Australia’s Carbon Farming Initiative (CFI), established last year, has created a carbon offsets scheme that allows participants in approved projects to earn carbon credits by storing carbon or reducing greenhouse gas emissions on land. Although the CFI operates independently of the carbon pricing mechanism, certain credits generated by CFI abatement activities may be sold to third parties wishing to offset emissions or reduce their liability under the Australian carbon pricing mechanism. This should create new investment opportunities for interested businesses.
In general, CFI credits will be eligible for trading under the carbon pricing mechanism if they are issued in respect of projects recognized by the Kyoto Protocol – in particular, agricultural emissions avoidance projects, landfill legacy emissions avoidance projects, or offsets projects specified by the regulations. However, CFI credits generated from non-Kyoto projects can only be used in the voluntary carbon market and are not tradable in the market established under the carbon pricing mechanism.
During the first three years of the mechanism, liable entities will only be entitled to surrender CFI credits to meet a maximum of 5% of their emissions obligation. After that, however, there will be no limit to the surrender of CFI credits under the carbon pricing mechanism.
You must be a
to read this content, please
Michael Sheng is a partner in the Shanghai office and Jeff Lynn is a partner in the Melbourne office of Blake Dawson
Blake Dawson Shanghai office
Suites 3408-10, CITIC Square
1168 Nanjing Road West, Shanghai
Postal code: 200041
Tel: 86 21 6263 1888
Fax: 86 21 6263 1999