Carbon farming Down Under

By Michael Sheng and Jeff Lynn, Blake Dawson

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.

Michael Sheng, Partner, Blake Dawson
Michael Sheng
Blake Dawson

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.

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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