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Passed by parliament in August 2011, the CFI is an offsets scheme providing economic incentives for land and agricultural based reduction of emissions and the establishment of carbon sequestration activities. Relative to the forestry industry, land managers will be able to earn credits for sale to the voluntary market from actions including:

 Reforestation and revegetation

 Reduced fertiliser pollution

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 Native forest protection

 Forest management

 Reduced pollution from burning of stubble and crop residue

Kyoto compliant credits earned under the CFI will also be tradable under the CPM. During the first three years of the CPM in which the carbon price is fixed, liable entities may use Australian Carbon Credit Units (ACCUs) issued under the CFI to meet up to five per cent of their carbon unit surrender obligations. In the following flexible price period, there will be no limitations to the amount of ACCUs used to meet obligations.

Non-Kyoto compliant CFI credits that cannot be purchased under the Carbon Pricing Mechanism will be purchasable under the Governments Non-Kyoto Carbon Fund. Receiving Commonwealth funding of $250 million over six years, the Non-Kyoto Carbon Fund will provide incentives for land sector abatement additional to Australia’s emissions targets under current accounting rules, which can include improvements in soil carbon, revegetation and cessation of logging in native forests. At this point, details of this fund are yet to be published. The Land Sector Carbon and Biodiversity Advisory Board will be consulted on the design and the fund will be administered by the Department of Climate Change and Energy Efficiency.

Kyoto compliant activities are those that are recognised under the Kyoto protocol and therefore count towards Australia’s reduced emissions under the Kyoto protocol rules. They include reforestation, avoided deforestation, reducing emissions from livestock and waste deposited in landfills before July 2012. Non Kyoto compliant activities are not recognised under the Kyoto protocol, but are verified as reduction or sequestration activities and include soil carbon, feral animal management, improved forest management, and non-forest vegetation. Kyoto and non-Kyoto activities for earning ACCUs are illustrated in Figure ‎8.16.

To ensure emissions from activities such as industrial processing are truly offset, carbon must be sequestrated and stored permanently. In terms of carbon sequestration, the internationally accepted timeframe of permanence is 100 years.¹³⁸ The 100 year timeframe is based on the estimated lifetime of a tonne of carbon in the atmosphere. Sequestration project owners may cease their project at any time by relinquishing any credits earned by the project back to the administrator. If credits have already been sold, replacement credits can be purchased at the market price or the proponent could use credits from another project.

In the event of a natural disturbance such as fire, disease, drought or the requirement to establish a firebreak, project owners are not required to return credits if carbon is lost.

Following the occasion of such a disturbance, project owners are required to re-establish

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carbon stores. No credits will be issued for carbon under restoration. Further credits will only be obtainable once previous levels of carbon storage are exceeded.

Figure ^‎8.16 ACCUs from Kyoto and non-Kyoto Activities and Trade Markets

Derived from: http://www.climatechange.gov.au/government/initiatives/carbon-farming-initiative/activities-eligible-excluded/kyoto-and-non-kyoto-activities.aspx

Voluntary market value: Peters-Stanley et al., 2011

Non-kyoto carbon fund value: http://www.climatechange.gov.au/government/initiatives/carbon-farming-initiative-non-kyoto.aspx

Only 95 per cent of the carbon stored under a sequestration project will be issued the equivalent credits. This creates a five per cent buffer allowing for residual risks that cannot be managed, such as temporary losses as a result of a disturbance, or long term losses resulting from a failure to re-establish stores and relinquish credits.

Other clean energy options

Further assistance and funding opportunities for alternatives to native forestry available under the Clean Energy Agreement could provide $26 million in funding for Tasmanian farmers over six years. The programs include:

Kyoto activities

 Reforestation

 Avoided deforestation

 Reducing emissions from livestock

 Waste deposited in landfills before 1 July 2012

Non-Kyoto activities

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Carbon Farming Futures: An initiative with $429 million of funding over six years to assist farmers and land managers to benefit from carbon farming. This package complements the CFI by funding research ($201 million), development ($20 million) and on-ground demonstration of emission reduction and carbon storage techniques ($99 million) and will also support extension and outreach activities ($64 million). Based on Tasmania’s contribution to GDP,¹³⁹ Tasmania could expect to receive $7.7 million over six years under the Carbon Farming Futures package.

Biodiversity Fund: An ongoing fund delivering $946 million over its first six years for the establishment, restoration, protection or management of biodiverse carbon stores. The fund will target particular land systems identified under the Government’s $44 million initiative Regional Natural Resource Management Planning for Climate Change. Based on Tasmania’s contribution to GDP, Tasmania could expect to receive $17 million over the first six years of the Biodiversity Fund.

Indigenous Carbon Farming Fund: An ongoing fund delivering $22 million to assist indigenous communities to participate in the CFI. Specialists will be funded to work with indigenous communities to develop carbon farming projects and reporting tools. Based on Tasmania’s contribution to GDP, Tasmania could expect to receive close to $400,000 under the Indigenous Carbon Farming Fund.

Regional Natural Management Planning For Climate Change Fund: Funding of $44 million over five years to support regional natural resource management organisations to update planning for climate change impacts on the land and to maximise the environmental benefits of carbon farming projects. Based on Tasmania’s contribution to GDP, Tasmania could expect to receive close to $800,000 over five years under this program.

Carbon Farming Skills: Funding of $4 million over five years to develop a new nationally accredited qualification for carbon service providers and accreditation of carbon brokers and aggregators operating under the CFI. Information workshops will also be provided for farm extension officers, catchment authorities and rural service providers about carbon farming. Tasmania could expect to receive close to $72,000 over five years under the Carbon Farming Skills Fund.