Carbon Farming Knowledge

What Is Carbon Farming and Why Is It Important?

What Is Carbon Farming and Why Is It Important?

Carbon farming broadly refers to land management activities that reduce GHG emissions from agricultural practices or sequester carbon dioxide in the landscape. These activities involve managing: animal diets to reduce emissions from digestive processes, biological processes that absorb and retain carbon in plants and soils, and re to prevent more potent greenhouse gas releases associated with hot res. An emerging opportunity is ‘blue carbon’ which is the potential of aquatic ecosystems such as mangroves to capture and store carbon.

In the context of emission reductions, carbon farming methods from the land sector deliver abatement at varying costs. There is however significant opportunity for low-cost abatement, particularly when realising the opportunities for considerable savings and productivity benefits for agricultural enterprises2.

Importantly, carbon farming can be operationalised in a way that creates environmental, productivity, and social co-benefits such as: rural and regional economic and income diversification, new or restored habitat for native species, retention and transference of cultural knowledge, greater agricultural productivity, and improved water quality. The potential market for carbon credits with verifiable co-benefits means multiple benefits for the land sector can be achieved for a fraction of the cost of pursuing those objectives individually through separate government programs.

Industry Vision

The vision for the domestic Carbon Farming Industry is to be a vibrant sector in the Australian economy, providing a strong source of jobs and revenue for the range of market participants, whilst making a significant contribution to Australia’s net-zero emissions trajectory by 2030.

Background to the Carbon Farming Industry Roadmap

Carbon farming broadly refers to land management activities that reduce greenhouse gas (GHG) emissions from agricultural practices or sequester carbon dioxide in the landscape. In Australia, carbon farming is an emerging industry that is making an important contribution to Australia’s emission reduction task and is central to the Government’s climate change policies. In addition to carbon sequestration, carbon farming also delivers other important economic, environmental and social benefits.

The carbon farming industry itself is at a critical point of potential growth. To outline and highlight the pathway to growing this industry, the Carbon Market Institute (CMI), in collaboration and with support from the Queensland Government Department of Environment and Heritage Protection (EHP) have developed a National Carbon Farming Industry Roadmap (“the Roadmap”).

The Roadmap is national in scope, and outlines a strategic framework for the carbon farming industry to reach its full economic, environmental and social potential, highlighting the primary actions of key industry stakeholders out to 2030. CMI has undertaken extensive consultation across the carbon farming supply chain and has received input from over 200 stakeholders through: convening these stakeholders at the Queensland Carbon Farming Industry Summit (August 2017), a comprehensive industry-wide survey, and one-on-one consultations nationally.

Carbon farming activities have a critical role in contributing to Australia’s 2030 emissions reduction target of 26-28% on 2005 levels. Initially established with bipartisan support to provide Australian Carbon Credits Units (ACCUs) to support the Carbon Pricing Mechanism, projects under the Carbon Farming Initiative transitioned to be eligible to be funded under the Government’s Emissions Reduction Fund (ERF). After the first five ERF auctions, the vast majority of contracts are land sector projects. Approximately153 million tonnes (MtCO2e) of abatement (out of 189 MtCO2e) is under contract to land sector projects which equates to roughly $1.8 billion of investment.

Into the future, demand from international voluntary and compliance carbon and environmental markets for verifiable and premium carbon credits is also expected to grow. This demand is likely to provide new opportunities for Australian land managers and project developers to supply carbon credits, and this Roadmap is designed to provide support as they position themselves in readiness for these new markets.

State of Play in Australia

The Carbon Farming Initiative (CFI), which commenced operation in Australia on 8 December 2011, was a Federal Government carbon o set scheme established by the Carbon Credits (Carbon Farming Initiative) Act 2011 (the CFI Act).
The CFI enabled emissions avoidance or carbon sequestration projects for the purpose of generating ACCUs which were then tradable under the Carbon Pricing Mechanism. One ACCU is equivalent to one tonne of CO2e.

In 2014, the CFI was transitioned into the Emissions Reduction Fund (ERF) via amendments to the CFI Act. The ERF has three components whereby the government credits, purchases and safeguards emissions reductions. Currently, the ERF is the primary source of demand for ACCUs for projects that reduce emissions or enhance carbon storage on the land.

As at October 2017, the Clean Energy Regulator has held
ve ERF auctions with the total contracted abatement approximately 189 million tonnes, with over 153 million tonnes (81%) awarded to projects under land sector methods3. The volume weighted average price of contracted abatement across the ve auctions is $11.83 per tonne of CO2e. There is approximately $300 million remaining in the ERF of an initial $2.55 billion4. Of the 34 methods available under the ERF,

19 are for land sector emissions reduction activities (agriculture, savanna burning and vegetation projects).

Carbon farming projects can also generate ACCUs for sale into secondary and voluntary Australian carbon markets. The price at which the carbon is traded is determined by supply and demand.

Carbon Farming Industry Drivers

There are a number of important domestic and international market drivers for the growth of the carbon farming industry
in Australia. A strong carbon farming industry can provide important benefits for the triple bottom line delivering valuable economic, environmental, social and cultural outcomes.

In addition, there are a number of global policy and market drivers which are also important to understand.

International Drivers

The Paris Agreement was reached in December 2015, and is a global agreement which aims to limit global temperature increase to 1.5 – 2°C degrees Celsius.
It is based on voluntary emission reduction commitments made by each country in the form of Nationally Determined Contributions (NDC’s).

Post-2020, it is expected that global climate policy developments in the form of market mechanisms under the Paris Agreement will drive increased international demand for carbon credits, particularly high-quality credits that demonstrate sustainable development outcomes.

There is an opportunity for the Australian Government to engage with international market developments, to provide additional sources of demand and future export opportunities of ACCUs from domestic carbon farming projects.

As the world transitions to a zero-net emissions economy, global emitters are looking to new and innovative waysto lower their emissions, as well as providing access to o sets for the remaining emissions. The Carbon Offsetting Scheme for International Aviation (CORSIA) is an example of how international developments in the aviation industry’s response to climate change could create additional sources of international demand for Australian land sector credits. 80% of survey respondents believe the CORSIA could open a new market for ACCUs from carbon farming activities.

If domestic policy evolves to allow the export of ACCUs, Australia is well placed to supply this market given its mature, well-designed regulatory approach to carbon credit creation and verification, low sovereign risk, defined land tenure and ownership arrangements and processes, scientific c expertise, and biophysical capacity.

1⁄4 It is expected that there will be increased voluntary demand from multinational corporations for premium, verifiable credits with co-benefits for social licence purposes.


Co-benefits are direct positive outcomes associated with carbon farming projects that are additional to the emissions avoided or carbon stored. They are the social and cultural, economic and environmental benefits that occur as a result of a project. Examples of important co-benefits that can ow from various land sector projects include:

  • Vegetation Projects: Diverse environmental plantings and human induced natural regrowth provides co-benefits such as restoring damaged or degraded ecosystems, diversified revenue streams for farmers, risk management and improved climate resilience for traditional agricultural activities. Environmental co-benefits such as improved water quality where restoring riparian vegetation is involved, as well as greater biodiversity and ecosystem services.
  • Agriculture Projects: Soil carbon projects also result in improved soil health which can lead to improved agricultural productivity. Methane capture projects can provide a means for generating renewable energy and improving the efficiency of intensive farm operations like piggeries and dairies.
  • Savanna Burning Projects: Savanna burning can assist to support remote Indigenous communities by providing a steady source of income for local employees through ‘on country’ jobs, as well as boosting further local economic activity. Socially and culturally there are benefits too, as savanna burning builds on traditional and customary practice and helps to preserve knowledge.

Co-benefits are currently a key policy driver for state and territory governments who see the potential for well- designed carbon farming projects as being able
to incentivise and increase uptake of sustainable land and agricultural practices. Land sector projects are seen to be able to deliver on several initiatives that might otherwise require multiple investments in addition
to the emission reductions.

About the Carbon Market Institute

The Carbon Market Institute (CMI) is at the center of climate change policy and business in Australia. The CMI has developed a National Roadmap for the growth of the domestic carbon farming industry. The Roadmap, developed with support from the Queensland Government, identifies a clear path forward for both government and the private sector to work together, addressing opportunities and challenges for the industry’s growth out to 2030.