An agricultural analyst has warned primary producers to be careful when signing up to sell carbon credits, saying at present aggregators were getting a significant amount of the income generated.
Andrew Whitelaw, Episode 3, said at present aggregators within the emerging carbon market were taking up to 40 per cent of the earnings for brokering the sale of carbon credits produced by a farmer.
"It is a significant amount of the earnings, so our main piece of advice is to be extremely wary before selling any carbon credits," he said.
Mr Whitelaw said farmers choosing to utilise any credits generated on-farm had to carefully consider the risks involved.
"There are significant risks involved in the trading of carbon credits from farm, including the possibility of future government policy changes and the risk of washout," he said.
Mr Whitelaw noted the carbon sector was still developing and said farmers had to do their due diligence on who they worked with.
"In this space there seems to be a lot of 'snake oil' salesmen who promise the world and deliver an atlas," he said.
"The production of carbon credits, and the trading of them is absolutely not a risk free trade."
Mr Whitelaw said conducting thorough research was critical, but added at present it could be difficult to gain a real understanding of the requirements, given the different standards and language used.
"Farmers around the country are confused by the whole process, those who have an interest are reading up and learning about the process," he said.
"The majority are placing carbon markets in the too hard basket, a level of standardisation, education and extension from stakeholders who are independent and not commercially linked the acquisition of carbon credits is probably required to change that.
"As a relatively new, and novel industry, there is a huge degree of uncertainty, there are arguments about each and every methodology about whether they are acceptable methods of accruing carbon, and whether they actually store carbon."
Mr Whitelaw said farmers may be best served by hanging onto any credits in case mandated net zero requirements became stricter.
"My personal view is that farmers should be very reluctant about selling carbon credits at the current market levels," he said.
"The farmer may require them in the future to become 'carbon neutral', but they may also be selling an asset for a long period of time at a price that may not be all that accurate in the future.
"There are also the potential risks of selling locked up carbon over a period of 25 plus years, if something goes wrong, you could end up owing carbon - similar to forward selling wheat and having a frost."
Although there has been a lot of publicity in the carbon credit space, Mr Whitelaw said he did not feel Australia was set for a rush of growers looking to participate in carbon markets.
"Farmers are on the whole going to avoid carbon farming until there is less risk and the whole process is a lot simpler than it currently is, at present they are just not interested in the whole process required," he said.
In terms of marketing opportunities from going net zero Mr Whitelaw said grain farmers in particular would likely see continued demand for their product whether or not they met carbon targets.
"There seems to be anecdotal evidence of some companies willing to pay for carbon free grain, but the reality is that the majority of grain is sold as is - with no real concern whether it is carbon free or otherwise," he said.
This article is part of ACM Agri's Carbon Series. The series was produced in collaboration with the Australian Science Media Centre with support from the META Public Interest Journalism Fund administered by the Walkley Foundation.