Carbon farmers hope for rewards and recognition from financial institutions

Recently, Tom and Antoinette Archer, Rexton, near Goondiwindi, and Andrew and Meagan Lawrie of Moora Plains, Gogango, achieved what's believed to be a world first for the large scale sequestration of carbon in their soils.

As carbon farmers and after five years of soil carbon measurements, the two couples were issued a combined 151, 312 Australian Carbon Credit Units ACCUs which in today's market could fetch about $4.5 million.

To find out how financial institutions would recognise ACCUs in a farming enterprise, specific questions were asked of three big players in the rural finance sector - NAB, CBA and Rabobank - about whether they would give a lower interest rate to farmers who sequestered carbon and if they would recognise ACCUs as an asset and allow carbon farmers to borrow against that asset.

While a response was received from NAB, CBA and Rabobank, there were no specifics in the answers despite the fact that to participate in the scheme the Archers and Lawries had a substantial outlay of about $200,000 each.

A smaller finance company, Legacy Livestock, was more forthcoming saying it did recognise regenerative farming practices and rewarded those practices in their loan pricing structure.

Mr Archer, who runs merino sheep and backgrounds steers, heifers and cows on his 3851 hectare property, said the impetus to participate in the soil carbon project was to add "a more stable income stream" to the business.

"We started the time control grazing in 2003 and then signed up to carbon farming in 2016.

"The income stream from our production business varies quite a lot depending on seasons and commodity prices, and we saw carbon as a more stable form of income.

"If we are successful in sequestering carbon and we have ACCUs issued every five years we have the option to sell them at will and even out our income."

Mr Archer said his bank had been positive about what they were doing at Rexton, but he declined to say if that had lead to anything tangible such as a lower interest rate.

"I am not expecting anything, but I would like to think that the banks would reward or like to participate in the process," he said.

"I would hope these results fall favourably for the livestock industry."

Richard Brimblecombe, the CEO for livestock finance company, Legacy Livestock, said while he was not directly involved in funding any operations associated with carbon at this point in time, he said he was watching the space very carefully.

A former NAPCO CEO, Mr Brimblecombe said he was a firm believer that Australia's primary producers were part of the carbon solution and were better placed to sequester carbon and use livestock as a management tool to promote sequestration of carbon.

"One of the things that we're looking at as a financial services provider is whether or not there is a role to play in the financing of carbon related activities to provide the capital needed for producers accelerate the rate of take up of these kinds of activities," he said.

"I am in a unique position in that I own a livestock enterprise (1300 ha at Glenmorgan) in my own right and I have done a feasibility study on my property for a soil carbon project based on soil carbon methodology.

"So, I have a really good understanding of it and it's of real interest to us because there is a large capital outlay required for some time prior to funds being received and it is going to have to be funded somehow."

Mr Brimblecombe said when his company considered applications for funding from producers they were very interested in the management practices that producers adopted on farm.

"We are particularly interested in whether or not they are managing for regenerative, sustainable outcomes and we actually recognise that and reward that in our loan pricing structure, but additionally by definition that extends to carbon initiatives," he said.

Rabobank's regional manager for Southern Queensland Brad James said Rabobank was engaging with clients who wished to undertake carbon assessments on their operations.

"We're supporting this process by offering workshops - delivered by the University of Melbourne - across Australia that provide an understanding of where emissions are generated in farming, the latest research in emissions reduction and where research is heading and the options for agriculture," he said.

"This includes providing information on the Emissions Reduction Fund EFR and the options available to landholders in undertaking carbon projects. Importantly producers are becoming aware that retention of Australian Carbon Credit Units within the farm business is an important consideration if the ag supply chain requires low emissions and/or carbon-neutral product into the future.

"Producers are also becoming aware that completing a carbon account, which nets off emissions from their activities and sequestration from soil and vegetation, can be completed to reflect management changes to lower net emissions independent of whether an ERF project is entered into or not."

Mr James said if clients were improving soil carbon through their activities, then they should be rewarded through improved productivity, resilience and profitability which could only be good for the enterprise.

"We see our role as helping clients with building knowledge and developing plans that take into consideration the environmental, social, and governance (ESG) changes within their supply chain, markets and regulation to enable our clients to thrive into the future."

NAB Regional and Agribusiness executive Khan Horne said NAB recognises the role it plays in supporting customers address the risks and opportunities presented by climate change.

"A key component of our climate transition growth strategy is supporting sustainable agriculture," he said.

"Many business owners are choosing to make tong term investments into a more sustainable future.

"Recent NAB research shows around one in five businesses strongly intend to make an investment to improve the sustainability of their business over the next two years. Business owners want our help and they want commercial solutions to help them transition.

"Late last year, we launched our Agri Green loan and business finance for green equipment to support customers with their decarbonisation journey.

"NAB's finance for green equipment has seen strong uptake - growing 59 per cent in the last three months - with significant demand for energy efficient agriculture equipment, solar and EVs.

"We also continue to partner with research organisations to better understand the relationship between our customers' operations and the environment, including climate change mitigation and adaptation activities. We also partner with technology providers to explore how smart digital solutions can be used to support our customers on farm."

Mr Archer said a carbon soil project was certainly not a crackpot scheme, but he did not want to speculate as to how many farmers would now become involved in carbon farming.

He said it was still early days and up until now the scheme had been "a bit foreign" to a lot of farmers.

Mr Archer said his family certainly had not been interested in the scheme when there was a 100 year permanence or even 50.

"I don't know if the 25-year permanence was a turning point, but if we'd still been on 100 we wouldn't have done it so maybe it was a contributing factor," he said.

"There are a lot of very successful people in agriculture who don't do what we do...there's quite a lot of people who do this type of grazing, it's not unique. We're early adopters of the carbon bit, but there will be a lot more of them I suspect."

Over a period of 15 years, the first part in 2002 and the second in 2015, the Archers split 30 paddocks into 150, and added an additional 30 waterpoints.

A CBA spokesperson said CBA had been a proud supporter of Australian agribusinesses for more than 110 years and was deeply committed to working with customers as they looked to meet the nation's net zero by 2050 targets.

"As Australia's largest bank, we want to play a leading role in supporting our nation's sustainability transition and we see supporting the development of the carbon market as core to that strategy. Our customers tell us that financing is the biggest barrier to entering carbon markets, so we are working on ways to unlock market access and support clients with mobilising carbon credit supply and the significant economic opportunity it holds for Australia," the spokesperson said.