Saturday, November 22, 2008

A Carbon Con?

It seems a certain marsupial has been causing a little mischief this week on "The Land" website, have a read of this down to the comments section:

A carbon con?
14/11/2008 4:00:00 AM
Farmers are being warned not to sign over their carbon credits before they understand the true value of the product and the liabilities they may incur by signing contracts.

Ben Keogh, of Australian Carbon Traders, is hot under the collar about a clause in the vegetation agreements put out by several Catchment Management Authorities (CMAs) in NSW and Victoria, which claims for the CMA all or half the carbon credits that arise from the contracted revegetation work.

“One landholder I know of was offered $800 a hectare to revegetate by his CMA, on a site that will return about 550 tonnes of CO2 equivalents during its lifetime,” Mr Keogh said.
“Break that down and the CMA is offering $2.90 a tonne for the carbon – and they are using government money that was put aside for biodiversity and water quality projects.

“They could sell those carbon credits on the open market for up to $30 a tonne.

“When the CMA is proposing paying a fraction of the market price, with no mention of liability if the carbon is lost, and without knowing what they will actually do with the carbon rights, some big questions hang over their intentions.”

Mr Keogh also warned farmers about signing over carbon rights without understanding the implications if agriculture is “covered” under the Federal Carbon Pollution Reduction Scheme (CPRS) at a later date.

Farmers who commit their carbon, or land, for a low price now may find themselves obliged to buy in carbon if agriculture is later included under the CPRS, and the farm has to account for its emissions.

That could lead to farmers having to buy back carbon from those they sold it to earlier in order to balance the CPRS books.

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The Great Carbon Con!
Posted by BigD on 14/11/2008 6:22:28 AM

All on the basis of bogus "science".
Posted by Ted O'Brien. on 14/11/2008 7:36:37 AM

I'd love to know how Ben Keogh does his calculations, if farmers are getting $2.90 per tonne after the CMAs take their share then without the CMAs they'd be getting $5.80/t and if the brokers are selling it for $30/t where does the extra $24.20/t go to? A "con"? Well yes maybe, but it doesn't look like the CMA's are the ones doing it. I've looked at a number of schemes over the years and the advice I give is do you research and calculations thoroughly a lot of schemes are nowhere near as good as they market themselves.
Posted by Spottedquoll on 15/11/2008 5:00:41 PM

Dear Spottedquoll, The calcualtions are based on what the CMA is paying for revegetation in return for the carbon rights. The agreements have no mention of cosats or liabilities, access requirements or transaction costs, etc. Brokers usally get 5 to 10c per credit. The extra money would go to the sellers of the carbon or the owners of the Carbon rights, in this case the CMAs. If you read the article what I am urging landholders to do is to ensure they have done their homework and ensure they know what they are signing up for. What I object to is the CMAs tying carbon rights to PVP and reveg activities without fully recognising the input of landholders and operating by stealth. I agree entirely that there are a lot of schemes out there that are nowhere near as good as they seem and this is another one.
Posted by ben keogh on 18/11/2008 3:27:11 PM

Thanks for that Ben, So what you're saying is the CMAs are paying $2.90 per tonne for their (potential) share of the carbon up front and the landholder still has 275 tonnes to sell on the open market? So over time the landholder could still get $9000/Ha (from his sales plus the CMA "pre-purchase")? And this is only one particular case I'm aware of CMA payments for some revegetation projects going far higher than $800/Ha. The other point is is should taxpayers money be used to finance (or part finance) a crop (which essentially it will be) and taxpayers not get any return for it?
Posted by Spottedquoll on 19/11/2008 7:46:48 PM

Note that the CMA's "could" sell the carbon at $30 per tonne, no doubt that does depend on whether anyone wants to buy it at $30/tonne. Hell they "could" sell it at $50/t, $100/t etc it all depends on what the going market rate is, something Mr Keogh doesn't mention.

This $30 a tonne sounds great but honestly how much does the grower actually get? You can't just go out and sell the rights to your carbon, it's quite a long process to get it all set up and accredited you need to insure that the carbon will be in place for the next 130 or so years, you need to have a system in place to measure the carbon you have and you need to have some sort of insurance against flood, fire or anything else which will reduce the carbon you've guaranteed you've locked up. This insurance is generally in the form of putting aside a proportion of your carbon for just such a contingency, I believe that it's around 30 percent. It's a bit of a pain for the individual to do it so it's best for a company or co op to put a scheme together and pool carbon from a wide area administer the scheme split the profits (no doubt there's many more models than that but I really couldn't be bothered checking into all of them or going through the numerous documents I've gotten on the subject over the past few years - some of which may still be "commercial in confidence").

Now Ben Keogh is the manager of Australian Carbon Traders and has worked with Landcare Australia Limited to set up their CarbonSMART Scheme. According to their site CarbonSMART basically pools the carbon in their scheme, sells it and pays landholders 60% of the sale price.

So how much is this 60%? According to their case study the landholder "could" recieve $80 per hectare per year, which is, well, a pretty low return, it may just cover the cost of maintenance but I doubt it would cover the cost of establishment.

I suppose in this case I'd be more than happy to take $800 per hectare to revegetate it then split the profits rather than pay for it myself then get $80 per hectare for it. It all tends to make Ben Keoghs objections quite interesting doesn't it?

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