How carbon credits work

An increasing area of Tasmanian farmland is being planted with trees as farmers and investors look to make money from carbon credits as well as forestry.

But what is a carbon credit, and how can planting trees generate an income?

At its simplest, the Federal Government’s Australian Carbon Credit Unit Scheme puts a financial value on reducing greenhouse gases.

Projects that either prevent greenhouse gases from being released or remove carbon dioxide from the atmosphere can earn Australian Carbon Credit Units, known as ACCUs.

One ACCU represents one tonne of carbon dioxide equivalent and the credits have a value because they can be sold.

They can be sold to the Australian government under carbon abatement contracts, or traded to businesses that want carbon credits to help meet their emissions obligations or targets.

For farmers, one way of earning ACCUs is through trees that absorb carbon dioxide from the atmosphere and store carbon in their trunks, branches, roots and other biomass.

However, that does not necessarily mean the trees can never be harvested.

The ACCU Scheme includes a plantation forestry method specifically designed for commercial forestry.

The amount of carbon credited takes account of how the plantation will be managed, including harvesting and replanting.

Other types of tree-planting carbon projects may be intended as permanent forests and operate under different rules.

What they have in common is that carbon which has been credited cannot simply disappear without consequence.

Depending on the project, the carbon must generally be maintained for either 25 or 100 years.

If credited carbon is deliberately lost through actions such as unauthorised clearing or poor management, the project operator can be required to restore the carbon or surrender ACCUs.

That makes entering a carbon project a significant, long-term decision for a farmer rather than simply another annual source of income.

Private Forests Tasmania chief executive Elizabeth Pietrzykowski said growing trees for carbon credits could allow primary producers to diversify their income.

“A tree project can reduce dependency on livestock or cropping,” Dr Pietrzykowski said.

“Some of our landowners refer to it as an insurance policy.

“If milk or meat prices are low, you can use the money earned through ACCUs for a rainy day.

“Also, if you’ve got less productive land for agriculture, you might be able to generate stronger returns through carbon forestry projects, especially if the tree growth rates are favourable.”

She said farmers needed to recognise that carbon forestry was a long-term land-use decision.

One company developing carbon projects in Tasmania is Permagen, which is running a project at Mangana.

The company has leased land from pig producer Primal Pastures and planted more than 80,000 trees across the 200ha site.

Permagen co-director Harrison Holihan said the project had been designed to provide environmental benefits without necessarily removing the land completely from agricultural production.

“There’s obviously the carbon footprint benefit, but there is also the biodiversity component as well due to there being about a dozen different types of plantation species,” Mr Holihan said.

“We’ve also planted the trees every four to six metres and are allowed to bring stock on to the property once those trees are resilient enough to withstand it.

“Rather than just foresting and walking away, you can actually maintain it as an active farm.”

Mr Holihan said livestock could generally return after the trees were sufficiently established, although stocking rates could be lower than under a conventional grazing system.

He said about five years was a useful rule of thumb before trees were sufficiently established to withstand browsing by livestock.

Mr Holihan said interest in carbon projects was growing, but the cost of establishing them remained a significant barrier for farmers.

“Funding is the biggest factor that prevents farmers from starting these projects, which is where we come in,” he said.