While there continues to be a significant degree of uncertainty as to future policy directions in relation to a carbon price,  a solid amount of work has already been done in setting up a legal framework on which a  long term carbon market can develop.  Every market has its early and late participants; the distinguishing feature of the carbon market is that it has been created to (1) reduce and (2)  reabsorb pollution of the atmosphere released by the emission of green house gases. The aim of this is to  prevent global temperatures rising so much that the planet becomes irrevocably degraded as habitat for the species now living on it.

Traditional markets (such as coal) start with a commodity in demand and prices are determined by supply and demand. Global economic growth is still based to a large degree on fossil fuels, so  carbon markets  are badly distorted by  economic signals that rely on  rising fossil fuel demand to continue to drive economic growth. It will take time for the carbon market to achieve the type of recognition that the energy market currently possesses. Energy use and fuel pricing has become a fundamental element of human societies, yet carbon pricing encouraging sequestration will need to become just as important if global temperatures are to remain within tolerable limits.

The good news is that the Federal Government has just released (June 2013) new regulations which allow farm forestry to be an eligible carbon farming alternative. This opens up opportunities for farmers to plant trees as  small scale plantations, to operate those plantations as commercial tree growing operations and to obtain carbon credits as well.

In areas of 400 mm+  rainfall, a farm forestry project will need to be no larger than 100 hectares or 30% of total farm area so that it is distinguishable from a commercial plantation industry. In areas of  less than 400 mm  rainfall, a farm forestry project will need to be no larger than 300 hectares or 30% of total farm area.  This new methodology for carbon sequestration will be welcome to landholders who wish to diversify into tree planting but especially so to small landholders who wish to enter the carbon market but do not see the current carbon price as sufficient  by itself to justify the costs of tree planting and setting land aside.  With this new methodology, it will be possible to derive income from harvesting of plantation products while still remaining compliant with the rules of the carbon trading market.

The additionality requirement stemming from the Kyoto Protocol that set a 100 year project parameter  for environmental plantings under the Carbon Farming Initiative has been seen as a barrier for farmers to enter the carbon trading market, even though the science backing it is sound. There will be more detailed posts  about additionality  following at a later date on this blog.

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