Uncertainty limits take-up of carbon farming credits

Australia this week surpassed 3 million credits issued under its carbon offset scheme for agriculture, forestry and waste, but uptake of new projects is low with regulatory uncertainty weighing heavily on project developers, experts say.

The Carbon Farming Initiative (CFI) was launched in 2011 under the former Labor government to drive emission reductions in sectors not covered by the carbon pricing mechanism, as part of Australia's target to cut greenhouse gas emissions to 5 per cent below 2000 levels by 2020.

Under the CFI, developers that curb carbon emissions are issued offset credits, known as Australian Carbon Credit Units (ACCUs), which they can sell to big emitters looking to meet carbon targets imposed by the government.

But with the new government eager to repeal the carbon pricing scheme, demand for ACCUs has fallen away and development of new projects has almost ground to a halt.

"Should the carbon pricing mechanism be repealed, demand for ACCUs will be limited to the voluntary market," said Lloyd Vas, general manager with lobby group the Carbon Market Institute.

Compared to mandatory emission markets, voluntary demand is modest.

The conservative government wants to keep the CFI as a supplier to carbon cuts under its proposed Emissions Reductions Fund, but it remains unclear how the fund will work.

Landfills

Of the 3.1 million ACCUs issued since the Carbon Farming Initiative started two years ago, nearly 80 per cent have gone to projects that capture methane emissions from landfills. But those are mostly projects that were already up and running when the CFI launched.

"Landfills were already heavily participating in previous offset schemes, so they were easily able to transit those projects over to the CFI," said Elisa de Wit, partner with lawfirm Norton Rose Fulbright.