Carbon farming eligible projects

Part 1 of the Carbon Farming Series gave an overview of the carbon market, but you may be wondering, how exactly does a farmer sequester or abate carbon? The purpose of this blog is to provide an overview of the common carbon farming projects seen within the market.

The methodology of determination

The Clean Energy Regulator (CER) is responsible for the development of new methods under the Emissions Reduction Fund (ERF). These methods act as the backbone of eligible carbon farming activities, where each method has distinct attributes and measurement methods which must be followed. As a generalisation, projects can be classified into two areas:

Emission avoidance offset projects: A project fits within this category if it is an agricultural emissions avoidance project, a landfill legacy emissions avoidance project, any other project to avoid emissions of greenhouse gases.

Sequestration offset projects: To remove carbon dioxide from the atmosphere by sequestering carbon in one or more of the following: living biomass, dead organic matter, soil.

Falling within either of the above categories, eligible projects which the team at Mazars has seen in practice are discussed briefly below.

Soil carbon projects

Soil carbon farming projects fall within the sequestration offset category, storing carbon by increasing the amount of organic matter in the soil as a result changes in property management. Examples of such include:

Changing pasture species composition from annuals to perennials;
Retaining stubble that was previously removed by baling or burning;
Converting cropland to permanent pasture.

Soil carbon has gathered substantial attention in the media and community at present, and remains one of the harder projects to establish from a cost outlay point of view. Soil carbon methodologies are now in their 3^rd iteration, where each iteration has improved on the limitation of the previous. How much carbon is sequestered within the soil is heavily impacted by management practice implemented including: legume plantings, rotational/timed grazing and improved pastures. It’s expected that with greater demand the cost of the science will come down and in line with a greater value on ACCU’s, projects will become more viable.

Soil carbon projects are implemented over a 25 or 100 year period with initial ACCU’s typically generated from year 5. Where land managers must measure the baseline carbon content of the soil before the project commences and measure the change in carbon levels over the lifetime of the project.

Native forest regeneration projects

Regeneration carbon projects, involve managing the land in a way that enables native vegetation to regenerate naturally into the forest. Falling within the sequestration category, methods to achieve this outcome include reducing or removing suppressants including:

Grazing pressure;
Feral animals;
Non-native plants;
Clearing activities.

This project involves promoting the natural germination of trees rather than seeding or planting activities. The goal is that overtime the project, a once clear area will transition to forest cover. Projects can only take place on land areas that have not had forest cover for at least 10 years, where regeneration projects can be implemented for 25 or 100 years.

Beef herd management projects

By means of carbon avoidance a beef herd management project involves managing cattle in a way that reduces the emissions intensity of the herd. Changes may include:

Expanding water points to allow cattle to graze more widely and make better use of available pasture;
Providing a feed supplement all year round;
Establishing higher quality pasture;
Installing fences to control herd movements and improve joining practices;
Improving weaning percentage by culling unproductive cows.

The duration of beef herd management project is commonly 7 years. Where conditions include the tagging of cattle and the requirement of positive live weight gain.

Savanna burning projects

Savanna burning is an emission avoidance activity tailored to properties located in Northern Australia with high rainfall, typically over 600mm annually. Whereby land managers can generate ACCU’s through strategic early dry season burning. The purpose being to reduce the risk of uncontrolled savanna wildfires, thus reducing emissions and enabling additional carbon to be stored in growing vegetation.

Projects that focus on avoided emissions from wildfire can be implemented on a yearly basis, while projects that also monitor stored carbon in growing vegetation can be implemented in either 25 or 100-year durations.

Things you should consider

When correctly implemented, carbon farming projects can offer a great additional revenue source for primary producers. The reality is that carbon contracts can be very long in duration, with associated risks that need to be considered. Our understanding from talking with our clients is that regenerative farming projects can be run in conjunction to existing operations and may lead to great outputs through the best deployment of physical assets. Carbon farming can also provide additional income/ capital to further improve other farming projects to their best use.

Risks should always be considered on a case-by-case basis, and through Mazars’ experience some trends have been identified:

Misunderstanding of reporting requirements, including audits;
Unrealistic expectations of ACCU generation;
Carbon farming to the detriment of current operations;
Project design which does not suit the country type;
Misunderstanding of permanence obligations.

When projects are considered in conjunction with the current operation co-benefits can be generated. It is advantageous to discuss various project approaches, potential risks, expected financial return and reporting requirements with an expert. Mazars Agribusiness team is well placed in the market to delivery practical and actionable advice. Contact your usual Mazars advisor or our specialists John Kotzur and Matthew Beasley for a confidential discussion via the form below or on:

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Published: 03/06/2022

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