Australia moves to simplify carbon trading practices for reforestation

The Australian government is consulting on a pilot program promoting local carbon credit projects based on reforestation using native species of trees, with the government offering to buy the credits from farmers at a fixed price under a simplified system.

Australia's carbon market functions in a unique manner. A government-administered scheme, the Emissions Reduction Fund (ERF), supports investments in carbon abatement projects on a voluntary basis.

ERF project developers can sell locally certified Australian Carbon Credit Units (ACCUs) either to the government through a carbon abatement contract, or to private buyers in a secondary market.

However the country's Clean Energy Regulator, which manages the ERF scheme, has found that complex technical registration, reporting and crediting processes have held back participation of farmers and other landholders in the projects.

The Clean Energy Regulator is in charge of developing the rules governing eligible ERF projects, registering projects and issuing ACCUs, as well as buying the units via competitive auctions. While more commercial stakeholders are beginning to buy ACCUs, the regulator is still the major buyer of the units.

To boost participation the pilot program is set to reduce administrative requirements and simplify trading through a government purchasing desk at a fixed price.

In the first quarter of 2021, ACCUs were priced at AU$18.5/mt ($13.8/mt), latest available official data showed.

Platts CNC nature-based carbon credit assessment, focused on forestry, farming and land management avoidance/reduction or removals, was priced at $7.10/metric ton CO2e on Aug. 30, up 53% since launch on June 14.

A fixed price under the pilot program has yet to be proposed.

Eligible projects must involve the planting of native species to establish new and permanent forest cover, with a total planting area of 200 hectares or less.

The public consultation on the program is to close on Sept. 28.