UNCERTAINTY over the federal government's carbon pollution reduction scheme has cast a shadow over the growth prospects for the carbon offsets plantation industry.
UNCERTAINTY over the federal government's carbon pollution reduction scheme has cast a shadow over the growth prospects for the carbon offsets plantation industry.
Those within the sector have told WA Business News that potential customers were delaying carbon-offset schemes until there was certainty surrounding the proposed legislation.
The issue was highlighted late last week when Western Australia's Forest Products Commission announced it was cutting staff and contractors in response to a downturn in the sector.
The FPC delivered 5,000 hectares of carbon-offset plantings for Synergy in 2009, but said all new work on carbon sequestration was on hold pending resolution of the federal CPRS.
It was one of several groups, including listed companies CO2 Group and Carbon Conscious and not-for-profit business Carbon Neutral, which had anticipated rapid growth in demand for new plantations.
The key driver was the global move toward carbon pollution reduction schemes, which had prompted emitters such as Woodside Petroleum and Origin Energy to sign multi-million dollar agreements.
In July, for instance, Carbon Conscious signed a carbon sink deal with Origin Energy that could be worth up to $169 million over 15 years if fully implemented.
Carbon Conscious said at the time that it expected the industry to move rapidly, and that the passing of legislation was an important step.
Oil Mallee Association of Australia general manager Simon Dawkins said the failure to finalise legislation had adversely affected the sector.
“From what I can tell there is no lack of confidence in carbon sequestration itself, but the level of debate surrounding the CPRS has caused uncertainty," he said.
“Customers are prepared to wait before committing themselves."
The uncertainty surrounds the composition of and obligations under proposed CRPS, as the government negotiates with other political parties to pass its legislation.
New Forest WA director Ron Mulder said business for the plantation contractor had been slow recently as customers held off ahead of the legislation.
“Why would companies invest in carbon sequestration now when they could be allocated free carbon credits in the future," he said.
FPC's move to suspend carbon sequestration work followed its customers being affected by the global financial crisis and Varanus Island gas explosion.
It said its business had also been affected by losses in its softwood plantations caused by wildfires.
In response, it is shedding 60 staff and contractor positions to save $7.5 million a year.
Carbon Neutral chief executive Leo Kerr said that, in terms of rules and regulations, the industry's goal posts had been moving ever since his company entered the sector in 2001.
“The whole thing has now become a political football (and) it is affecting the industry," he said.
“However, for us as a not-for-profit organisation it is business as usual, because customers who come to us are not those caught up in the CPRS."
CO2 Group chief executive Andrew Grant told WA Business News the business had continued to grow as it secured agreements via the voluntary market, the New South Wales carbon reduction measures and projects needing environmental offsets for approval.
