Carbon Farming Myths
This is part of a series of articles, written by Carbon Sync’s expert team members, to help dispel some of the myths that surround carbon farming.
Carbon Farming Myth 1: “If I trade my carbon, I might regret
it if I need it in the future”
You might ask, “Should I trade my carbon?” The answer is ‘Maybe.’ If you are already generating carbon credits — good on you — you are well ahead of the pack and will be sleeping much more soundly now. Our only advice to you is, do not enter into any forward contracts for the sale of those credits. Open your own ANREU account (a government-regulated ‘bank account’ for carbon credits) and maintain control of to whom and when you
sell your credits.
This then leads to the question, “Why do I need carbon credits in the first place?”
At Carbon Sync, we anticipate a number of scenarios in which farmers may need or want their carbon:
Scenario 1: The imposition of Carbon Border Taxes in countries that
receive our exports
The EU has just imposed the world's largest Carbon Border Tax. It applies to iron and steel, cement, aluminium, fertilisers, electricity production and hydrogen initially and will be extended to other imports. There are now 36 countries in the world that have carbon taxes and 32 that have emissions trading schemes. These countries have imposed carbon border taxes to protect domestic industries in the process of decarbonisation from imported goods that are not addressing their climate impact and are therefore cheaper. Mid-January 2023 marked the beginning of discussion around a potential carbon border tax for Australia.
Why should you care? Because it will not be long before you will have to declare the carbon intensity of each tonne of grain or kilo of meat you export. The price you get for that commodity will have the value of the greenhouse gases emitted in the production of that commodity subtracted from the income you receive for the commodity in the country to which you export it.
The way to avoid having your commodity income reduced is to lower the emissions intensity of your production or generate a trade-compliant carbon credit to accompany your commodity when it is exported. You can reduce your emissions intensity and you can create carbon credits and
improve your profitability, but that is a whole different conversation.
What should you do? Accept what the future will look like, and start preparing for this inevitability. Things you can do to prepare in order of importance are:
1. Begin using a modern farm management system, for example, software packages like Agworld, Agriwebb and Maia Grazing. Be meticulous with maintaining your management data.
2. Start thinking of your farm as an ecosystem. For some inspiration check out this video from Will Harris.
Scenario 2 — To attract a variety of rewards by thoroughly
embracing the challenge of decarbonisation for your farming operation.
Global corporations are coming under increasing pressure to reduce their impact on both climate and nature. There are two standards corporations are accountable to when reporting on their impacts. The Climate-Related Financial Disclosures (TCFD) and The Nature-Related Financial Disclosures (TNFD).
The stated goal of the TCFD is through widespread adoption, financial risks and opportunities related to climate change will become a natural part of companies’ risk management and strategic planning processes. As this occurs, companies' and investors’ understanding of the potential financial implications associated with transitioning to a lower-carbon economy and climate-related physical risks will grow; information will become more decision-useful; and risks and opportunities will be more accurately priced, allowing for the more efficient allocation of capital.
What does this mean for you as a farmer? Corporations are reliant on the
commodities you produce. Your farm is in its supply chain. They must understand the climate risk inherent in their supply chain to meet TCFD disclosures and even more importantly, they must act to mitigate risk in their supply chains. The big focus under TCFD disclosures for food companies is Scope 3 emissions. These are the emissions generated on your farm in the production of the commodity they buy from you. Companies are falling over themselves to incentivise farmers to reduce on-
farm emissions. Check out this example from Cargill US.
The TNFD aims to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related risks, with the ultimate aim of supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.
As difficult as it may be to accept, all sectors of the economy must change if we are going to stabilise the earth’s climate and maintain habitable conditions for human life on this beautiful blue planet.
Unfortunately, agricultural management is arguably the most significant driver of the destruction of ecosystems and the loss of biodiversity. Agricultural expansion through the wholesale clearing of ecosystems and the destruction of habitat for diverse flora and fauna is inextricably linked to climate change.
These standards began as voluntary standards and are increasingly being adopted as mandatory in countries such as the UK, EU and Japan.
The important understanding here is these standards mandate action and the only person who can act in a corporate food company's supply chain is you, the land manager. The only way these corporations can get you to act is to punish you (with ‘sticks’) for not acting or incentivising you (with ‘carrots’) to act.
At Carbon Sync, we see ‘carrots’ in the form of payments for verified ecosystem service delivery, biodiversity, price premiums for low-carbon commodities, access to discounted ‘green finance’ products and improved land values validated through Natural Capital Accounts.
We see ‘sticks’ in the form of carbon taxes, increases in the cost of finance and insurance, and reduced and discounted market access.
How can you capture the value?
1. Adopt the mindset that you are in the driver’s seat because you are. You, as the land manager, are the only person who can deliver the outcomes needed by these corporations. And agriculture is the only sector of the economy that can remove more carbon than it emits. There is a reason Australia’s carbon policy is built on Carbon Farming;
2. Embrace the decarbonisation challenge;
3. Don’t get caught in the carbon tunnel, there is more to this than just carbon credits, make sure you work with people who see the big picture and can help you capture all the value on offer; and
4. Until you see the carrot or the stick, don’t stress but prepare to enter the
market when you are ready.
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