Australia: What should primary producers consider when entering into the carbon farming market?

What is carbon farming?

Primary producers may be contemplating entering into the carbon farming market as a potential revenue stream. Carbon sequestration involves the capture and storage of carbon dioxide in plants, soil and oceans. Carbon farming helps reduce the effects of greenhouse gas emissions and protects the environment.

The Commonwealth Carbon Credits (Carbon Farming Initiative) Act  2011 has set up a scheme for the issue of Australian carbon credit units as part of the Emissions Reduction Fund. Land managers can gain carbon credits through adopting innovation in land management practices to store soil carbon. Land managers can also reduce the effect of greenhouse gas emissions through offset projects, such as upgrading equipment, improving vegetation management or using new carbon capture technology.

Carbon credits can then be traded in the carbon market. Companies like Qantas  have purchased these credits from offset projects to achieve their emissions targets.

Legalities

It is essential that you secure your legal right to the carry out the project activities and your ownership of the right to be issued the credit units as a result of such activities. The process for establishing this legal right will differ depending on the type of project, but it is always essential to consider pre-existing rights, and in particular in the case of pastoral land, Native Title rights.

Offset projects under the Emissions Reduction Fund require the consent of all 'eligible interest holders', including Claimants and holders of native title rights. Pastoral lease holders should undertake due diligence and, where appropriate, enter into legally binding agreements which set out their rights to conduct project activities and deal with ownership of associated carbon credit rights.

In the case of native title groups, it is imperative that they are consulted throughout the process. This includes the requirement for free, prior and informed consent.

An agreement is likely to require an Indigenous Land Use Agreement, which must then be provided to the Clean Energy Regulator. Such agreements protect the proponent from any future changes to native title while ensuring native title holders can negotiate or be consulted about activities on the land. The agreement allows the pastoralist or land manager to secure a legal right to continue the project into the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.