Carbon farming is no longer new in Australia with our Australian Carbon Credit Unit (ACCU) having been generated, bought, and sold for around 10 years now. However, there is still a lot of misinformation and a lack of understanding about what this means for 21st Century Agriculture and the bottom line. In this article, we will examine some of the common terms and bring them together to show why carbon farming is not only smart but an essential element of the future of farming in Australia.
The State of the Environment Report 2021 discusses amongst other things the cumulative pressures both historical, present, and future that agriculture and our environment face. In general terms, with the impact of these pressures including climate variability and global economic features, it is harder and harder to do business in modern times. Agriculture is in a difficult position globally with consumers, governments, and conservation groups demanding more environmentally friendly solutions to our emissions and corporations looking to find unique ways to manage their emissions through insetting and offsetting. It can be a complicated space. However, understanding the opportunities being presented can assist you to future-proof your agricultural business and add additional benefits to your bottom line.
Understanding the Emissions Landscape
Understanding the Emissions Landscape is part of the process. Exploring the requirements and why they are necessary will assist you in working out how to deliver and who will be interested. Let’s take a quick look.
Put simply emissions are considered in relation to carbon dioxide equivalents. Whether it is methane from ruminants or nitrous oxide from fertilisers or carbon dioxide from the diesel used in the tractor every emission is reported as CO2 equivalent, this is for ease of understanding the accounting framework. There are calculations that make these conversions that are built into tools such as the SB-GAF tool which calculates your emissions – it is not like for like. We can help you navigate the emissions calculations for your farm business. Click here to get in touch.
Next emissions are broken down into Scopes. These scopes are based on where in the chain they are produced and who is responsible for them.
Scope 1 emissions are those which you have direct responsibility for eg you own or control them. These include your livestock, general farming emissions such as running equipment, etc.
Scope 2 emissions are a result of energy generation that you consume in running your business – your power consumption is a primary example.
Scope 3 emissions are all those that occur off your farm and outside your control and contribute to your business inputs. A good example is the emissions generated by a fertiliser manufacturer or transport company in their processes before you purchase their product.
There has been a lot of talk about emissions reductions and supply chains ahead of the mandatory reporting that many large corporates will need to begin addressing in the coming months. The simplest example of this is your bank. They may hold a mortgage over your property in return for operating capital which means that they are effectively very interested in your business health as it bears a direct relationship to your ability to repay your loan. We all understand this. But your bank, at least the bigger ones at this stage, are also very interested in your emissions as they will be required to report to their shareholders and ASIC about their emissions and what they are doing to reduce them. Those emissions include the emissions from your farming operations as your farm sits on its balance sheet. Your Scope 1 & 2 emissions are their Scope 3 emissions. So it is in the bank’s best interest to work with you to ensure your emissions are also coming down. This is where you can apply some leverage if you are a farmer who has added carbon to the list of commodities you grow.
Carbon as a Commodity.
Most farmers are growing commodities of one type or another be that wheat, sheep, cattle, or cotton. Every product you hope to turn off is in fact a commodity. Carbon whether it is in the form of soil organic carbon or standing in trees could also become a precious commodity to your farming business. Imagine being paid a premium for soil restoration or for planting shelter belts around your crop or in your grazing country as part of your farming practice. This is something that Australian farmers can do right now. Many farmers are already reaping the rewards from doing exactly that.
Australia’s Clean Energy Regulator administers the Australian Carbon Credit Units Scheme which allows you to register projects according to various methods that will generate carbon credits that can be sold or retired against emissions. This represents a valuable instrument or commodity that many corporate entities are seeking in order to assist them in reducing their emissions. This is called offsetting. On the other hand, insetting is where a corporation would use carbon credits they have generated to retire against emissions. Australia has one of the most robust systems for this in the world and other countries look to our policies to inform their own.
As a business owner in the agriculture sector farming carbon makes more sense than just the generation of carbon credits. Depending on the method used to generate those ACCU’s the benefit to your natural capital and the value of your farming asset will also increase. You effectively are getting paid to increase your productivity, and your capital assets, and when combined with regenerative or conservation agriculture you will also see an uplift on the bottom line as your product becomes better quality and more sought after. That is a fourfold win.
Carbon Farming Methods
Primarily there are a few basic methods for carbon farming in Australia, Sequestration or Emissions Avoidance. Under the sequestration heading, we can look to the soil and build soil organic carbon at scale utilising a range of activities or vegetation usually in the form of trees. Emissions avoidance seeks to avoid the issue in the first place so things like reducing emissions through feed additives in livestock is one method. Methods are under constant development and review to ensure they remain effective and reach the desired outcomes. It is for this reason we have not gone into the specifics of any one method in detail here. Look for our other articles about specific methods and how to qualify on our site or reach out for a chat to understand your specific context and needs.
Whichever way you farm now it is clear that to remain viable and financially secure into the future agriculture must evolve and that includes taking up the responsibility for restoring our degraded soils and farmlands. Farmers are in the box seat when it comes to carbon farming as they are the only ones who can sequester carbon at scale. 21st Century Smart Farmers are adding carbon farming to their list of commodities and opening up a new world of options and possibilities in the process.