The bills to create the Gillard Government's promised national Carbon Farming Initiative (CFI) have been introduced into Federal Parliament, a development that may be relevant to businesses who have participated in previous greenhouse gas reduction schemes, are interested in generating and dealing in carbon offsets, offsetting land-based carbon emissions, green marketing or are likely to be exposed to a carbon price.

The timetable for commencement of the Carbon Credits (Carbon Farming Initiative) Bill 2011, Carbon Credits (Consequential Amendments) Bill 2011 and the Australian National Registry of Emissions Units Bill 2011 is July 2011.

How does the carbon farming scheme work?

The CFI aims to give farmers, forest growers and landholders access to domestic and international carbon markets, providing an investment incentive for environmental conservation and greenhouse gas emission reduction. The CFI will work alongside the carbon pricing mechanism to monitor land-based abatement projects.

By undertaking emission abatement activities that reduce or store carbon pollution, landowners can generate carbon credits, known as Australian Carbon Credit Units (ACCUs), that can then be sold domestically or internationally, either voluntarily or to meet regulatory requirements. The CFI is capped at $45.6 million over four years.

Statutory mechanisms

The CFI recognises offset entities, provides project methodology approvals, issues ACCUs, provides for the transferral or termination of projects and the trading of ACCUs and includes compliance, monitoring and enforcement provisions including both civil and criminal penalties. Review of decisions on their merit is available.

Recognised offset entity

By application to the Carbon Credits Administrator (Administrator), a participant is recognised as an offset entity using the "fit and proper person" test. Consent must also be given by all relevant interest holders in the land. Where the land is subject to native title, the relevant participant in the scheme is the registered native title body corporate.

Project methodology approval

Once recognised as an offsets entity, the participant must gain project methodology approval from the Minister. This approval is based on the recommendations of an independent expert committee, the Domestic Offsets Integrity Committee, which considers the proposal submitted by private proponents or government agencies. The proposal is subject to a public consultation period of at least 30 days.

Reporting and issue of ACCUs

Achieved abatement levels are reported to the Administrator in an offset report accompanied by an audit report prepared by a registered greenhouse and energy auditor. Reporting must be made within a 12 month to 5 year period.

At the end of the relevant crediting period, which is dependent on project type, a certificate of entitlement for ACCUs must be submitted. The Administrator then issues ACCUs into an Australian National Registry of Emissions Unit account.

Kyoto Protocol consistent credits can be exchanged and exported overseas. It is recognised that some projects are likely to involve both Kyoto and non-Kyoto credits. Obligations created under previous schemes, such as the Greenhouse Gas Reduction Scheme and Greenhouse Friendly, can be transferred to the CFI.

What sorts of abatement projects are eligible under the CFI?

Eligible abatement projects include:

  • reforestation, revegetation, native forest protection, improved forest management
  • reduced forest degradation
  • forest restoration
  • avoided de-vegetation
  • rangeland restoration
  • improved vegetation management and enhanced or managed regrowth
  • maintaining or increasing carbon stores in soil
  • savannah fire management
  • legacy waste deposited in landfill facilities
  • reduced emissions from feral animals and livestock; and
  • manure management and reduced fertiliser emissions.

The Bill also contains a list of abatement activities that are ineligible for ACCUs if they have a significant adverse impact on the availability of water, biodiversity conservation, employment or the local community. Also, abatement practices that are currently in use are not eligible.

Stakeholders

The Department of Climate Change and Energy Efficiency received 276 submissions on the draft legislation. The participating stakeholders involved included peak bodies such as the National Farmers Federation, the National Association of Forest Industries, Australian Plantation Products and the Paper Industry Council and Australian Landfill Owners Association, as well as individual businesses, environmental NGOs, indigenous groups, state and territory governments and technical experts. The explanatory memorandum for the bill states that this feedback was "broadly positive".

Next stage

The Bills have been referred to the House of Representatives' Climate Change, Environment and the Arts Committee for review and reporting. The Committee will accept submissions until Wednesday, 13 April 2011.