“Not all carbon is created equally!”

The existing funding source for ecosystem services in Australia is primarily through the Emission Reduction Fund (ERF), now called Climate Solutions Fund (CSF), using the legislated methods of carbon abatement and sequestration. The challenge for ecosystem service providers is that the carbon price being offered through the ERF/CSF isn’t high enough to justify further action. This is evidenced by increasingly low volumes of ACCU’s being purchased through ERF auction.

Environmental and climate scientists have drafted many marginal abatement cost curves (shown below) that detail the type of carbon action and total volumes that could be achieved at various prices points within Australia. We thought we could meet international commitments using a “lowest cost abatement” model — we thought wrong! In fact, the current Federal Policy is limiting the growth of a lucrative green asset industry and hindering our ability to lead international action.

The McKinsey “An Australian Cost Curve for Greenhouse Gas Reduction” marginal abatement cost curve shows that we need a carbon price of around $35-$50AUD to begin large scale environmental projects that sequester carbon.

price differentiation and valuing triple bottom line is the solution

While we agree with climate scientists that one tonne of CO2 has the same effect on the environment, it is not true that all carbon projects have the same effect. Firstly, one tonne of carbon that is abated means that we have prevented one tonne of carbon from entering the atmosphere. Reducing our emissions is an important first step for mitigating climate change. However, in addition to reducing our emissions we also need to take carbon dioxide from the atmosphere and lock it back up in organic matter and byproducts; this is called sequestration. The easiest way to sequester carbon is to grow photosynthesising plants like trees. However, the cost of planting trees is much steeper than many of the activities that prevent carbon from entering the atmosphere. This is the second reason we our mantra is “Not all carbon is created equally.” Certain carbon projects such as environmental plantings cost much more than carbon abatement projects, but they also do more than reduce our emissions they take prior emissions and return the carbon into organic matter. Locking carbon back into forests and increasing soil carbon are some of our best options for sequestering CO2 that we have already put into the atmosphere.

The ERF/CSF are currently paying nearly identical prices for carbon credits despite the method used to reduce or remove the carbon from our atmosphere. We believe that sequestration projects offer substantially greater climate action that avoided emissions. Furthermore, carbon sequestration activities such as soil carbon and environmental plantings produce additional benefits of a social, cultural and ecological nature. We believe that by differentiating between the methods used to produce carbon credits that the voluntary and compliance markets will generally pay differing prices for the different credits. Through price differentiation we hope to cross the “carbon price chasm” that is preventing new project development and hindering the green asset proliferation within Australia.