CBA says carbon pressure on ag will make financial sense for farms

Although significant business management changes may be unavoidable for family farmers, Commonwealth Bank's national agribusiness director, Carmel Onions, said the transition to a net carbon zero farm economy was already well underway in Australia, and making financial sense for producers.

She said moving to net carbon zero and "nature enhancement" should be seen as "financial value for farmers" and a nature building opportunity which would aid long term productivity.

While many primary producers still struggled to find enough time in their long daily work schedules to understand "what the heck are Scope 1 emissions, and how do I measure them", the sector needed to acknowledge the pace of change and expectations was increasing.

"Urgency around climate change and nature loss is rising," she told this month's agricultural Outlook 2023 conference.

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A substantial way to understand and support the transition was to recognise that farming practices which cut greenhouse gas emissions or sequestered carbon into the landscape would also help productivity.

The world needed a big carbon sink and, conveniently, carbon dioxide was an essential ingredient for productive agricultural soils.

At the same time, newly planted trees and shelterbelts provided incredible benefits - from protecting livestock and helping their mortality rates, to attracting pollinators and ecosystem biodiversity, reducing erosion and nutrient runoff, and sequestering carbon.

The same practices which cut net emissions and rebuilt our natural vegetation, soil and waterway capital would also underpin a farming business' long term productivity and lift property valuations.

"Keeping your soils protected encourages soil biological health and stops your valuable asset blowing away," Ms Onions said.

Transition practice changes could also trim farm business costs.

Converting to more renewable energy options, including solar pumps, cut energy costs and reduced Scope 2 emissions created by power generators.

Modifying the farm's reliance on certain fertilisers and chemicals by adopting natural system options also mitigated input costs and the release of nitrous oxide and other Scope 1 emissions into the atmosphere.

"Natural capital will change and repair itself," Ms Onions said.

"But there is often a lag between investing in practice changes and when these benefits flow through to lift productivity and reduce net emissions.

"It's important to emphasise the business case for investing early in transition."

The case for speedy action was also emphasised by Australian Bureau of Agricultural and Resource Economics and Sciences executive director, Dr Jared Greenville.

Despite the sector's varied opportunities to mitigate carbon emissions, agriculture's share of Australia's greenhouse output would actually rise from 16 per cent today to more than 20pc in 10 years.

The reason: On current trends agricultural emissions were set to stay tracking in line with production, while more significant and cheaper mitigation was happening in the energy sector, including the closure of fossil-fuelled power stations.

"But as global efforts to reduce emissions ramp up, technologies change and consumers become more climate conscious, and the costs of further decarbonisation in energy rise, there will be greater attention on agriculture," Dr Greenville warned.

"The need to mitigate agriculture's emissions will be inevitable."

Although Australia was committed to reach net zero emissions by 2050, not every sector could eliminate them.

Food production would continue to expel greenhouse gases, but would also need to slash its output and sequester much more carbon to help get the economy to net zero.

With Australian farmers well known as innovative and adaptive, Ms Onions noted many examples of farm transition already well underway.

As more producers tested and adopted regenerative-style agricultural practices these were becoming more mainstream, and their benefits clearer.

"The focus is now on how we accelerate progress while ensuring no perverse outcomes for nature," she said.

Transition traction support was coming from the food supply chain - retailers, farm lenders and other market players.

Woolworths had committed to cutting its value chain emissions 19pc by 2030, Coles had a target for Scope 3 emissions (emissions from waste, transportation of goods and workforce-generated emissions), and the Commonwealth Bank would have a "financed emissions" target for agriculture in 2024.

These commitments involved helping farmers with greenhouse gas management strategies, including CommBank's Agri Green Loans providing incentive-based discount finance for new practices which cut net emissions or enhanced natural capital.

The farm sector's own industry bodies were delivering support, too.

"Most, if not all, industries now have a sustainability framework, which is well-researched and increasingly seeks to measure the commodity sector's performance," she said.

"The beef sustainability framework is in its sixth year of reporting on 24 priority areas and 53 metrics and the dairy industry has extensive tools and practical farm support around net zero and other ESG goals.

"Sectors like cotton and sugar have excellent best management practice guides showing farmers what's required to lift sustainability."

Ms Onions said there was, however, an urgent need to simplify and reduce the cost of measuring emissions and carbon sequestration, particularly moving from net emissions to specific on-farm categories.

"What gets measured, often gets done - it brings focus to an issue and any gaps in a target," she said.

"Once measured, farmers will have the opportunity to differentiate themselves around environmental scorecards to supply chains, to secure their market opportunities and access new ones."

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