[Analytics] Big impact on farm businesses and the rural landscape

A farmer harvests rice in Kalasin province. Flooding and drought have hampered the 2019-20 growing season. Yongyuth Phuphuangphet. Sketched by the Pan Pacific Agency.

Labor’s 2030 net zero target could drive up the carbon price and demand for carbon credits. The government’s Technology Investment Roadmap aiming to bring down the cost of carbon sequestration on farms. The rising carbon market could help transform farm businesses and reshape the Australian landscape. David Claughton, Josh Becker specially for the ABC Rural.

Farmers may be deeply affected by net zero policies of the two major parties, and a big shake-up is possible to both the carbon market and farm landscapes around the country if they are fully adopted.

The ALP has set a 43 per cent reduction target for 2030 and has earmarked the “safeguard mechanism” as its key driver for getting there.

John Connor from the Carbon Market Institute has welcomed the policy but thinks both parties need to go further.

The group represents farmers, carbon traders and the big emitters and corporates, including BHP, Newcrest, Qantas, Coles, Energy Australia, Origin, Orics, Lion and Incitec Pivot.

“We have to do almost 50 per cent reductions on 2010 levels by 2030.”

He also supported the government’s Technology Investment Roadmap, which includes a range of measures to support companies to reduce emissions and develop the carbon trading system.

“The government has also been assisting companies that want to do voluntary measures, and we should be backing all these horses.”

How does the safeguard work?

The safeguard mechanism is designed to help big businesses measure, report and manage their emissions.

The Coalition introduced it when Tony Abbott scrapped the price on carbon, but Labor wants to make the controls on the major emitters even stronger.

Andrew Ward from the farmer-based carbon trading platform Regen Farmers Mutual thinks that a change to the safeguard principle will help push the price of carbon credits up beyond $40 per tonne.

“In Australia, it’s rising rapidly off a low base, but in the EU, it’s pegged to go over $100 per tonne.”

The bottom line still a barrier

For many farmers, the price of carbon is still only at the break-even point because the cost of complying with the regulatory framework is very high.

Up until last week, farmers had to use expensive tests to get a baseline on how much carbon was in their soils and then test again to prove how much it had increased.

A new methodology that allows modelling to determine carbon levels and testing should bring the cost down. However, Professor of Agriculture at Western Sydney University Snow Barlow said it was still not viable for many farmers.

Bankers’ attitudes changing

Farmers have been reluctant to commit to 25-year carbon sequestration deals because they put constraints on how they can manage their land, and banks have seen those deals as a liability on a farm’s title as well.

According to Andrew Ward, that could change as the constraints are being eased by new, more flexible carbon sequestration rules and the banks re-evaluate the benefits of carbon trading.

“They’re now starting to see those carbon assets as assets, not liabilities, and they’re lending now against environmental assets that are on-farm, where previously they never even measured environmental assets.”

To sell or not to sell?

Over 90 per cent of the trade-in carbon credits so far has been through the government’s own Carbon Emissions Reduction Fund (ERF) but the voluntary market is growing as more corporations seek to make deals directly with farmers or carbon aggregators.

So, should farmers focus on the voluntary market instead of a much lower-priced government trading platform?

Andrew Ward thinks there is still merit in going through the process of accreditation with the ERF because it has a good international reputation.

“Use the ERF for qualification, reporting and verification but because the voluntary market will pay for things that the regulated market won’t probably sell into the voluntary market.”

Carbon trading could help change the landscape

Riverina cattle and sheep farmer Clare Cannon is excited about the potential of these policies to change the economics of farming and the way farmers manage the land.

That is because storing carbon requires a lot more vegetation and biodiversity on-farm.

“Not only is it giving us potentially more income, but it will actually help us restore our landscapes.”

“The earth’s soil has the potential to hold two and a half times more carbon than all plants on earth and the atmosphere combined,” she said.

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