Australian tree growers could cash in on the voluntary carbon market

Political wrangling and controversy have dominated public discourse on carbon valuation in Australia.  Meanwhile, the global market for carbon credits has increased to €45 billion and there is solid potential for tree growers on Australian farms to generate meaningful revenue by participation in the voluntary sector of the market.  Worth $4 billion in 2014, the international voluntary market provides for direct transactions between carbon offset providers and buyers. Participants may be individuals, corporations, or governments, and the traded offsets may derive from energy conversion, avoided deforestation, land use change, or forest carbon sequestration.

I have recently returned from Hawaii where I led a local company, Hawaiian Legacy Hardwoods, through the process of certifying their carbon assets with The Gold Standard Foundation.  I was impressed by Gold Standard’s approach and its suitability to Australian farm forestry, especially considering the following features:

1. Gold Standard permits the registration of carbon credits from rotational forestry.  This is a unique feature of Gold Standard that allows participation by tree growers who have scheduled harvesting in their forest plans
2. Gold Standard encourages the registration and sale of carbon credits from projected forest growth at the initial stage of certification, providing a massive benefit to project cash flow.  Robust methodologies are in place to ensure that the projected carbon sequestration is actually achieved through the project life and the project developer is liable for any shortfalls between projected and actual sequestration. 
3. Retroactive submissions are permissible for project activities that commenced up to three years prior to initial certification as long as it can be demonstrated that carbon was a serious consideration in the decision to undertake those activities.
4. Gold Standard sets high barriers for compliance to environmental and social benefits, similar to those required for Forest Stewardship Council certification.  Although this may impose certain limits on operational practice, the great integrity of the Standard’s accountability mechanisms has translated into consistently greater prices for Gold Standard credits in the marketplace.  For example, Gold Standard credits traded at an average price of US$8.50 versus a market average of US$4.90 in 2014 (across all project types including the less valuable carbon from energy change projects).

The Gold Standard Foundation has removed two major barriers to participation by Australian tree growers in the carbon market by allowing rotation forestry and up-front trading of project carbon that may take 20 to 30 years to sequester.  However, there are other considerations that in some cases may pose barriers to participation:

1. The project must demonstrate its additivity, which means that the project feasibility relies upon revenues from carbon registration.  In practice, the additivity test involves identifying all plausible land uses for the project area and applying market analyses to determining which land use would offer the greatest revenue in the absence of carbon finance. It can be a complicated step but one that we can help guide you through.
2. The project must not be conducted on land that was cleared within 10 years of commencement, although new guidelines for small projects (up to 500 ha) allow for recent land clearing if it was not intentionally for the purposes of conducting the carbon project.
3. A number of environmental and social do-no-harm requirements must be met but these can usually be accommodated by altered operational practices and implementation of policies and protocols that we can assist with.
4. Baseline carbon is the amount of carbon that would be maintained or sequestered under the business-as-usual scenario.  The carbon baseline must be calculated for each particular project.
5. The project must not simply shift a carbon-polluting activity from one place to another. This is termed leakage.
6. There are a number of fixed costs associated with developing a carbon project including fees to The Gold Standard, payment for auditors, and for technical services.  These effectively impose a limit on the scale of a project. 

Trading on the voluntary carbon market (as opposed to a compliance mechanism such as the Emissions Reduction Fund (LINK)) provides for an intimate connection between buyer and seller and affords you the opportunity to differentiate yourself from other carbon-offset suppliers.  This offers the greatest advantages to those who are creative in their project design and marketing.  For example, a buyer may be willing to pay upwards of $15/t for carbon sequestered in a permanent restoration planting of biodiverse rainforest, whereas carbon from a Turkish wind farm project may be worth as little as $2 or $3/t.

Treehouse Consulting has the expertise to assist landowners and forest growers with carbon project feasibility assessments, concept evaluation, project design, and establishment of the structures and pre-requisites that must be in place to ensure a smooth certification with a registry such as The Gold Standard.  Contact us for more details.