Carbon pooling advantage for farmers

Carbon pooling advantage for farmers


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Australian Carbon Traders director Ben Keogh said buyers will not want small contracts so landholders must aggregate to satisfy the varied carbon market demands.

Australian Carbon Traders director Ben Keogh said buyers will not want small contracts so landholders must aggregate to satisfy the varied carbon market demands.

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POOLING of carbon and biomass will allow farmers to take advantage of opportunities in the billion dollar carbon market resulting from the Carbon Farming Initiative (CFI).

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POOLING of carbon and biomass will allow farmers to take advantage of opportunities in the billion dollar carbon market resulting from the Carbon Farming Initiative (CFI).

Speaking at the 2011 Oil Mallee Industry Conference in Perth, Australian Carbon Traders (ACT) director Ben Keogh said buyers will not want small contracts so landholders must aggregate to satisfy the varied market demands.

With the uncertainty surrounding the future carbon market, farmers should be planning for small varied supply volumes to meet a large, varied market demand.

Pooling would allow farmers to apply a traditional approach they were comfortable with to a new industry.

Mr Keogh said the present carbon market in Australia was a regulated voluntary market governed by the National Carbon Offset Standard (NCOS) where people measured, monitored and reported on their carbon emissions and used offsets to become carbon neutral.

"We have about 17 key buyers at the moment and their purchase parcel size ranges from the smallest at 300 tonnes up to about 200,000t," Mr Keogh said.

"All up, we're looking at something around the 1.4 to 1.5 billion tonnes bought annually."

Mr Keogh said the mandatory international market was valued at $136 billion globally in 2009.

He said forestry or farm abatement activities were already a strong performer in the voluntary market and was influenced strongly by marketing campaigns.

People were influenced by the point of difference at the purchase point where given a choice between two equal washing powders, for example, they would choose the low carbon emitting one.

Pooling would enable participants to enhance their marketing power to take advantage of the emotional triggers that influence consumer buying.

Marketing research could also be used to adapt abatement choices further back in the supply chain.

"One of the major reasons for pooling is economies of scale, where you can start getting a larger amount of carbon sequestration managed in a single way and share the costs and methodology to get a cheaper product to market," Mr Keogh said.

Pooling also allowed bargaining power not available to small sellers and helped obtain competitive prices for monitoring, verification and auditing requirements.

With buyer preferences changing over time, Mr Keogh said delivery risk was shared among participants when resources were pooled.

"We're talking about permanent abatement and biosequestration when we've got to deal with seasonal and climatic anomalies, changing government regulation and changing ownership," Mr Keogh said.

"Succession planning is complicated enough without passing on an obligation to maintain the soil carbon for the next 60 years."

Information sharing in developing methodologies or approaches to measuring and reduced administrative and transaction costs were another advantage.

"Once carbon credits are created, you need to recover transaction costs and smaller projects under self management make this harder," Mr Keogh said.

New carbon rules in CFI had opened opportunities for the pooling and aggregation markets with a huge range of supplier sizes.

"There are about 1000 or so landholders in the Oil Mallee Association with 12,000 hectares spread out over a fair bit of WA so you've got to somehow pull that together," Mr Keogh said.

"The CFI is almost on us and we need to make the best money we can out of our plantings.

"We are farmers and businessmen and what we're trying to do is actually make a profit, so we need to understand the market."

Unlike the wool or grain market which dealt with tangible goods, Mr Keogh said when dealing with abatement, they were actually selling a series of numbers.

"It gets a little esoteric at times and we need to provide these securities and certainties to the buyers.

CFI allowed people more choice such as blending of the environmental, water and biomass markets and he said the ACT's Australian Farm Abatement Registry (AFAR) would allow the tracking of management units to direct it to the best possible market.

Mr Keogh said people needed to think of the end market when creating and selling credits and understand the rules and regulations.

He said farmers should start with the emissions and then look at the sequestration and abatements available to take them to the end market.

"I've heard people talking about prices of $25 a tonne, but it's not going to be $25/t in the non-Kyoto CFIs," he said.

"At the moment you can buy non-Kyoto credits to satisfy a NCOS arrangement for $2 and $3/t.

"Kyoto credits are going to be subject to international pressures and that's where the main market is going to be."

Mr Keogh said sellers of carbon credits have to be able to adapt to changing preferences and multiple project streams and sites.

"By going through the projects which are in the CFI, we will reduce carbon in the atmosphere and it will also lead to efficiency gains in production and cross-production benefits such as lowering wind speed amelioration, lower surface temperatures, building soil properties and fighting salinity, which will lead to more productive farms in the long-run," Mr Keogh said.

"Strong carbon will lead to better moisture retention, diversifying income through different product and income streams."

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