No cash in carbon crops

GREENHOUSE gas sequestration is yet to provide an income stream.

With the possibility the banks may ease their demands ,Cate and Mark Stuart on the bank of the Langlo river, take a break from packing and begining to move their belongings out of their historic homestead home on Mount Morris station , as they were to face eviction in the next couple of days by the banks who will not recognise carbon farming , using Mulga, as part of a financial structure for their cattle farm. About 110km north west of Charleville , western QLD

THE mulga trees are tall and flourishing in the brilliant rust-red soil of Cate Stuart’s outback cattle station, Mount Morris, northwest of Charleville in western Queensland.

Stuart glows with pride as she walks amid the dense mulga — shrubs and saplings that have been growing for more than three years since Stuart and her husband, Mark, decided to set a quarter of their 20,000ha property aside as a carbon farm.

The multi-generational “red-dirt” farming family turned to ­carbon storage as an alternative source of income on their cattle station, along with farm tourism stays and wild pig hunting, back in 2011.

It was a time when the federal Labor government was championing the formal exchange of carbon credits between the big industrial carbon emitters — such as energy companies, airlines, mining companies and manufacturers — and farmers who were able to sequester carbon as the best way to cut Australia’s carbon emissions to tackle climate change.

For the Stuarts, who had endured floods and drought in consecutive years, the Carbon Farming Initiative looked worth exploring.

Cate Stuart says carbon farming seemed an ideal way to look after their mulga bush country at the northernmost headwaters of the Murray-Darling Basin, reducing the need to stock cattle so heavily, yet still enabling the family to make a living.

“The CFI, we discovered, was landholder-friendly; it allowed us to nominate portions of our property as native revegetation, but still allowed us to graze, maintain firebreaks, fence and control weeds and feral animals as we do on the rest of the place,” she explains.

“Mulga on places like Mount Morris are our hay; during a drought the cattle eat the mulga leaves but not the trunks, and that is where the carbon is stored, so you can do both.”

But, as highlighted by The Australian in recent weeks, and as the Stuarts have discovered, there is no easy road to becoming an approved carbon farmer.

While their mulga revegetation project was painstakingly designed by carbon consultants to fit Department of Agriculture and Clean Energy Regulator criteria to make the 5000ha eligible for carbon credit payments of about $400,000 after three years, the Stuarts have never got to first base to apply for CFI approval.

The mulga is growing beautifully, storing an estimated four tonnes of carbon a year for every hectare of regrowth.

But the Stuarts’ bankers, Rabo­bank, who hold a $2.6 million debt over the crown-perpetual lease property and are therefore classed as holding a joint interest in the station, refused to give their consent for the mandatory 100-year-long carbon farming venture on Mount Morris to apply for CFI carbon credits, as required under Clean Energy Regulator rules.

The bank has told the Stuarts it views carbon farming as an “encumbrance” that could detrimentally affect the cattle station’s resale price if it were sold sometime in the next 100 years.

As a consequence, the Stuarts’ plans to repay their farm debt and build a solid future are in tatters. Receivers are involved and the family faces losing the farm and their home.

“We say this carbon project is an asset that makes the property more viable and resilient by diversifying our income stream and our reliance on cattle; yet the bank seems unable to value its worth or to see it that way,” says Stuart.

“This is a carbon farm, not just cattle, and the government, the Greens and Labor all in theory support what we are doing; but the banks seem unable to cope or keep up with modern practices. Something has to be done or carbon farming will never work.”

At the heart of the bank’s opposition — a stance common across all major banks — are concerns that carbon farming is not producing a tangible product, is too open to political machinations and policy changes, is at the mercy of volatile world carbon prices, and has to remain on the designated property for 100 years.

The likely abolition of the carbon tax next month — and with it the requirement for companies to cut back their carbon emissions by at least 5 per cent by 2020, by buying carbon credit offsets or reducing true emissions — has only added to these uncertainties.

Ben Keogh, manager of the consultancy Australian Carbon Traders, who designed the mulga project on Mount Morris, is at his wits’ end.

A specialist in designing carbon credit-eligible native revegetation projects on vast outback stations, Keogh says he has seen banks block carbon farming in the western land lease country west of Bourke, north of Broken Hill and in other parts of western Queensland on mortgaged properties because “they don’t believe in carbon credit schemes”.

“I’m starting to feel this is all lip service, the greatest greenwash in history,” says a frustrated Keogh.

“Farmers are desperate for these credits, all the politicians are saying that carbon farming is good, and you can’t say it’s not real what is happening — just look at the 5000ha of mulga growing on Mount Morris and ask if that is not sequestration writ large — but it’s not translating to much on the ground, or money in the bank for farmers.”

Environment Minister Greg Hunt is adamant he understands the practical problems faced by rural landholders like the Stuarts who want to farm carbon but are finding it too tough.

He is equally resolute these issues will be fixed as part of the government’s Direct Action plan to meet the nation’s international obligations to reduce greenhouse gas emissions by 2020 without threatening the viability or growth of the economy and its largest corporations.

“The Carbon Farming Initiative lies at the heart of our new $2.55 billion Emissions Reduction Fund; that’s why we are calling it the CFI Amendment Bill,” says Hunt.

“The critical change is that we are changing the rule that says carbon farming projects have to be in place for 100 years; that is absolutely terrifying for many farmers, and the banks see it as a caveat that restricts the future use of the property. That is why we are now allowing (carbon farms) to have a 25-year timeframe yet still earn 80 per cent of the carbon credits of a 100-year project.”

Hunt says he has spoken with banks to gauge their attitude to carbon farming projects needing to remain in place on the farm for 25 years instead of the previous 100 years.

“I can’t guarantee that every individual project will now go ahead but I think the change will help significantly,” Hunt says. “(The banks) tell me they think the shorter period of time makes (carbon farming) a much more viable and achievable option.”

The other key change of the new Direct Action scheme is that the government will buy back the carbon generated by farmers, rather than businesses (see sidebar).

The buybacks will be offered in open tenders as new long-term contracts, lasting for at least five years, and include regular payments to farmers who sell their annual credits to the government so it can meet its Kyoto carbon emissions reduction target.

This will enable farmers to compare the annual returns available from carbon farming a hectare of land over a 25-year period with running livestock or growing crops on the same paddock, as well as to diversify income sources.

But the price paid by the government for carbon credits remains critical to the future of carbon farming.

On this point, Hunt is cautious about speculating on a future ­carbon price, currently legislated in Australia at $24.15 a tonne under the carbon-tax pricing mechanism.

In Europe, carbon is trading at around $8 a tonne, while in the US it is fetching $5 a tonne. But Hunt says those figures relate to price penalties or tax rates paid by corporations for emitting damaging carbon pollution, not buying stored carbon.

However, if $2.55bn is available in the ERF to buy the required 421 million tonnes of carbon abatement by 2020, that suggests the government can afford to pay about $6 a tonne.

It remains uncertain if this would be enough to make carbon farming an attractive option for landholders, particularly when just getting projects up and running can cost $3-$4 a hectare ­annually.

Keogh says the amount of carbon stored will be critical to the economic viability of future farm projects.

For example, while mulga scrub and outback vegetation can grow and store carbon at the rate of three to four tonnes a hectare annually, cool climate native rainforest in Tasmania sequesters seven to 10 tonnes of carbon a hectare each year, offering quite different profit expectations.

Out at her vast Charleville station, Cate Stuart is cautiously optimistic that her family’s early backing of carbon farming may ­finally bear fruit under the new scheme.

“To us it’s a no-brainer; carbon farming is good for everyone: farmers, the environment, the government and our children’s and grandchildren’s future,” says a passionate Stuart.

“We have done the right thing and been good stewards of the land; during the past two years of drought we were the only property out here that hadn’t run out of feed and water, because of our mulga,” she says. “Now we just have to work out a way to get a return for what we are doing.”