Carbon Credits

Carbon dioxide is one of the greenhouse gases contributing to global warming and climate change. When carbon is removed from the atmosphere and stored in the biosphere it is said to be sequestered. Places where carbon is stored are called carbon sinks.

All living things are part of the carbon cycle. Carbon is continually turned over during the natural progression through birth, growth, death and decay. Some of the carbon atoms in our bodies at this moment would have been constituents of the plants, animals and soils present on earth many millions of years ago. People are around 18% carbon, wood is around 50% and the organic matter component of soils is around 58% carbon.

When people think ‘carbon’ they usually think ‘trees’, but in reality 75% of carbon in the terrestrial biosphere is in the soil. Healthy grasslands may contain over 100 times more carbon in the soil than on it, making a well managed perennial ‘grass ley’ the quickest and most effective way to restore degraded land.

Billions of tons of organic carbon have been lost from agricultural soils – and continue to be lost - through inappropriate land management practices. For this and other reasons, agriculture is the second largest contributor to greenhouse gas emissions in Australia. The ‘standing energy’ industries such as coal-based electricity generation are the largest source.

Carbon credits are a financial reward for activities that reduce the levels of carbon dioxide accumulating in the atmosphere. There are a large number of different carbon trading schemes in the world, some of which date back to as early as 1995. A ‘carbon trade’ can simply be an agreement between two parties. For the term ‘carbon credits’ to be used, the emission reduction or biosequestration to which the credits apply must be subject to verification by an accredited certificate provider.

One credit, as designated by an emission trading, emission reduction, renewable energy or abatement certificate, represents one tonne of carbon dioxide equivalent. Carbon credits for sequestration are a type of offset trade and the carbon storage may be leased or sold. Simply stated, the entity emitting the carbon buys registered certificates and the entity sequestering carbon sells them (ie receives money for carbon storage). A ‘trade’ occurs when carbon credits are secured and then surrendered or acquitted through an accredited carbon broker, carbon exchange or carbon registry.

The first government legislated carbon trade in NSW, valued at over one million dollars, was registered in March 2005, between Forests NSW and Energy Australia. The ‘carbon credits’ were for carbon sequestered in hardwood timber plantations in northern NSW. Trading in carbon is a multi-million dollar industry in Europe and the United States. Forecasters have suggested that carbon trading is poised to become the world’s largest commodity market, generating financial innovation in hedge funds, futures and derivates. The volume of trade under the European Union’s Emission Trading Scheme (EU-ETS) exceeded all expectations in the early part of 2005, leading to the recent launch of the European Climate Exchange (ECX), the world’s first carbon futures market. Carbon emissions are a global problem and credits for both emission reduction and carbon sequestration are an important part of the global solution.

Organic carbon (such as humus) has many benefits in soils, making effective carbon management the key factor for productive farms, revitalised catchments and a greener planet. Carbon credits for regenerative land management would help to ‘cash flow’ the multiple natural resource management and environmental benefits that accompany increased levels of carbon in soils.