To meet its carbon emission reduction targets it is a sure bet that Australia will look to carbon storage through reforestation (bio-sequestration). In the future carbon storage in trees could be a major potential income for farmers but great care will be needed in exercising any plans to commit to a qualifying carbon sink forest.
So far the legislation for the Carbon Pollution Reduction Scheme (CPRS) devised by the Federal Government has failed to pass the Senate. Under the scheme carbon credits would be issued for carbon stored in carbon sink forests at a rate of 1 carbon credit per 1 tonne of carbon dioxide stored. As part of the CPRS Cap and Trade scheme these carbon credits can then be traded, which would allow Australian companies with emission reduction targets to acquire credits in order to offset their greenhouse emissions. The value of the carbon credits could be between $10 and $20 each.
Under the current CPRS plan forests (including land care, environmental and commercial plantings) are included as a carbon abatement opportunity on a voluntary basis. Therefore farmers are able to register tree plantings to reduce salt encroachment or combat soil erosion as a carbon sink forest as well as access carbon credits, which may have significant value.
There is also the option for farmers to register harvestable forests such as brushwood, sandalwood, millable timber and oil malee plantations. This would give a farmer the opportunity to derive a financial return from the disposal of the harvested timber as well as create valuable carbon credits. When the forests are harvested, the estimated amount of carbon stored less the estimated amount of carbon harvested will determine the amount of carbon credits that may be issued. As a point of interest approximately half the dry weight of a tree’s biomass is carbon and 1 tonne of carbon is equivalent to 3.67 tonne of carbon dioxide.
At the moment forests established for timber harvesting may only attract carbon credits effectively from the non harvested portion of the tree. However carbon credits could be issued in the future in respect to the carbon stored in harvested timber. They could also be issued for harvesting and milling waste used as a renewable energy.
The revenue stream from forestry carbon abatement may increase should there be a change to the scheme rules at some point in the future to allow carbon credits from harvested timber and waste to be issued. This would also increase the value of carbon rights.
Carbon sink forests must be held by Accredited Forest Entities, who can be landowners, leaseholders or carbon property rights holders, according to the CPRS.
Before farmers commit to planting a carbon sink forest there are certain issues they must consider first. One key issue is that carbon sink forests are a long term investment and must stay in place for up to 100 years, in addition most of the stored carbon is created in the first 20 years of tree growth so there could be a very long period of forest management without much carbon credit benefit. The other key issue is that the costs and administration of managing a forest are such that most landowners prefer to sell carbon rights to a forestation enterprise and receive a regular fee.
For more information on investing in Forestry please click here
April 9th, 2010 at 4:01 PM
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