Australian carbon tax lays groundwork for carbon credits

Agricultural businesses will be able to earn money from trading carbon credits in Australia as the Australian government secures the final necessary votes in parliament to bring in its carbon tax plans.

Agricultural production currently accounts for almost a quarter of Australia's yearly total of greenhouse gas emissions. Now the Australian government is helping food producers to contribute to the fight against climate change through the Carbon Farming Initiative.

The plans are set to be laid out in detail on Sunday and it is thought that carbon will be priced at around A$23 per tonne.

The carbon tax will initially be levied at the country’s top 500 polluting companies, a number which was whittled down from the top 1000 polluting companies after unpopularity at the proposal in Australia.

Australians are among the world’s worst greenhouse gas polluters per person because of a reliance on cheap coal reserves in the country.

The tax will underpin demand for farm based offsets, steered by the Carbon Farming Initiative.

Over three to five years the carbon tax on polluting businesses is planned to evolve into an emissions trading scheme. Companies will be able to reduce their carbon emissions against the Australian government targets through trade with agricultural producers implementing carbon reduction methods.

International trade will be permitted at the end of the initial fixed price period for carbon price after a market in Australia has been established.

Agricultural landowners can do a number of things in order to gain an Australian Carbon Credit Unit (ACCU). These include reforestation and native forest conservation, soil enhancement in order to store more carbon and curbing methane emissions from livestock and also landfills. Activities will only be rewarded if they are beyond the owner’s normal effort.

New ideas such as these are being envisaged and floated at the moment in a country which has previously relied heavily on fossil fuels. In an interview with Reuters, Martijn Wilder, global head of Baker & McKenzie's environmental markets practice explained that the economic mechanisms behind the scheme are also at the avant garde of countries’ plans to reduce carbon.

He said: "The fact that ACCUs are legally recognised as both a clear property right and in many cases a financial product is significant and well ahead of other markets.”  

"It also puts in place a more transparent legal framework which brings together state-based legislation, under which property rights to sequestered carbon are registrable on the title of the land, with the federal rights to create the carbon that can be traded

"It puts a formal regime in place for regulating the legal treatment, from a financial markets perspective, the trading of such rights,"

In an interview with ABC News, Dr Ed Charmley, Research Programme Leader at the Commonwealth Scientific and Industrial Research Organisation said: “CFI is a program that will reward producers. It's an incentive, it's not a big stick and I think that's great. I think incentives are good.”

Image: John Tramway | Flickr