Carbon conundrum

21 Dec, 2012 01:00 AM
Former stockbroker Chris Main is dealing with the complexities of the CFI.
The problem is the practicality of the CFI, and having that as a revenue stream for the farmers
Former stockbroker Chris Main is dealing with the complexities of the CFI.

WHEN former stockbroker Chris Main and green energy consultant Shaun Colley decided there had to be a new way to invest in agriculture, the Carbon Farming Initiative (CFI) looked like being a key.

The company they formed, AgriCarbonInvestments, was built around a perversity of the CFI concept: if it includes soil carbon, it could reward farmers who have depleted soil carbon from their land, giving them the opportunity to earn credits by restoring carbon levels.

On the other hand, farmers who have built up their soil carbon levels through careful management may have much less capacity to earn credits through the CFI because gains are harder to make in soils already relatively rich in carbon.

So, the partners thought, why not buy hard-pushed farmland and rebuild fertility and carbon levels using regenerative farming techniques like managed grazing?

They reasoned that the investment should repay itself in traditional ways, through farm output and capital gains on improvement; but the additional hook for investors would be the earnings from carbon credits via the CFI.

"The problem is the practicality of the CFI, and having that as a revenue stream for the farmers," Mr Main told Fairfax Agricultural Media.

Even if a CFI soil carbon methodology was available - which it isn't - the "100 year rule" turns a cold shower on any investor interest. Under the rule, gains in soil carbon would have to be retained for a century.

"If we have to maintain soil carbon levels over 100 years, it makes it very difficult to be confident that you could sell the land because of the liability that would go with it," Mr Main said.

"We'd want to buy land, fix it up, and in time - say seven or 10 years - we'd sell it to recycle the capital into more land."

AgriCarbonInvestments has been talking to an investment bank with a portfolio of super investors wanting to invest in carbon-related products.

The realisation that the CFI couldn't deliver, and may not for the forseeable future, meant AgriCarbonInvestments had to re-write its prospectus around more traditional ways of earning a return.

The CFI bristles with integrity, but that has set some extremely high hurdles for would-be carbon innovators to clear.

Radio National's Background Briefing program recently reported that 5000 square kilometre Henbury Station in the Northern Territory may also be running into difficulty with the CFI process.

Henbury was bought by R.M. Williams Agricultural Holdings in 2011 for $13 million - except that taxpayers footed $9 million of the bill on the agreement that Henbury would be destocked and become part of the National Reserve System.

R.M. Williams planned to earn revenue by growing vegetation in the absence of livestock and claiming credits on carbon stored in wood and roots.

To do so, it needs a methodology approved through the tortuously rigorous process overseen by the Domestic Offset Integrity Committee (DOIC).

According to the ABC's Caddie Bain, R.M. Williams and some partners have submitted a "meth" along these lines, but so far it hasn't surfaced from within the CFI system, even for public comment.

Until a suitable methodology is made available through the CFI, Henbury will have to rely on the voluntary carbon market, which is unlikely to deliver anything like the $23 a tonne for carbon available through the CFI.

However, according to Background Briefing, Qantas has said it will take all the voluntary credits that Henbury can produce.

Meanwhile, AgriCarbonInvestments is regrouping.

It is sticking with its original model, which is to have investments in run-down farmland managed by farmers with the proven ability to regenerate farming landscapes. It has put together an advisory board that reflects the same interests and capabilities.

For now, building soil carbon won't provide the benefit of an extra income stream. But building carbon remains a key objective of AgriCarbonInvestments.

"The guys we talk to say they are already making money out of the increased carbon in their soils, through increased water holding capacity, better mineral cycling, greater climatic resilience," Mr Main said.

"That's more than enough good reasons to do it."

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21/12/2012 4:35:13 AM

Yes, what a tangled web we weave! Nature on its own is nowhere near as complex and complicated...
21/12/2012 8:19:52 AM

There is a big difference between city based theory and reality on the ground. Most farmers know that there will be no monetary gains for them in carbon credits. If, for instance, I sold a paddock of regrowth timber, and a bush fire wiped it out sometime in the next 100 years, I believe the money would have to be paid back. Whatever happened, it would keep the lawyers in BMWs for a long time.
21/12/2012 8:44:57 AM

And it is even more complicated - it would probably not make the additionality criteria: If more than 10pc of farms in the area are already doing it as normal activity it would not qualify.
Ian Mott
21/12/2012 9:08:33 AM

Get ready for the new wave of so called "managed Investment (ponzi) schemes. Where absentee urban tax rorters glut a market that was originally designed to help real farmers.
Bill Pounder
21/12/2012 11:32:44 AM

Unless something has changed since October, the Henbury vision has well and truly had the plug pulled. ure=player_detailpage&v=3QWjRh9h- cw "..(a) neighbour who is selling up, says the conservation project was the final straw." /-/article/15656614/rm-williams-p lans-cattle-on-carbon-farm/ "Whilst we are involved in the Henbury model, the destocking is most definitely not our intention for the model." said CEO Rory Richards. When do we get our $9M +interest back?
22/12/2012 4:13:35 PM

Yes, a fraud based on a lie will never work. C02 is one part carbon plus two parts oxygen and is a vital component for plant grown. So how could it be in anyone's interest to get rid of it? No way can it be a danger to health. Unless like water you immerse yourself in 100% concentration of it !
24/12/2012 8:48:53 AM

Yes I agree with this article, Cris Main has hit the nail on the head. Comments I agree with as well. "What a tangled web we weave", by Gerhard. "City based theory and reality", by R. "Normal activity would not apply", by Scientist. "Ponzi schemes", by Mott. "Where is our $9M + Interest", by Pounder. "Fraud and stuff up", by EJ. Yes the CFI is a Wonderful concept, but it will have to be formed properly. And through Government Dept Control, without Ponzi Schemes. Individual farmers should be in control of their own project through Government inspectors or the whole concept will fall in a Heap.
Ian Mott
3/01/2013 9:02:31 AM

The key issue here is raised in the first paragraph. This carbon scam was not created by farmers to satisfy a need of their own. It was devised by "stockbrokers and consultants" as another means for them to capture profits from agriculture. The problem for them is the fact that returns must always be commensurate with the risk involved. And none of them have ever made the slightest mention of what sort of compound interest we would need to lock up a major element of capital for 100 years. This would be a dog at $210/tonne, let alone $21, or the $6 being paid in Europe.
3/01/2013 6:53:58 PM

Best comment of them all Mott
Ian Mott
4/01/2013 8:27:53 AM

Thanks Ranger, I see we are on the same page/planet.


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