About the Carbon Farming Initiative

The Carbon Farming Initiative (CFI) provides farmers and land managers with an opportunity to generate carbon credits by improving carbon storage or reducing greenhouse gas emissions relative to a “business-as-usual” baseline. Verified credits can be traded in a carbon market. Engagement by farmers in the CFI is voluntary.


Farmers and land managers can generate “Australian Carbon Credit Units” (ACCUs) by conducting an approved project that:

·         Increases the amount of carbon stored in soil or vegetation, or avoids deforestation (sequestration projects); or

·        Reduces or avoids greenhouse gas emissions (emissions reduction projects). Examples include reductions in:

o   Methane emissions from livestock.

o   Methane or nitrous oxide emissions from the burning of savannas.

o   Methane or nitrous oxide emissions from agricultural soils.

Demand for Kyoto-compliant ACCUs (see Kyoto Credits post) is assisted by the Clean Energy Act, which puts a price on the carbon emitted by around 500 of the country’s top emitters. This “carbon price” (also known as the carbon tax or levy) forces the top 500 emitters to either:

·         Buy permits from the Government.

o     Starting at $23/tonne of CO2-equivalent[1] emitted, rising at 2.5%/ p.a. until 2014–15, the price becomes partially flexible in 2015 with a floor of $15/tCO2-e and a ceiling $20 higher than the expected international price, with these prices indexed annually. After June 2018, ceilings and floor will be removed;

·         Buy Kyoto-compliant ACCUs from farmers or land managers (“mandatory” carbon market).  

o   Initially, only 5% of an emitter’s obligation can be satisfied by purchasing ACCUs, but this increases to 50% after June 2015; and/or

·         Reduce their emissions directly.

Importantly, because the purchase price of Kyoto ACCUs is expected to be less than the cost of purchasing permits from the government[2], emitters will most likely prefer to purchase ACCU’s from farmers rather than buying permits.

More information...

Acknowledgements: Aust. Dept. of Climate Change and Energy Efficiency

---

[1] CO2-equivalents (or CO2-e) refers to the amount of all greenhouse gas emissions, including carbon dioxide, methane and nitrous oxide, but with the various units converted into an equivalent carbon dioxide concentration.

[2] Experts estimate that Kyoto compliant ACCUs will go for around $20/tCO2-e, but this is highly dependent on the cost of carbon credit production, as well as market demands.