Listed companies and major banks, expected to form the basis of a carbon credit market, are on a collision course with property rights unless a clear security of title for carbon credits is developed, Australia’s leading valuers say.
The problem is that the majority of carbon credits, or carbon sinks, will be held in forests, and so far there is no way to separate the carbon value of a forest and trade it or lend against it, from the underlying land title.
But so far neither the federal government, nor the Opposition has focused on the dilemma,despite many approaches, according to carbon spokesperson for the Australian Property Institute, John Sheehan,
Mr Sheehan has been travelling the country presenting the Institute’
s views and trying to drum up interest in the issue. See his paper, presented to this years Australian Property Institute Victorian Division Annual Conference in Melbourne on 4 September in Spinifex.
According to Mr Sheehan, what’s clear is that in order to trade carbon credits, or lend against them, the market needed security of tenure. Despite calls for this to be developed, the issue was still off the table for the federal government, he said.
“The purchasers of carbon credits sourced from land based carbon sinks can be expected to be major ASX listed companies, who will seek funding from the banks, who will demand robust security to underpin large loans to these companies,”he says.
“This security needs to be provided by a robust property right in carbon,” Mr Sheehan said.
“Existing property law and titling does not permit robust property rights in carbon to be created at the level of security and transferability that the community has come to expect from existing property rights such as Torrens Title,” Mr Sheehan said.
“For trading in land based carbon sinks to be a reality, there needs to be a lot of attention given to just how the property rights in carbon are separated from the existing property rights in land.
The Senate defeat of the CPRS legislation in the lower house was a chance to get things right, Mr Sheehan said.
“The Government now has the time to go back, redraft the legislation and clearly define a property right in carbon. “
The Institute has been calling for a robust debate on the issue of land based carbon sinks.
“Whether Australian Emissions Units (AEU’s) under the CPRS are ultimately created or whether emissions offsets to a carbon tax are adopted, it is clear land based carbon sinks will underpin the emerging market in emissions offsets,” Mr Sheehan said.
“The API would welcome any opportunity to work with the Government and Opposition on this important issue to ensure the success of the emerging Australian market in carbon,” Mr Sheehan said.
The Fifth Estate – Sustainable property news