Forestry offset providers gearing up for credit market

CARBON sequestration companies have mixed views on the changes to the Carbon Pollution Reduction Scheme, which is now set to be rolled out in 2011.

Full market trading is likely to occur from July 1 2012, with the temporary fixed priced permits a sharp discount to the anticipated price in Australia of around $20-$25 a tonne.

Australia's carbon credit market is in its infancy, however some forestry abatement providers, which can charge up to $19 a tonne to plant trees to offset emissions, believe the $10 fixed price does not reflect the underlying market.

Under the government's modified proposal, it is understood that reforestation projects will still be able to commence generating CPRS permits from eligible forests from July 1 next year.

But, the reforestation industry remains sceptical of the effects of the $10 cap.

Floreat-based Carbon Neutral last year planted 600,000 trees for about 450 organisations predominantly from Perth, with interest also coming in from Victoria, New South Wales and South Australia.

Carbon Neutral business development manager Angela Tillier said the government changes confirmed the organisation's stance that the whole scheme needed an overhaul.

She said the temporary half-priced pollution permits were ridiculous and would do nothing to develop the market in a realistic way.

"The delay is a bad decision, but mind you we don't like the scheme in its current form anyway," she said.

"We think it's benefiting the big polluters, it's not going to do a lot to reduce emissions, because they are giving huge government handouts to make the transition and we don't believe that's the right way to go.

"We would like to see more investment in renewable energy infrastructure and we would like to see, like the British government is doing, a phase-out of coal-fired power.

"I think it's really disappointing, Australia had a golden opportunity here to take a real leadership role... but at the moment we just look like we want to whinge and make excuses and basically benefit the big polluters."

ASX-listed CO2 Australia welcomed the changes to the CPRS, saying it was sensible for Australia's large emitters who needed certainty around the timing and design of the scheme for critical business decisions.

CO2 Australia chief executive Andrew Grant said because reforestation projects are able to generate CPRS permits from July 1 2009, the delay would therefore have little impact on reforestation projects.

"In fact, investors in reforestation projects will be advantaged because they will effectively have an additional 12-month period prior to scheme commencement during which they can be banking permits generated from the forest," he said.

Last year, CO2 Australia signed an agreement with global resource company Newmont Asia Pacific to establish and manage a 50-year pilot carbon offset project that uses mallee trees to create a permanent carbon sink.

The company has also struck a deal worth up to $100 million with Woodside to plant mallee trees to offset emissions from the resource giant's $12 billion Pluto liquefied natural gas project in WA.

Subiaco-based Carbon Conscious said while business would have benefited from the CPRS being implemented sooner, it was essential for the government to get the legislation right, particularly in regards to the carbon credit market.

The ASX-listed company last week announced that it had reached a non-binding agreement with an ASX Top 50 company to plant mallee trees in the Wheatbelt for the production of carbon credits.

The name of the company is being withheld until the deal, which involves the planting of "many millions" of trees, is finalised in about six weeks' time.

Carbon Conscious chief executive Peter Balsarini said the delay would not hinder the organisation's plans, which includes the planting of 1,200 hectares of trees this year on marginal farming land.

However, farmers too have mixed reviews on the changes. WA Farmers Federation climate change spokesperson Dale Park said while the delay meant farmers would not be affected for another year, the government should have gone with its original implementation date in order to get some surety.

"As far as agriculture is concerned we've still got problems and we've asked the government whether the integration of agriculture on the system in 2015 is going to be put back or not," he said.

"One of the problems the government has got as far as the agricultural side of things, under the current scheme they are going to be dealing with around a thousand large companies.

"With agriculture you're tackling 16 per cent of Australia's greenhouse emissions and will deal with up to 150,000 people or entities."

MWH Australia team leader environment and sustainability, Daniel Huxtable, said despite the delay of the CPRS, there was a first-mover advantage with forestry abatement.

"There is a finite amount of land to plant trees and the people that get in first will get the best opportunities to pursue the forestry option for their abatement," he said.

"It can be the low hanging fruit for some companies and can be a fairly cost competitive option."

He said forestry abatement providers would have benefited from the CPRS and the carbon credit market officially coming online earlier because the industry would have an economy driving it.