Farmers warned not to hastily sell carbon credits

The comments follow the federal government's tax relief to Australian farmers working to lower carbon emissions, worth an estimated $100 million over four years.

Under the change due to start on July 1, the concessional tax treatment will apply to primary producers that generate revenue from the sale of Australian Carbon Credit Units and biodiversity certificates.

But Mecardo managing director Robert Herrmann warned farmers against signing away rights to carbon credits before there was clarity on the implications to a farm business, such as ownership of the rights and the potential need to retain them in offsetting business emissions in the future.

"Farmers should be hesitant to sell based on the current information, which is not 100 per cent clear and not easily understood what the obligations are to a farmer who sells carbon credits to a third party," Mr Herrmann said.

"If those credits reside on a farm but someone else owns them, what does that mean if something goes wrong and you have a drought?

"No one has adequately answered that."

Earlier this month the price for carbon credits came crashing down, after experiencing a high of more than $55 a tonne in January.

The carbon credit market plunged by more than 30pc following the announcement that people would be able to apply to opt out of their fixed-delivery carbon credit contracts with the federal government and enter the lucrative open market.

This market volatility was another reason Mr Herrmann urged extreme caution until there was the regulation of carbon markets and carbon values to address how ownership of carbon credits would apply to agricultural land.

He said depending on soil carbon, which was based on rainfall, was difficult in a country that was susceptible to drought conditions.

"You gain carbon credits in a good season because you can't help but increase soil carbon when you're growing grass," he said.

"But the reverse is also applied - you lose carbon in a drought."

With the value of carbon credits set to increase, Mr Herrmann said market opportunities could outweigh the financial gain from selling credits.

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He said farmers may be better off saving carbon credits for their own commodities as consumers increasingly demand carbon neutrality.

"You may use those carbon credits to attach to the commodity you are producing to increase its value to customers downstream," he said.

"Farmers will see real value added to the commodities in offering products with the provenance of carbon credits, and other factors like regenerative farming.

"There is an inquiry for carbon-neutral wool already and brewers would love to be able to say they grow from carbon-neutral farms."

He urged those farmers pursuing carbon neutrality farming market opportunities to register their carbon abatement interest with government agencies and begin to benchmark their carbon sequestration through monitoring.

"Without a baseline, you can't claim anything," he said.

"Selling carbon credits shouldn't be your first point of movement - the first thing you may need to do to sequester carbon is change your farming practices, and the second thing is to measure your baseline and register with the government that you intend to improve your carbon."

A recent report by Mecardo market analyst Andrew Woods into livestock production systems' greenhouse gas emissions revealed electricity, stationary energy and transport combined impact generated 70pc of the world's total emissions, while agriculture was the next-largest contributor at 14.9pc.

Grazing beef was the largest source, accounting for 44pc of agricultural emissions while sheep came next accounting for 18pc and dairy 10pc.

In Australia, ruminants account for 11.1pc of the country's greenhouse emissions, with beef accounting for 7pc of this, sheepmeat accounts for 1.3pc, wool 1.4pc and dairy 1.5pc.