts 5% of the value of every sale into a ‘buffer account’ – called a Risk of Reversal Buffer – which covers the losses. You will be expected, however, to restore the carbon levels in soils or trees for which you had earned ACCUs. If you refuse to restore the carbon, the Program Regulator can request that you ‘relinquish’ (or hand back) the ACCUs you were paid in the first place. Your ‘carbon maintenance obligation’ sounds like a burden, but it means that you simply commit to continuing the land management practices that had led to the soil carbon levels previously achieved.

Q. If we plant trees today under the Environmental Plantings methodology, how soon can we be paid for it?

A. Theoretically, you can be ‘paid’ at the end of the first year. Practically, you would be likely to wait until there has been enough carbon captured to make it worthwhile to submit an audit report. You can claim ACCUs only after a reporting period closes. You can choose the ‘reporting period’ from 12 months at the minimum or any time up to 5 Years after commencement of the project. Each subsequent reporting period begins immediately after the last reporting period.

Q. How long can we expect the income from Environmental Plantings to continue?

A. The CFI law sets out the length of time that different activities can generate credits using an approved CFI methodology. This is known as a ‘crediting period’. Most projects have a 7 year crediting period. Reforestation will have a 15 year crediting period and native forest protection projects have a 20 year crediting period. The end of the crediting period does not mean the end of the project’s earning capacity. Projects can be approved for a further crediting period so long as the project activity remains eligible. (This sounds like enough time for someone to shift the goal posts. If you are signing contracts for a project like this, insist that the factors that will make activities eligible or ineligible are spelled out in the contract.)

Q. The prices that carbon credits are fetching now are too low to make it worth my while, according to many experts. Why should I bother?

A. No one has any knowledge of how the market for ACCUs will operate. Any opinion about the future is mere speculation, especially if it is based of misunderstandings. Eg. the price on international markets has plummeted in Europe for no other reason than the Global Financial Crisis forced companies with carbon offsets on their books liquidate these assets for cash flow. The rush to offload units depressed prices.  In the USA the year before, the Chicago Climate Exchange’s agricultural offsets price collapsed after President Obama failed to convince his Congress to pass an Emissions Trading Scheme (ETS) into law. The companies buying CCX units were doing so to prepare for the ETS which did not arrive. Unlike the USA, Australia is getting an ETS.  The CCX scheme also had problems with Additionality which the CFI solves. Another ‘fact’ experts quote is that Voluntary market units inevitably sell for less than Compliance market units. But, in Europe, voluntary units have sold for close to 10 times the price of Kyoto compliance units. So you see, speculation is useful only if it is based on facts, such as: 1. You can ‘bank’ your ACCUs and sit on them until the market price suits you. 2. No Australian farmer is likely to have enough sequestered carbon to sell until at least 5 years in to the project’s life. A lot has happened in the last 5 years and a lot can happen in the next 5 years. 3. Within that period, our major trading partner China has announced that it will have a nation-wide Carbon Trading system by 2015. It has started a  three-year trial in 5 provinces using a $10/tonne Carbon price.

Q. No farmer I know would sign a contract for 100 years, especially as many of them are close to retirement. The experts always mention the 100 years rule as a problem. What do you say to that?

A. While it is natural to imagine the worst thing that could happen, the facts are these: 1. Between 2001 and 2005, only 2.5% of Australia’s forests were impacted by wildfire each year. The odds are 37 to 1 of a fire event. The vast majority of wildfires do not kill the trees. The CFI requires that dead trees be replanted. 2. The Soil Carbon Methodology submitted to the Government’s expert panel by the Bridge Consortium (Carbon Farmers of Australia is a member)  offers an ‘self-insurance’/’mutual insurance’-type system that spreads the risk over pooled and stored units and over a number of farmers across climate zones. 3. “100 years liability” sounds worse than “100 years of healthy soils”.  But how hard could it be to continue treating the soil with respect and enjoying the benefits of soil structure, water efficiency, increased microbiological activity, more available nutrients, buffering against drought, greater resilience against disease, etc.? 4. If those "experts" are right and prices of soil carbon offsets never amount to much, your Permanence liability will never amount to much either. 5. 100 Years might seem to be set in stone, but there is no scientific reason for that period. It is not the amount of time in which a molecule of CO2 is held in the atmosphere. The CFI Legislation allows the Minister to set any other period. Carbon Farmers of Australia is seeking to have the 100 Year Principle reconsidered.

The leadership of the major farmers' groups in NSW and VIC have redefined leadership as walking backwards into the future on the issue of carbon trading. "NSW and Victorian farmer groups are urging producers to be wary of locking into long term carbon trading, " reported the ABC recently. "Both groups see little financial benefit for producers from the new carbon trading to begin in July. NSW Farmers Association's senior vice president and head of their sustainability taskforce, Sam Archer, says the returns are not there due to falling global carbon prices and restrictive land management."Potentially low commercial benefits, restrictions on land use practices, the onerous land use permanence requirements of 100 years, and as we have seen overseas, a high transactional cost (so) all of which I would encourage people to err on the side of caution." The President of the Victorian Farmers Federation, Andrew Broad, says farmers reject the notion of a carbon economy. "Globally we have been fools by making our agriculture less competitive and we think somehow that we are saving the planet."

The comments are poorly informed. EG., the low prices currently on offer reflect the global financial crisis as companies realise the value of offsets they have on their books for liquidity purposes. Now is the perfect time to buy some cheap offsets to cover your future liability. A farmer sitting on offsets would be wise to keep sitting until better prices are available. Few farm commodities are as bankable. These gentlemen may not be aware (because they are not engaged in the process) that there are several insurance and buffer mechanisms being proposed to reduce the 100 Year risk. Sam's complaint about 'restrictions on land use practices' seem odd since he has his own scheme called the National Ecosystem Services Scheme (ESS) which would see farmers paid for land stewardship - which involves 'setting aside marginal land' for ecological 'goods and services'. The only difference between the CFI system and Sam's Scheme is how the farmer is paid. We believe in markets. Sam believes in taxes: "Potential funding for the scheme could come from a GST on fresh food..." Whoa! Australians love their farmers, but not enough to pay 10% more for food. And governments tend to find it difficult keeping their hands off a GST. Stewardship payments are handouts which institutionalise the top-down, dependency relationship traditional for farmers. They can be switched on or off at will. In The Land's Year of the Farmer supplement recently, Mr Archer said his proposed ESS could become "the cornerstone of Australia's response to climate change..." But it has no connection to Climate Change. Why is the carbon market anathema to many in agriculture? Why are those involved in it seen to be ethically compromised? This has motivated some to propose "Market Based Instruments" which are not markets at all, but schemes that pit farmer against farmer to compete for handouts.

Carbon Farming is now law. It is the Law of the Land. It is being progressively implemented by the approval of "Methodologies" which govern the way offsets can be earned. It is a fait accomplis. Still some people champion alternative solutions. This is good. Diversity means opportunity. For instance, Sam Archer's National Ecosystem Services Scheme (ESS) would see farmers paid for land stewardship - which involves 'setting aside marginal land' for ecological 'goods and services' such as carbon sequestration, wildlife habitat, improved water quality and bushland protection. (Taking animals off land and locking it up is the fast way to degrade it.) Government regulation would be 'light' to avoid the scheme becoming a victim of political whim and changes of government. (Can't see how this works.) "Potential funding for the scheme could come from a GST on fresh food..." Whoa! The Community loves its farmers and expects them to protect the environment, but not enough to pay for it. And governments tend to find the concept of 'light regulation' difficult and keeping their hands off a GST? Stewardship payments are handouts which institutionalise the top-down, dependency relationship traditional for farmers. They can be switched on or off at will. The 600lb gorilla not in the room is the market. The market for offsetting carbon emissions... "Mr Archer said his proposed ESS could become the cornerstone of Australia's response to climate change..." But it has no connection to Climate Change. The carbon market is anathema to many in agriculture - and those involved in it are seen to be ethically compromised. This has motivated some to propose "Market Based Instruments" which are not markets at all, but schemes that pit farmer against farmer to compete for handouts.

Australia’s dairy farmers have been given a cold shower on Climate Change by Dairy Australia. “It doesn’t matter if you believe in Climate Change or not, because it is now a major political and social force that is and will continue to impact on all industries, including dairy,” it says on its website. Many in the farm community have been convinced by those who deny the science of Climate Change. “The physical reality of Climate Change remains is still debatable for some. This will continue to be the case because it is very hard to differentiate small changes to the average climate from the background of large and poorly understood climate variability. However, ‘belief’ in Climate Change is no longer relevant because the very idea of Climate Change, backed up by clearly more volatile weather events, has created its own, overwhelming social and economic momentum. ‘Climate Change’ is fundamentally changing everything from the behaviour of Governments to consumer choices. It has become one of the critical lenses through which every decision must pass – how individuals and industries react will fundamentally their future resilience and competitive advantage.”

Hysterical Predictions

‘Perform Achieve and Trade' (PAT), the flagship programme of the Indian Government’s National Mission for Enhanced Energy Efficiency (NMEEE), is intended to stimulate energy efficiency investments that would enable industries to save at the minimum 5 per cent of their energy cost, estimated at 9.8 million tonnes of oil equivalent. The PAT scheme and NMEEE are an integral part of the National Action Plan on Climate Change (NAPCC) which was released by the Prime Minister in June 2008. NAPCC outlined eight national missions for multi-pronged, long-term, and integrated strategies for achieving the key goals of sustainable development while balancing the concerns of climate change. 

The first soil carbon methodology submitted to the Domestic Offset Integrity Committee (DOIC) has reached first base! Submitted only 8 weeks ago, it has been analysed and an issues paper written in response. We should get it in a few days. Stay tuned...

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If you can believe yesterday's Australian Financial Review, the Carbon Farming Initiative will be rorted like the Pink Batts scheme; will not deliver genuine reductions in carbon emissions; and will put at risk the brands of any emitters who buy its offsets. It claims that this is because the CFI will not verify the actions of farmers that earn offsets and will allow farmers to claim offsets for actions they would have taken anyway because it would cost too much to prevent them.


These remarks are astonishing. Their source is an article in the Australian Financial Review based on an interview with a member of the the body responsible for ensuring that none of the things mentioned above happen. Rob Fowler is a member of the interim Domestic Offsets Integrity Committee (DOIC). The role of the DOIC is to assess offsets methodologies and work with the people putting them forward to build the safeguards into the system. The checking - physical or otherwise - is dictated by the DOIC. It has the last word.


We applaud Rob's stated aim of not burdening farmers with the expense of a what he calls a 'rort-free' system, but he seems to be saying that the operation of the CFI is impossible because of the cost of measurement and verification. This is an old objection. It overstates the problem and underestimates the impact of innovation on reducing costs. But the Government, while it will be less than impressed with the way he raised the issue, must urgently address Rob's concerns to restore confidence in the CFI.


If those of us spending thousands of hours working for free on methodologies to give farmers access to offsets can't be confident in the integrity of the process, this could deter further submissions and make Rob's prediction self-fulfilling. We are sure he wouldn't want that.

Some people dislike the notion of trading offsets as a way to reward farmers for environmental services. They give the following reasons: 

1. 1. Farmers should be doing the right thing anyway (ie. provide environmental services for free). 
2. 2. “Someone will make a lot of money out of it…” (ie. traders on-selling the units). 
3. 3. “It’s all bullsh--!” (ie. anything with the word ‘carbon’ in it is too hard to understand and is therefore a rort). 

One thing most people agree on is that our soils are degrading and farmland is badly in need of restoration. Our food production capacity is declining. If you think about it, there is no way we will get the maximum number of farmers to make the necessary changes to their management of soils without a system of incentive that is acceptable to the greatest number and is likely to last long enough to get the job done. 

The system that offers this is trade in offsets.

1. 1. Farmers have demonstrated little enthusiasm for ‘doing the right thing anyway’ on the grounds that no other sector of the community is asked to work for free and, besides, they already do a lot for free. 
2. 2. The majority of farmers have not engaged in taxpayer-funded land management incentive programs in more than two decades in which billions of dollars were invested by governments in restoration programs. 
3. 3. Tax and spend programs last only until the next election cycle as politicial priorities change. 
4. 4. Farmers are comfortable growing and selling commodities. That’s what they do. They happily deal with middle men and there are windfall profit opportunities from futures trading. 

So the answer to the question, “Is Trade the best option?” is Yes. If you seriously want to see our agricultural soils restored and enriched, out waterways cleaned, and landscape regenerated – as soon as possible across the largest percentage of the 60% of the nation’s  landmass used for agriculture.

The first methodology for soil carbon sequestration under the Carbon Farming Initiative was submitted at the Carbon Farming Conference on the 6th Anniversary of the start of the campaign by the Carbon Coalition for soil carbon credits.

The Methodology – developed by the Bridge Consortium (Carbon Farmers of Australia, Offset Generation Services and Object Consulting) – operates entirely within the CFI Legislation and is designed to circumvent the oft-quoted ‘uncertainties’ of soil carbon by using buffer pools and menus. For instance, Additionality is addressed by offering a program for renewal of vegetation in line with the Positive List and requiring participants to choose two or more additional practices or products from a long menu. 

The variety of combinations satisfies the ‘common practice test’ in most cases. The Measurement challenge is answered by reducing the uncertainty around direct sampling using a 90% certainty interval and by extending the Government’s own 5% ‘risk of reversal’ buffer into a Project Buffer which requires the participant to “bank” a tonne of CO2 for each tonne they trade during the first 5 year period. Thereafter both carbon buyer and grower are protected by the collective Program Buffer Pool that aggregates risk management and balances impacts across climate zones. This reduces the grower’s exposure while increasing buyer protection. 

Relinquishment provisions follow the CFI Legislation with the additional benefit that a Program Buffer Manager may accept a relinquishment responsibility entirely on behalf of a grower.  This allows the added security of protection for all concerned coming from a balanced pool of projects rather than from a single farmer or piece of land only.  Buffering and averaging of measured values over time are also included to solve the Permanence issue. An elegant solution.

Many people are interested in the role of the Aggregator in the Australian farm offsets market. The role is strategic because Aggregators form the interface between supply and demand. There is no doubt that the role is important, despite the fact that the Legislation does not mention it, placing the responsibility for the supply side management on the shoulders of the “Project Proponent”, ie. the Grower. Most Growers can’t assemble enough tonnage to deal cost effectively with the market direct. But even a corporate landholder with sufficient land too deal direct will need specialist advice. The average landholder will have to deal through an aggregation service. Organisations with memberships have access to potential growers/suppliers and bureaucracies which can supply the necessary arms and legs. 

Banks may see synergies, especially since the legislation defines the offset unit as a financial product and therefore those giving advice or dealing in them must have a Financial Services Certification. To give advice tat maximises the Growers opportunity, the aggregator must understand how to draw up a Carbon Farm Plan that integrates practices and boosts emissions reductions and amounts stored in soils. 

There are five options facing Growers: 
1. Deal Direct with a big polluter.
2. Engage an aggregator as an agent.
3. Sell the rights to your units to an aggregator or agent.
4. Join an aggregation as a member.
5. Sell direct to the farm gate market. 

Aggregators will need to have sound knowledge of the five pieces of legislation that established the Carbon Farming Initiative. They will need a sophisticated data management system, an education function, an outreach program, and connections with local services such as measurement and auditing. At the same time, they will need to engineer costs out of their services to keep middleman costs down and prices competitive.

Aggregator Briefing: An Introduction to Carbon Farming – A One Day Workshop. Delivered by Carbon Farmers of Australia. FarmReady Approved. Call 02 6374 0329

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