Carbon Farming

Carbon farming is one activity that has developed rapidly in recent years and, along with other environmental markets, is expected to continue evolving into the future.

What is carbon farming?

Carbon farming involves land managers changing practice to reduce greenhouse gas emissions or capture and hold carbon in vegetation and soils.

Land managers who register approved projects with the Clean Energy Regulator can sell their carbon credits to the Australian Government through the Emissions Reduction Fund, or on the secondary market.

Carbon farming is still a reasonably new industry in Australia. It allows land managers to earn Australian Carbon Credit Units (ACCUs) by following specific carbon farming methods. Each Australian Carbon Credit Unit equals one tonne of carbon dioxide equivalent (tCO2-e) and is a financial product.

Carbon farming methods fall into two categories: emissions avoidance and carbon sequestration.

Emissions avoidance
These are activities that reduce or avoid greenhouse gas emissions. Emissions avoidance projects do not involve permanence agreements. Emission avoidance activities could include:

  • destruction of methane generated from manure
  • herd management
  • changing livestock supplement regimes
  • changing fertilizer regime in irrigated cotton.

Carbon sequestration
These activities involve removing carbon dioxide from the atmosphere and storing it in vegetation through the process of photosynthesis. Carbon can also be sequestered in soils. All sequestration projects involve a period of permanence. Carbon sequestered in soils or vegetation must be maintained for a period of 25 or 100 years.

Earning Australian Carbon Credit Units through carbon farming has the potential to provide landholders with an alternative income stream and improve enterprise viability. However, as with any important business decision, it is critical that you take the time to understand all the pros and cons.

This series of webinars on Soil Carbon for Your Farm Business looks at the science of soil carbon to give farmers the foundations of carbon and their soils, and how to measure and trade carbon. Includes presentations from the NSW Department of Primary Industries and the Clean Energy Regulator.

Considering a carbon project?

Carbon projects should not reduce landscape diversity through a significant change of vegetation composition or structure.

The Clean Energy Regulator is the government body responsible for administering the Emissions Reduction Fund and the legislation around reducing carbon emissions.

The Clean Energy Regulator website has some excellent tools and information to help you determine an appropriate carbon method for you. The section called opportunities for the land sector outlines a range of methods including both emissions avoidance and carbon sequestration projects.
If you are thinking about a project involving storing carbon in vegetation or soil you should use the soil and sequestration decision tree to work out which method is most appropriate for you.

soil and vegetation sequestration decision tree

Carbon farming project guiding principles

  1. Projects should achieve social, environmental and economic benefits throughout the full project life.
  2. Projects should have multiple outcomes and co-benefits wherever possible.
  3. Projects should not have adverse social or environmental impacts.
  4. Where appropriate projects should include strong community support and involvement.
  5. Projects should achieve long-term sustainable land-use.
  6. Projects should not negatively impact primary production.
  7. Projects should not adversely affect neighbouring landholders.

What are good carbon farming projects?

A carbon project should seek to meet the following criteria:

  • The project should seek to improve, not reduce, landscape diversity through a change of vegetation composition and structure.
  • The project should seek to maintain groundcover above a minimum threshold of 50% through influences such as the control of total grazing pressure.
  • The project should seek to maintain or improve groundwater or surface water distribution, quality and availability.
  • The project should seek to adhere to relevant invasive species or biosecurity plans and should not result in an introduction or increase in pest animals, diseases or weeds.
  • The project should seek to maintain or improve high conservation value asset areas.
  • The project should seek to avoid damage to sites of Aboriginal cultural significance in accordance with the Due Diligence Code of Practice for the Protection of Aboriginal Objects in NSW.
  • Project managers should be familiar with all relevant State and Federal legislation. - The project should avoid impacts on threatened species or endangered or threatened ecological communities as listed under State and Federal legislation. - Relevant recovery plans provide a sound basis for managing recognised endangered or threatened ecological communities as listed under State and Federal legislation.
  • The project should be consistent with any existing Local Land Services contractual requirements

Will the proposed carbon project fit in with your long-term goals?

Before you make the decision to take on a long term carbon project you should consider how it will fit in with future plans for your property, business and lifestyle? Remember, sequestration projects involve committing to maintaining the carbon for a 25 or 100 years.

Although 100 years may seem like a long time, consider the permanence obligations on carbon sequestration projects. When determining the long term goals for your property or business you should also take into account succession plans where appropriate. It may be worth consulting a professional to assist you with your plan.

Once you’ve determined your long term goals you must decide whether the carbon project you’re considering aligns with those goals. Other things you might ask yourself:

  • What changes to your management practices will you need to undertake to meet the requirements of the carbon project?
  • Do you have the time and capacity to make those required changes?
  • Will your project allow you to continue grazing the area? If not, how will that impact on your primary production?
  • Will your project allow you to achieve long-term sustainable use of your land?
  • What will the landscape look like after 25 or 100 years in a carbon project?

Carbon Project SWOT analysis

Some people find it useful to use a SWOT analysis when they’re making important decisions. These are just examples of how you might think about the strengths, weaknesses, opportunities and threats associated with implementing a carbon project.

Example — guaranteed income for the duration of the contract (3-10 years).

Example — permanence obligation may limit long term productive capacity.

Example — Financial opportunity to invest in infrastructure and improving management practices.
Example — Opportunity for intergenerational wealth.

Example — wildfire may destroy project area.
Example — permanence may impact on property value in the long term?

Consider the impact of your project

  • Will the project cause damage to areas of high conservation value or areas of Aboriginal cultural significance?
  • Will this project have any adverse effect on neighbouring landholders?
  • Will the project adversely impact groundwater of surface distribution, availability or quality?
  • Will the project reduce landscape diversity?
  • Will the project result in a reduction of groundcover below 50%?
  • Does the project conflict with the requirements of any existing government contracts?

Carbon project developers

Sometimes referred to as brokers or aggregators, there are a range of project developers working across the carbon and environmental sectors.
Many land managers work with project developers to help them navigate the scientific, financial and legal aspects of developing a carbon project which involves following very specific “methods” to deliver carbon abatement that is measured and traded as an Australian carbon credit unit.

Before signing an agreement with a project developer you should do some homework.

What are their skills, experience and track record? If they cannot demonstrate experience and expertise in this field you should be cautious.

Does the carbon broker hold an Australian Financial Services licence? Australian carbon credit units are tradable units and are regulated by the Clean Energy Regulator as financial products. Reputable brokers (project developers) should hold an Australian Financial Services licence. You can also check whether their name is on the Australian Securities and Investment Commission’s register.

What income will you receive from participating in the project? What percentage will the broker take? Different brokers offer different fee structures. Talk to other landholders and brokers to make sure you’re getting the best deal. When considering the projected income from your carbon project don’t forget to factor in implementation and maintenance costs as well as any income potential you may forgo if you implement this project. For example, will your stocking levels be reduced?

Who is the project proponent? You or the carbon project developer? It is the project proponent who enters into the carbon abatement contract with the Clean Energy Regulator. Australian carbon credit units are issued to the project proponent and they are responsible for reporting to the Clean Energy Regulator about the conduct of the project. In some cases the landholder is the project proponent who works with a broker or aggregator. In other cases the carbon project developer themselves are the project proponent for the project being implemented on your property.

What services will be covered by the broker fees? Will there be additional costs for auditing, monitoring and reporting over the life of the project?
Find out just what services you will receive as part of the fee your broker/aggregator is receiving. For example, auditing. There are rigorous auditing and reporting requirements involved with carbon sequestration projects. Ask your broker whether they will provide all the auditing involved with your project? If so, is this included in their flat fee or commission, or will this incur extra costs?

How much is it going to cost you to implement the carbon project? Also, how much will ongoing management of the carbon project cost? For example, you may be required to install fences and fire breaks to protect your carbon investment. As well as considering initial costs for installing these, you should also think about the ongoing maintenance costs over the full life of the project.

What are the risks? How certain are the future financial benefits? What are the implications if your project doesn’t generate the emissions reductions agreed to in your contract? What will happen if your carbon project is impacted by fire or damaged in some other way?

Carbon Farming in NSW Western Region

Local Land Services recognises that carbon farming can provide opportunities for landholders in the Western region. Part of our role is to work with all relevant stakeholders to maximise the long term regional benefits and help to avoid any adverse outcomes.

These three factsheets will help you get started and navigate a carbon project.

  1. An introduction to carbon farming (PDF)
  2. Guiding principles of carbon farming (PDF)
  3. Managing a carbon project (PDF)

Commonly used climate change terms

Carbon emissions: the total amount of greenhouse gases, including carbon dioxide, methane and nitrous oxide, that are released into the atmosphere.
Carbon abatement: the means to reduce greenhouse gas emissions. It includes both carbon sequestration and emissions reduction activities.
Carbon sequestration: the process by which carbon is captured and stored in vegetation and soil. Vegetation absorbs carbon dioxide through photosynthesis, releases the oxygen, and stores the carbon in its leaves, wood and roots. As plant roots die, the carbon molecules in the roots remain in the soil unless they are exposed to the air through tillage and other disturbances.
Emissions reduction: the process of reducing the amount of greenhouse gases that are actually produced.
Carbon mitigation: a human intervention to reduce our impact on the climate system. It includes strategies to reduce greenhouse gas sources and emissions as well as enhancing greenhouse gas sinks.
Carbon farming: a farming method that reduces greenhouse gas emissions or captures and holds carbon in vegetation and soils.

Related information