Carbon opportunities for Australian farmers

Written by: Kristine Dewar

The carbon market is developing at a rapid pace within Australia and internationally. Within Australia, a voluntary carbon market is already flourishing, however, this market relies predominantly upon carbon credits that are generated overseas and are matched with Australian businesses seeking to voluntarily reduce their carbon footprint. Although the Australian carbon market is operating largely on a voluntary basis, regulatory carbon markets already exist in the European Union and New Zealand. Indeed, the global carbon market is currently worth over $100 billion per year. The introduction of a national regulatory market within Australia such as the currently proposed Carbon Tax would see explosive growth in the market for domestic carbon offsets as liable corporations look to reduce their carbon footprints.

At the same time, farmers throughout Australia are facing increased pressure from the impacts of climate change manifesting themselves as droughts, floods and an increase in extreme weather events. These forces are increasingly impacting on the profitability of farming operations and causing landholders to seek ways to diversify and increase the resilience of income streams. These impacts are set to continue and intensify into the future with modelling predicting that climate change will have a particularly significant impact on the Australian rural sector.

A glimpse of the future Australian carbon offset market

Written by: Andrew Wilson

While the finer details of the government’s plan to introduce a fixed carbon price from July 2012 remain a mystery, the release of The Garnaut Review’s Sixth Update Paper last week offers some insight into what the future Australian market for carbon offsets may look like.

Professor Garnaut’s Sixth update provides multiple recommendations on how to best price carbon in the Australian economy. Whilst topics such as the linking of compensation to income tax cuts and pension increases are sure to generate the bulk of media and political interest, this update also contains important recommendations on how carbon offsets may interact with a fixed carbon price in Australia. Professor Garnaut advocates the inclusion of an offset program in the design of any carbon pricing mechanism in order to encourage abatement activity in multiple industry sectors - particularly those not covered by the carbon pricing scheme such as agriculture. He also advocates that in order to address concerns about budget neutrality and undermining the abatement effort in other sectors, caps need to be placed on the quantity of offsets able to be purchased by liable entities to meet their responsibilities.