For the world to successfully limit global warming and the litany of harms that it is causing, we will need to rely on the land sector to reduce emissions, as well as to remove previous emissions from the atmosphere. This is because there are currently no other scalable means to remove greenhouse gases from the atmosphere. While some exciting work is occurring with direct carbon capture, storage and use (and different combinations of those things), the reality remains that the land sector has a vital role to play and is well positioned to be a primary originator of nature-based carbon offset projects. In this guide we look at:
- Carbon farming and why farmers should consider it.
- How farmers and land managers can contribute to decarbonisation.
- How farmers can earn additional income through the carbon market.
- Carbon farming methodologies on farmland.
- The process of planning for and registering carbon projects.
- Carbon credit quality criteria.
- Verification standards for carbon projects.
- New ways to reduce emissions on cattle farms.
- The impacts of carbon farming projects.
Carbon farming and why farmers should consider it
Carbon farming is a whole-of-farm or landscape scale approach to land management, which aims to implement activities that increase the carbon sequestration rates in soils and vegetation. By sequestering carbon on their land, farmers can generate carbon credits for each tonne of CO2e- removed or avoided from the atmosphere. In addition, there is a scientifically proven link between soil carbon and land productivity. Managing soil carbon increases infiltration, improves soil water holding capacity and improves nutrient availability, while reducing the erosion potential.
How farmers and land managers can contribute to decarbonisation
With farmers and land managers controlling large areas of land in Australia and around the world, they have a significant opportunity to contribute to global climate commitments. Following the Paris Agreement, which established a framework to limit global warming to well below 2 °C and pursue efforts to limit it to 1.5 °C, the agricultural sector plays an important role in achieving net-zero and carbon-neutrality targets. In Australia, agriculture occupies a substantial portion of the country’s land. Recent data indicates that agriculture, fisheries and forestry together account for around 57% of Australia’s land use, highlighting the scale of land managed by farmers and landholders. This extensive land base presents significant opportunities for nature-based climate solutions, including reforestation, soil carbon sequestration and regenerative agriculture projects that generate carbon credits while improving land management outcomes.
How farmers can earn additional income through carbon markets
Farmers can benefit from the increasing demand for carbon credits, which is being driven by national and corporate net-zero commitments as industries seek to offset unavoidable emissions on the path of decarbonisation. By conducting activities which improve carbon sequestration or avoid emissions, farmers can earn carbon credits for each tonne of CO2e- abatement produced. The credits can then be sold on the market to businesses or governments wanting to offset their emissions.
To earn carbon credits, projects need to be registered under a certification standard and follow approved methodologies. These methodologies dictate the boundaries of the project, the carbon accounting framework used to measure abatement, the reporting, verification and auditing requirements. For each reporting period, the project can be issued with a number of credit units equivalent to the abatement generated by the project. These credits can be sold on the spot market, as well as a forward sale or off-take agreement. Importantly, farmers can often be remunerated beyond the costs of implementing their projects, allowing them to diversify their revenue streams.
Carbon farming methodologies on farmland
There are a range of carbon farming methodologies which can be implemented to register carbon projects and sell carbon credits. These include:
- Afforestation or reforestation: A natural sequestration method which involves planting seeds or seedlings for trees to create forests (key carbon sinks) which absorb carbon from the atmosphere, removing and storing it as ‘carbon stock.’
- Environmental or mallee plantings: A natural sequestration method (in Australia only) which involves planting a mix of locally endemic tree, shrubs and understory species to achieve forest cover.
- Human-induced regeneration: A natural sequestration method which involves conducting activities to promote the regeneration of forest cover, but does not include planting. For example, stopping chemical/mechanical destruction of regrowth or fencing to prevent cattle from damaging vegetation (this method has sunsetted so it is not possible to register new projects using HIR).
- Savanna burning: An emissions avoidance method, similar to “backburning”, which adopts First Nations People’s traditional practices of conducting low intensity burning in the early dry season, to prevent late season wildfires which produce more CO2e- emissions as well as a threat to local biodiversity.
- Soil sequestration: A natural sequestration method involving the maintenance of soil, a natural carbon sink — to maximise its carbon absorption capacities through various processes such as cover cropping and minimal tillage.
- Agroforestry: Combination of methods where shrubbery and other trees are planted on farms, grazing lands or croplands, which improves soil health, biodiversity, and natural carbon sequestration.
- Forestry plantation: Extending the rotation periods of a forestry (timber harvesting) project at existing or new plantations, to delay the harvesting of trees.
The most suitable methodology will vary greatly from farm to farm and a carbon specialist can help you determine the best approach. Some of the factors that influence which methodology to use can include the type of farm operation, its size and land type such as forest, grassland or savanna, as well as rainfall patterns and geographical location.
Process of planning for and registering a carbon project
To begin a carbon project, farmers can start by analysing each aspect of their farm’s operations. This includes identifying activities which emit carbon and then focus on areas with great potential for reductions. Farmers need to consider how easily a carbon farming activity can be implemented, its cost and how much carbon will be avoided or removed. These factors depend on the chosen methodology, and the types of credits that will be produced. Once a decision has been made to proceed with a project, a farmer can seek to register the project, either with a registry or, if under Australia’s ACCUs Scheme, with the Clean Energy Regulator. . A carbon specialist can assist with the project development process by helping farmers to maximise the carbon potential of their property and identifying possible co-benefits. They can also help with the ongoing reporting and verification requirements of the project.
Carbon credit quality criteria
High-quality carbon credits must represent at least one metric tonne of additional, permanent, and otherwise unclaimed CO2 emission reductions or removals. So when developing a carbon project, it’s important to consider carbon credit quality criteria. Depending on the particular crediting scheme, these can include:
- Additionality: The activities directed towards emissions reduction, avoidance or removal that would not have occurred or would not continue in the absence of the carbon markets.
- Permanence: The carbon projects must implement mitigation measures and establish ‘buffer reserves’ to mitigate the risk of reversal of GHG reductions or removal.
- Leakage: The carbon project must prevent any unintended shift of emissions at its boundaries. The leakage may be local or international in nature. A widely cited example refers to shifting of illegal logging activities from the project area to neighbouring forests.
- Accurate carbon accounting: Carbon credits generated by a project need to reflect real emissions reductions. In order to ensure accurate carbon accounting, projects need to:
- Establish project boundaries.
- Estimate baseline emissions.
- Measure sequestered carbon according to prescribed methodologies.
- Ensure independent third party verification.
- No harm: Activities undertaken by carbon projects should not contribute to social or environmental harms. To help ensure this, an inclusive and rigorous consultation process with local communities impacted by the project must be conducted. For some types of projects, Free, Prior and Informed Consent (FPIC) must also be achieved.
Verification standards for carbon projects
In Australia, most carbon farming projects are developed under the ACCUs Scheme, which is administered by the Clean Energy Regulator.
However, it is also possible to develop projects under international standards. These include:
- Verra (Verified Carbon Standard) (VCS).
- Gold Standard (GS).
- American Carbon Registry (ACR).
- Clean Development Mechanism (CDR).
- Climate Action Reserve (CAR); and
- Plan Vivo (PV).
Farmers and project managers can work with a carbon specialist to assist with this process, and understand the best fit for their project.
The impacts of carbon farming projects
Carbon farming can deliver significant environmental and economic benefits for farmers, land managers and the broader community. The Clean Energy Regulator reports that over 300 million ACCUs have been issued under Australia’s ACCU Scheme, reflecting large-scale emissions reductions and carbon sequestration generated through projects undertaken by landholders, communities and businesses.
Farmers can earn significant additional revenue through carbon farming depending on project type, sequestration rates and market prices. For example, a 1,000-hectare wheat farm sequestering three tonnes of CO₂-e per hectare annually could generate approximately 3,000 Australian Carbon Credit Units (ACCUs) each year, providing a potential new income stream for landholders. As demand for offsets grows, analysts expect carbon credit prices to increase. Current modelling suggests ACCU prices could reach around AUD $60 per tonne by 2030, driven by tightening emissions limits under Australia’s Safeguard Mechanism and increasing corporate demand for offsets.
With higher carbon prices and improved carbon farming methodologies, landholders have increasing opportunities to generate revenue while contributing to national emissions reduction targets.
To learn more about carbon farming, get in touch with one of our carbon specialists: info@viridioscapital.com.