Only 2-10 million tonnes of abatement from the land sector will occur under the ERF.

20 January 2014 — The full potential for Australia’s land sector to contribute towards abating carbon is not being realised, according to carbon advisory firm RepuTex.

RepuTex’s analysis, Unlocking Land Sector Abatement – An Outlook for the ERF, found that under both the carbon price mechanism or the Federal Government’s proposed Emissions Reduction Fund, only 2-15 per cent of Australia’s 2020 abatement challenge would likely be delivered through the Carbon Farming Initiative.

The ERF was likely to drive only 2-10 million tonnes of abatement a year in the land sector through to 2020, due to competition from cheaper sources of non-land sector abatement that could control ERF bidding, crowding out other more costly forms of abatement.

Like the energy sector, the land sector could have a major role in helping reduce Australia’s carbon emissions by protecting existing carbon stores, boosting rates of carbon sequestration and implementing low-carbon farming practices.

The primary policy mechanism for the land sector’s involvement in carbon reduction activities has been the Carbon Farming Initiative, which has enjoyed bipartisan support. The ERF could be another mechanism to drive further abatement, however according to RepuTex, as currently proposed, the Emissions Reduction Fund is unlikely to drive significant levels of abatement in the land sector.

“The land sector is a large source of emissions abatement for the Australian market, but has a slow return on investment, meaning that it is unlikely to compete for government funds against larger and cheaper sources of emissions reductions, such as efficiency projects undertaken by large corporations,” said Bret Harper, head of research at RepuTex.

“Industry abatement is likely to control much of the bidding within the Emissions Reduction Fund, crowding out other more costly forms of abatement from the land sector.”

RepuTex said a lack of long-term certainty was the key barrier stopping the land sector playing a larger role in carbon abatement.

“The most important driver of land sector abatement is for climate legislation to provide long term certainty,” said Mr Harper.

“In order for the ERF to unlock more substantial levels of abatement from the land sector, potential investors and project developers require funding certainty. There need to be payments for at least the next 10 to 15 years in order to make changes to land use practices economically viable.”