At the time of writing this article, the spot price for Australian Carbon Credit Units was around $53/ACCU, which represents close to a 300% increase over the past 12 months. This headline grabbing statistic is fuelling a frenzy of interest in rural land that is suitable for carbon farming, particularly the higher yielding (per hectare) vegetation projects. This recent growth is a result of a significantly constrained supply of carbon credits on the spot market- most are delivered under longer term sales or offtake agreements. Combined with a notable jump in demand, particularly from the increasingly conscious Corporate Australia.
So, the remote rural markets of south western Queensland, north western NSW, and Western Australia are flush with carbon investors, aggregators (carbon project developers) and other carbon industry related services providers. These property markets, which were already benefiting from favourable livestock industry trading conditions, in particular the goat market, are now seeing an added layer of demand from new entrants seeking to overlay carbon projects onto suitable holdings. Interested buyers are looking for themselves, as an investor or on behalf of the existing landholder, as a project developer. For those existing landholders that have or will be approached to undertake a Carbon Farming Project, we refer to a well written article by Adelaide law firm Cowell Clarke director Sam Richardson – the article reiterates the importance to consider all the factors when making a decision about carbon farming. These factors include;
- The business model used to facilitate the project
- The contractual arrangement behind the business model
- Whether the landowner holds an "eligible interest" in the land - this is particularly an issue for land subject to a pastoral lease or native title agreements.
- Whether the land is subject to a mortgage - mortgagee consent is required for the project and is often contentious to obtain as the project can be at odds with the rights of the mortgagee
- The process of obtaining and establishing a carbon abatement contract with the Regulator if credits sold to the Commonwealth
- The terms of the contract for sale if credits sold to the private sector
- Compliance with, and ongoing management of, the relevant contracts, including testing requirements, delivery and payments .
- Compliance with ongoing reporting and auditing requirements.
The Acumentis Agribusiness Advisory team is working with many clients in the Carbon Farming space. We are currently providing assistance in strategically designing and implementing a carbon farming project that complements a clients existing primary production enterprise and working with their financier to gain confidence around the consent requirement.
|Contract Description (AUD$)||Best Bid||Best Offer||Last/Fix|
|Australian ACCUs – Spot – AUD$||39.00||59.50||55.25|
|ACCUs – Feb 2022 (Cal 21)||55.25||55.35|
|ACCUs – Feb 2023 (Cal 22)||56.50||57.00|
|ACCUs – Feb 2024 (Cal 23)||58.65|
Providing our independent advice early in the process of considering a carbon project ensures the protection of long term agribusiness enterprise viability. Our advice will help maximise and maintain the value of the property once the project is in place.