by Mick Keogh
This article was first published at Ag Forum and cross posted under Australian Farm Institute copyright conditions
Henbury Station, site of RM Williams Agricultural Holdings controversial carbon project
Image sourced from Beef Central
Developments over the past week have confirmed the need for farmers to approach the carbon market with caution, and to ensure they have a full legal understanding of the implications of any contracts they enter into. This is particularly the case at the present time, when there is active discussion occurring on both sides of politics about potential future changes to carbon policy post-election.
Over the past few years, there has been quite a lot of commentary about the potential implications of carbon markets for Australian farmers. Initial Treasury modelling downplayed potential negative cost impacts for agriculture, although modelling by both ABARES and the Australian Farm Institute highlighted that, particularly in the short-term, negative impacts were likely to be quite significant for some sub-sectors of agriculture, especially given the absence of similar policies for competitor agricultural exporting nations.
The 'flip side' to the additional costs associated with carbon policy is the Carbon Farming Initiative, a legislative framework which provides the opportunity for farmers to adopt approved project methodologies and 'sell' the resulting carbon credits to major emitters. Some suggested this was going to provide a major opportunity for landholders, but the two main areas of risk - trading rules and carbon price - need to be carefully considered in any project.
Announcements over the past week that R M Williams Agricultural Holdings (RMWAH) - owners of the much-discussed Henbury Station carbon farming project - have gone into administration should serve as a caution to any landholders contemplating undertaking a carbon project, although reports have not yet clarified whether it was the carbon part of the operation that has caused the problems.
This blog has commented extensively on the Henbury project (see here, here, here and here), as the involvement of Australian Government funding (a reported $9 million), the inclusion of Henbury in the national conservation estate, and the absence of any obvious potential for the generation of carbon offsets that could be sold in the official carbon market made it very difficult to understand exactly how the project could generate revenue. There has been extensive reporting about the difficulties the business has encountered (see here, here and here), and no doubt the real reasons for the problems will emerge over time.
The fact that the Henbury project seems to have encountered difficulties should serve as a caution to landholders contemplating getting involved in a carbon project.
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