Banks and food companies are leading the push to account for agricultural emissions in Australia, but new methodologies and policy support are needed for the carbon market to attract more participation from the country's farming businesses, industry experts said.
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Register NowThe agriculture sector accounted for 18%, or 82 million mt, of Australia's total emissions in 2023, according to data from the Department of Climate Change, Energy, the Environment and Water.
Emissions from livestock, especially grazing beef cattle, accounted for the majority of these emissions in 2023.
"The finance sector globally and domestically is under huge pressure to report, set targets for their own net-zero pathways and then to report on their funded emissions and how that's being reduced," said Richard Heath, CEO of Australia-based Zero Net Emissions Agriculture Cooperative Research Centre.
Banks are closely followed by food companies internationally that are setting climate targets to be attractive to consumers and shareholders in the marketplace, Heath added.
One of Australia's biggest supermarket chain Coles said in August 2023 that it will partner with at least 75% of its suppliers to set emissions reduction targets by 2027.
Emissions accounting
Farm level emissions accounting is being seen as the first step toward decarbonizing Australia's agriculture sector.
Less than 3% of Australian farm businesses have baselines, said Will Onus, a farmer and founder of Australia-based agricultural emissions accounting company, Ruminati, adding that the awareness has ramped up in the last 18 months.
Australia introduced a bill in March that will mandate companies with revenue above A$500 million to report their scope 1 and 2 emissions starting 2025.
While the law may not directly cover many farming enterprises, it will include businesses and supply chains that farms supply to.
"I think that change has really brought to the forefront of farmer's attention the need to baseline and report on their emissions," Onus said.
Onus added that bigger corporate organizations were subsidizing farmers' subscription to Rumaniti platform as an incentive to promote emission accounting at the farm level.
Current carbon methods
"Currently, over 80% of ACCU Scheme projects have or currently involve the land and agriculture sector," a spokesperson to the Department of Climate Change, Energy, the Environment and Water said in an email.
However, industry participants said there was need for new methods to generate ACCUs to drive strong participation from the agricultural sector.
"I think at the moment many of the methods have been more suitable to the grazing sector but there's also a lot more work to be done around the different technologies to reduce enteric methane," said Skye Glenday, co-CEO of carbon project developer Climate Friendly. Enteric methane refers to gas produced by ruminate animals such as cattle and sheep.
She added that a livestock industry working group that is co-chaired by Climate Friendly was developing a blueprint for a methodology that allows generation of ACCUs for reduction in enteric emissions.
"The biggest opportunity for agriculture is soil carbon, because it works with the farms production system, so there is no trade off between the productive land and a soil carbon project," said Chris McCosker, COO of Australian carbon project developer CarbonLink.
Grazing or mixed grazing and cropping systems were best placed to take advantage of the carbon markets, McCosker added.
Challenges
"Carbon markets are important but I don't think that they're going to be and shouldn't be the primary driver for change for reducing emissions in agriculture," Heath said.
He raised concerns that early stages of revenue coming to farm businesses from carbon projects is more through land use change, which was changing productive farmland to permanent tree crops or other types of vegetation.
Heath called for development of stacked methodologies that allow integration of different activities, such as cover cropping and farm forestry, which are integrated with grazing.
A small number of dairy farm businesses were actively engaged in ACCU projects, and many dairy farm businesses have been approached by carbon brokers and project aggregators to gauge their interest in participation, said Elissa McNamara, national climate and energy lead at Dairy Australia, Australia's national body of dairy industry.
"The current ACCU methods available and relevant to dairy farmers are limited to soil carbon sequestration. There is work underway within the Federal Government to review and develop other methods but the timelines on when these will be available are still unknown," McNamara said.
Further, the high costs associated with the ACCU project requirements and limited applicability of available methods to many dairy farmers were the main challenges in participating in the carbon market, according to McNamara.
"A carbon project is a long-term investment, and it's still an emerging market, producers need confidence in the market over the long run," McCosker said.
Policy
The Australian government recently closed a consultation on its Agriculture and Land Sectoral Plan, which will support its larger goal to reach net zero by 2050.
"Through the plan's development, the Government will consider how to support the sector to reduce emissions and increase carbon sequestration, including through the role of carbon markets," a DCCEEW spokesperson told Commodity Insights.
The government cited the development of Integrated Farm and Land Management method to fill this gap, but the method development has been delayed due to requirement of more consultation.
While the federal government and several state governments have set emissions reduction targets, there were few incentives or penalties applied to farm businesses to achieve these targets, McNamara said, adding that and it was crucial to strike right balance in implementing meaningful change, without imposing a disproportionate burden on farmers.