Carbon Farming InitiativeThe Carbon Credits (Carbon Farming Initiative) Bill 2011 provides legislation that gives landholders, farmers and forest growers incentives to undertake land sector abatement projects. The scheme will credit the greenhouse gas abatement achieved by either: - Reducing or avoiding emissions, for example, through capture and destruction of methane emissions from landfill or livestock manure; or - Removing carbon from the atmosphere and storing it in soil or trees, for example, by growing a forest, or farming in a way that increases soil carbon. The CFI will create credits called Australian Carbon Credit Units (ACCUs). One ACCU will equal one tonne of CO₂-e

The Carbon Farming Initiative (CFI) is a carbon offsets scheme that will provide new economic opportunities for farmers, forest growers and land managers while also helping the environment by reducing carbon pollution. Farmers and land managers will be able to generate credits that can then be sold to other businesses wanting to offset their own carbon pollution.

Carbon credits created through the CFI represent reductions in greenhouse gasesGreenhouse Gases in the earth's atmosphere absorb and re-emit infrared radiation. The Kyoto Protocol lists six major greenhouse gases, which vary in their relative warming effect. The six gases are: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), HFCs (hydrofluorocarbons), PFCs (perfluorocarbons) and sulphur hexafluoride (SF6). in the atmosphere through:

• Increasing the amount of carbon stored in soil or trees, for example by growing a forest
  or reducing tillage on a farm in a way that increases soil carbon; or
• Reducing or avoiding emissions, for example through the capture and destruction of methaneMethane (CH4) is a greenhouse gas with a GWP of 21. emissions from landfillA specially designed site for the disposal of waste to land by burial. or livestock manure.

Potential eligible abatementA reduction in the amount or intensity of greenhouse gas emissions as a result of actions taken by a company or individual. activities include:

• ReforestationThe reestablishment of forest on land that was previously forested but converted to another use before 31.12.1989. and revegetation;
• Reduced methane emissions from livestock;
• Reduced fertiliser emissions;
• Manure management;
• Reduced emissions or increased sequestration in agricultural soils (soil carbon);
• Savanna fire management;
• Avoided deforestation;
• Burning of stubble/crop residue;
• Reduced emissions from rice cultivation; and
• Reduced emissions from landfill waste deposited before 1 July 2011.

Design of the Carbon Farming Initiative

A CFI credit is also referred to as Australian Carbon Credit UnitAn emissions unit issued under the Carbon Farming Initiative (CFI) established by the Carbon Credits (Carbon Farming Initiative) Bill 2011, for verified emissions reductions or removals achieved by projects approved under the CFI. Also referred to as a ‘CFI credit’. (ACCUSee Australian Carbon Credit Unit).  Under the legislation, there are two forms of ACCUs recognised, specifically Kyoto ACCUs and non-Kyoto ACCUs.

The Australian Government intends to adopt a single administrative arrangement (in terms of approval of methodologies and projects, issue of AAUs, entry into the registry accounts set up under the Australian National Registry of Emissions Units Act 2011 etc.) to enable crediting for both Kyoto and non-Kyoto abatement under the CFI.  An advantage of administering all eligible CFI credits under the same scheme is that farmers will be able to bring forward projects, without having to first determine whether or not the abatement is recognised towards Australia's Kyoto ProtocolAn international agreement linked to the UNFCCC and sharing its aim of stabilising atmospheric concentrations of greenhouse gases, but requiring separate ratification by governments. The Kyoto Protocol, among other things, sets binding targets for the reduction of greenhouse-gas emissions by industrialized countries. It entered into force for ratifying countries in February 2006 and commits developed nations to collectively cut their greenhouse gas emissions by 5.2 per cent of 1990 levels by 2012. Came into force in Australia on 11 March 2008. target.

The Australian Government notes that the demand and therefore the price of Kyoto CFI credits is likely to be higher than for non-Kyoto CFI credit which are only able to be traded in voluntary carbon markets.

Kyoto CFI credits

For Kyoto eligible projects the Australian Government proposes to allocate an Assigned Amount Unit to each ACCU created by the project. Kyoto projects are those for which the removal or avoided emissions can be used to meet Australia's climate change targets under the Kyoto Protocol or an international agreement (if any) that is the successor to the Kyoto Protocol.

Parties with commitments under the Kyoto Protocol (Annex BThe group of countries included in Annex B in the Kyoto Protocol that have agreed to a target for their greenhouse gas emissions. For more information, see here Parties such as Australia) have accepted targets for limiting or reducing emissions. These targets are expressed as levels of allowed emissions, or "assigned amount", over the 2008-2012 commitment period.  The allowed emissions are divided into Assigned Amount UnitsAssigned Amount Units. The emissions units are allocated to developed countries based on their Kyoto Protocol target and can be traded. One AAU equals one tonne of CO2e. (AAUs).  The Kyoto Protocol allows countries that have emission units to spare - emissions permitted them but not "used" - to sell this excess capacity to countries that are over their targets.  By combining the Kyoto ACCU with an AAU, Australian farmers, forest growers and land managers will be able to sell the credits created into regulated carbon markets internationally.

Non Kyoto CFI credits

For non-Kyoto projects, the ACCU's created by farmers, forest growers and land managers will be able to be traded in the Australian voluntary carbon market and will provide a source of domestic offsets under the National Carbon Offset StandardThe Commonwealth Government’s National Carbon Offset Standard (NCOS) came into effect on 1 July 2010 coinciding with the cessation of the Government’s Greenhouse Friendly™ program. It is intended to ensure that consumers have confidence in the voluntary carbon offset market and the integrity of the carbon offset and carbon neutral products they purchase. It provides guidance to businesses who wish to make their organisation carbon neutral or develop carbon neutral products in a way that achieves emissions reductions, through the purchase and cancellation of eligible carbon offsets. More Information.  The abatement resulting from non-Kyoto ACCUs is not counted towards Australia's Kyoto Protocol target. 

How can buyers be sure carbon credits represent real emissions reductions?

Offset projects established under the CFI will need to use methodologies approved by the Government.

An independent expert committee, the Domestic Offsets Integrity Committee, will assess methodologies and give advice to the Government on their approval, ensuring they lead to real and measurable emissions reductions.

The CFI legislation also includes measures to minimise fraud and dishonest conduct and ensure that consumers can have confidence that credits are genuine.  These include crediting only after emissions reductions have occurred, a test to ensure project developers are ‘fit and proper' persons, issuing and tracking credits in a central national registry, requirements for project information to be published, appropriate enforcement provisions to address non-compliance, and regulation of the issuance, transfer and retirement of credits as financial products.

Practical examples

Practical examples of CFI projects could include:

• The frequency and severity of savanna fires can be reduced by carrying out controlled burning earlier in the dry season, when there is less fuel on the ground. This will lead to reduced greenhouse gas emissions in the savannas of Australia's tropical north.
• Manure management could enable farmers to reduce emissions from intensive livestock such as piggeries. The emissions can be captured and flared or used to produce heat and electricity.
• Some farmers may have the opportunity to reduce the amount of nitrogen fertiliser they use, while still maintaining optimal crop production. This could lead to a reduction in nitrous oxideAgriculture accounts for the majority of nitrous oxide (N2O) emissions in Australia, The transport sector also contributes to emissions of N2O. N2O has a high global warming potential of about 310 times that of CO2.it breaks down very slowly – over about 120 years emissions from their land and generate carbon credits under the CFI.
• Activities that improve productivity in the beef and dairy industries can also reduce methane emissions from the animals. For example, optimising cattle breeding and stocking rates, faster turn-off of sale cattle and improvements to diet quality in beef and dairy systems, can lead to significant reductions in methane emissions.
• Landfill operators have the opportunity to reduce greenhouse gas emissions and generate carbon credits through changes to landfill gasThe gas that is generated by the decomposition of waste in landfills. management. The captured landfill gas methane can be flared or used to produce electricity.
• Land managers may increase the amount of carbon stored on their land through vegetation.

Further Information

The Department of Climate Change and Energy EfficiencyEnergy efficiency improvements refer to a reduction in the energy used for a given service (heating, lighting, etc.) or level of activity. Such savings are generally achieved by substituting technologically more advanced equipment to produce the same level of end-use services (e.g. lighting, heating, motor drive) with less electricity. has more information on the Carbon Farming Initiative at www.climatechange.gov.au/cfi.