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Henbury Station carbon farming project gets curioser and curioser.

- Friday, July 27, 2012

Announcements over recent days that Qantas has entered into an agreement to purchase carbon offsets from the R M Williams company's Henbury Station have further added to the mystery surrounding this project and exactly how it will work.

Announcements have been made over recent days (see here and here) about an agreement that has been reached between Qantas and the R M Williams company, under which Qantas will purchase up to 1.5 million carbon credits from the Henbury Station project over the next five years. 

Based on the comments made by a Qantas spokesperson, the volume of credits purchased will depend on the number of Qantas passengers who voluntarily opt to offset the emissions associated with their travel - so it will not actually be Qantas that is purchasing the credits but their passengers. Qantas currently charges passengers $9.22 per tonne of emissions offset, so this deal has the potential to be worth almost $2.8 million per year (presuming Qantas does not take a cut of the $9.22 for 'administrative' costs) for the Henbury project. 

However, there is currently no Carbon Farming Initiative (CFI) methodology that is applicable to the Henbury project. Information provided by the government suggests that the credits will be generated from additional carbon sequestered in soils and vegetation as a consequence of the removal of the cattle from the land. 

The Australian Government has a conflict of interest in relation to the development of a CFI methodology for this, because it reportedly funded $9 million of the $13 million purchase price of Henbury Station. In any event, even if a methodology is approved, it seems the carbon offsets created can only be recognised in the voluntary carbon market, and not the mandatory market that commenced on July 1st 2012.

But even more curious is the fact that the announcement about the Government funding for the Henbury Project indicated that the land had been added to the national reserve system - "Henbury will now be protected forever as part of Australia’s National Reserve System - our most secure way of protecting native habitat". Under Kyoto Protocol emission accounting rules, carbon sequestration occurring in conservation areas is not counted as part of a nations emission inventory. So if Henbury Station is now part of the national reserve system, it presumably cannot be used to generate carbon credits - although whether this applies in the case of the voluntary carbon market is not completely clear. 

If national parks can be used to generate carbon credits, then there is a great opportunity waiting the Government to take advantage of Australia's 100 million hectares of national parks to make some serious money!

And any landholders who have extensive areas of land with native vegetation on that land and that previously thought it was useless might now be able to sell their livestock and make some real money by not farming! 

Michael Kiely commented on 03-Aug-2012 03:00 PM
That ain't "Carbon Farming" in my book, Mick. You don't stop farming to grow carbon stocks. It is clear that the Henbury Station project does not have an experienced carbon farmer involved. People like Evan Pensini from the Pilbara or Chris Henggeler from
Kachana Station in Kimberley. They use cattle as a tool to increase carbon in vegetation and soil. Chris explains it like this: "Soils, plants and animals co-evolved over long time frames. They need each other. Vegetation needs to be kept healthy and growing
if we want to sink carbon. In seasonally dry environments, large herbivores play an important part in this because they mulch, fertilise and prune plants." Your assumption that the Voluntary Market is hardly worth considering should be revised in the light
of the $3m/year Qantas deal. The "brand halo effect" adds value to the unit. The 'story' behind the unit is more important in this market: the story of the RM Williams and Qantas brands and the story of Henbury Station all combining to appeal to the city-based
flyer. I would like to know the comparative gross margin per hectare for three scenarios: cattle only, carbon + cattle, and carbon only.
Anonymous commented on 03-Aug-2012 03:31 PM
Yes Michael - I admit the voluntary price (at least what Qantas charges its passengers) is higher than previous estimates - although I don't know whether this is the price paid to the landholder. The gross margin analysis would certainly be interesting.

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