Farmers could soon be repaying at least part of their property purchase borrowings in carbon credits if a landmark West Australian transaction is any indicator.
A special $1.7 million agribusiness loan from Commonwealth Bank of Australia has just covered the full cost of a 225,000-hectare grazing property purchase in the Mount Magnet Shire in WA's Mid West region.
The loan will effectively be fully repaid in the next five years as the bank takes ownership of Australian Carbon Credit Units (ACCUs) relating to a portion of the atmospheric carbon capable of being sequestered on the land.
The arrangement is understood to be a first of its type signed off by an Australian lender.
CBA, which will onsell the credits to bank customers wanting to offset or decarbonise their own business footprints, hopes the new lending option takes off across its farm sector customer base.
"Here is an opportunity for agricultural enterprises like this to continue running cattle and diversify their income stream, while also helping decarbonise the economy, said the bank's commodities, trade and carbon executive general manager, Alex Toone.
"We have other similar lending deals in the pipeline and interest from other customers on both sides of the carbon market," he said.
"As more businesses make net zero emission commitments, demand for ACCUs continues to increase, making supply a critical priority."
Under the financing structure's terms, the bank takes ownership of carbon credits tied to the pastoral leasehold which is about 300 kilometres inland from Geraldton and 600 kilometres north of Perth.
The holding, which involves two stations, Narndee and Boodanoo, is spread over mulga woodland and saltbush and native pasture country bought by North Queensland-based agriculture and ecological conservatory group, Forever Wild.
The transaction, inked in association with carbon project service provider, Corporate Carbon, will see Forever Wild build up an existing Droughtmaster-based herd and promote ecological and farm tourism opportunities on the land.
It will also manage the vegetation to promote carbon sequestration and other conservation goals.
Revegetation areas will not be locked up or separated from day to day beef cattle grazing management.
Corporate Carbon will audit vegetation growth and management to ensure Forever Wild complies with its sequestration responsibilities on behalf of the new ACCU owners.
"The property can generate far more offset credits than we have secured," Mr Toone said.
Repayment pressure cut
Forever Wild chief executive officer, Fiachra Kearney, said the deal removed a lot of the traditional pressure on a borrower to generate enough revenue to repay a loan while also trying to build a sustainably profitable business.
"We already have some cash to work with and we don't have the immediate stresses of rising interest rates hanging over us - and we expect our loan to be repaid in five years," he said.
"I think there's a lot of scope to make use of agriculture's natural capital for this sort of lending arrangement.
"It's a great opportunity for farmers."
Corporate Carbon's managing director, Gary Wyatt, believed there were many more opportunities to make this arrangement "a normal way of doing business in the agri sector".
CBA's Mr Toone noted Australia had some of the world's best farmland and coastal heath and mangrove resources available to rehabilitate as carbon sink initiatives and a respected government regulated marketplace to trade in.
The bank, which had traded carbon units in Europe, Britain and New Zealand for a decade, was comfortable investing in ACCUs, and confident prices would rise, thus providing landholders with an even more valuable resource to back any expansion of investment plans they may have.
"Carbon is going to be priced throughout the economy so we see a role helping to facilitate and support customers to manage carbon needs and opportunities," he said.
"I think arrangements like this demonstrate we trust and value the carbon market."
Each ACCU, currently trading around $33, represents a tonne of carbon dioxide equivalent stored via sequestration projects registered with Canberra's Clean Energy Regulator.
Natural capital value
Forever Wild took possession of the Mount Magnet country in mid November after spending almost three years looking for a property to develop and a finance package to support its focus on valuing natural capital.
Mr Kearney said structuring the loan and related ACCU arrangements had been "quite complex" and took its time because it was the first.
"However, now that we have achieved this, it opens the door to a bigger lending package later on," he said.
At Mareeba on the Atherton Tablelands the not-for-profit business' initial venture includes a pilot Brahman-cross cattle operation run alongside a wetland and savannah conservation project, plus high end tour experiences and community-good initiatives for traditional landowners and others.
The 2000ha property is actually state-owned land which Forever Wild converted to a conservation estate now supported with the income from its secondary agriculture and tourism ventures.
Mr Kearney said the WA purchase would expand the Far North Queensland model, making the most of the area's rich diversity of natural flora and fauna species, many of which were almost unknown.
Corporate Carbon's Mr Wyatt, said aside from breaking new ground with the hybrid loan and carbon credit deal, Forever Wild's was advancing sustainability and supporting a profitable and viable agricultural economy.
"These properties will remain productive cattle stations, while also delivering better carbon, environmental and biodiversity outcomes."
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