Landholders losing interest in offset scheme

December 12th, 20138:20 pm @

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Reuters

Australia this week surpassed 3 million credits issued under its carbon offset scheme for agriculture, forestry and waste, but uptake of new projects is low with regulatory uncertainty weighing heavily on project developers, experts say.

The Carbon Farming Initiative (CFI) was launched in 2011 under the former Labor government to drive emission reductions in sectors not covered by the carbon pricing mechanism, as part of Australia’s target to cut greenhouse gas emissions to 5 per cent below 2000 levels by 2020.

Under the CFI, developers that curb carbon emissions are issued offset credits, known as Australian Carbon Credit Units (ACCUs), which they can sell to big emitters looking to meet carbon targets imposed by the government.

But with the new government eager to repeal the carbon pricing scheme, demand for ACCUs has fallen away and development of new projects has almost ground to a halt.

“Should the carbon pricing mechanism be repealed, demand for ACCUs will be limited to the voluntary market,” said Lloyd Vas, general manager with lobby group the Carbon Market Institute.

Compared to mandatory emission markets, voluntary demand is modest.

The conservative government wants to keep the CFI as a supplier to carbon cuts under its proposed Emissions Reductions Fund, but it remains unclear how the fund will work.

Landfills

Of the 3.1 million ACCUs issued since the Carbon Farming Initiative started two years ago, nearly 80 per cent have gone to projects that capture methane emissions from landfills. But those are mostly projects that were already up and running when the CFI launched.

“Landfills were already heavily participating in previous offset schemes, so they were easily able to transit those projects over to the CFI,” said Elisa de Wit, partner with lawfirm Norton Rose Fulbright.

But while landfills have been successful under the scheme, other activities have been slow to take off and only a few projects have seen the light of day.

“We haven’t had any investment interest in 18 months,” Andrew Grant, CEO of CO2 Group, Australia’s biggest carbon project developer, told Reuters in October.

In addition to political uncertainty and lack of demand, project development is also hampered by the long lead-time and approval process farming and forestry projects need, according to observers.

“A few small forestry projects have gotten through, however, the larger projects have found it very onerous,” said one developer who wished to remain anonymous.

“In reality, investment in new CFI land-based forestry projects will not be viable without a significant carbon price or a clear price and purchasing signal,” he added.

With at least another seven months likely to pass until the future of Australia’s climate policy becomes clear, observers expect the nation’s offset market to languish for a while longer.

Article source: http://www.businessspectator.com.au/news/2013/12/12/carbon-markets/landholders-losing-interest-offset-scheme