Natural capital goes beyond carbon trading

That's the advise of former AgForce natural resources chair Peter Mahony, who believes the carbon market is too narrow and does not reward primary producers who have been looking after their land for decades.

With a degree in agricultural economics, Mr Mahony said banks and big business were already assessing primary producers on their "natural capital" whether they liked it or not.

"I don't think it will become prescriptive, but all the banks will be measuring your natural capital whether you like it or not - all the companies you supply to will be measuring it whether you like it or not," he said.

"Whether you like it or not, you are going to be measured. The question is do you want to benefit from that or do you just want to be a pawn in game and just go along."

Mr Mahony said there were two fundamental flaws with only going down the path of carbon sequestration and credits.

"One, you've got to have a change of practise, you've either got to put in cell grazing or plant trees, and two, it's often only rewarding those places which have been run down," he said.

"It doesn't reward those who have done an exceptional job over a long period of time and it's not wide enough. Carbon is a very narrow. If you've run your place exceptionally well - where you've got 85 per cent ground cover, you've rotation grazed for the last 30 years, then your place is pretty good and it's very hard to make much change in relation to carbon."

Mr Mahony said if a producer's soil carbon was about three and half to to four per cent then it was very hard to get that soil carbon up to four and four half per cent.

"Your improvements and increments are small because you're already right at the top," he said.

"Whereas if you've smashed your country or it's been farmed and you've put pasture in... then the change is so much more and that is essentially what carbon credits is paying you for, it's paying you for those changes.

"Natural capital, however, is not just carbon - it's your water, it's your water quality, it's community, there's so much to natural capital, it's how your farm works in with the environment around you which is human and not just the ecology that we see."

Mr Mahony said carbon trading also did not reward or give any incentive for producers to do anything with their remnant timber.

"You can have really good remnant eco systems and really poor remnant eco systems so how do you incentivise people to run their remnant country really well, that is, to make it really ecologically as good as it can be," he said.

"At the moment, there's no incentive for anyone to particularly run that country to the best it can be biologically so natural capital is a much wider look at the general health of your farm and it's not just ecological or environmental- it's human as well.

"It's really big picture stuff and the other metric that you are trying to measure is when there are some places that are already very good and they should be rewarded. Those places that are doing an excellent job of maintaining the environment for the social good as well as their own good generally, there should be a reward for that."

Mr Mahony said there was not a set natural capital market like the carbon market yet, but there were offshoots.

He explained that if producers had a carbon project they could get "additionality", for example, by involving First Nations people in a project or protecting an area with endangered species.

"Instead of getting $38 a tonne for carbon, you could get substantial additional funds per tonne on top of the $38 a tonne for the carbon because of what they call 'additional environmental benefits'," he said.

Mr Mahony said companies like Qantas would pay for this and the boardrooms of big companies were starting to talk about "a whole ecological balance sheet".

"Where we are really seeing the pull factor is with your banks which are having to comply with the TNFD - the Taskforce on Nature-related Financial Disclosures - that's being driven by Europe," he said.

"All the banks in Australia are going to have to account for their natural capital in their client base so they're going to have to model what effect on the environment their clients have.

"The bank manager is doing it already whether you like it or not. He's already got a value on your farm for this ecological value."

But Mr Mahony said it was not just banks, but major companies such as AA Co, JBS and Cargill that were also going to have to give a figure on their supply chain value.

"So natural capital is a broad measure of the ecological health on your farm which includes how you treat your remnant vegetation, how you sequester carbon in your soil; how you monitor your water and how you fit within your community," he said.

Mr Mahony said the federal government had been trying to build a natural capital market for the last three years.

"Farmers will be on one side while on the other side will be your big companies," he said.

"They will give you money, but it's unlikely to be as regimented as your carbon market for example."

Mr Mahony said AgForce's Ag Care program was one way producers could measure their natural capital in a consistent and sustainable way so a dollar value could be put on it.

After taking part in the first two rounds of Ag Care, Mr Mahony said it had shown him, as a landholder, where he was below par and what he could do to improve his natural capital on farm.

He said the concept of natural capital and how it was recorded would probably be greeted by some producers in the same way PMAVs were received when they were first introduced.

"It will be similar to PMAVs I'd say - what you find is that the top 10 per cent grab on to it and run with it and do very well out of it, eventually the next 50 per cent will poke in and will get it done and then the rest run the risk of losing out," he said.

With his wife, Nikki, Mr Mahony runs 3000 head of mainly Santa Gertrudis cattle on Gyranda, a 9400 hectare property at Cracow in Central Queensland. The couple bought the property from Nikki's parents, Burnett and Louise Joyce, in 2011. The property will have been in the Joyce family for 100 years in 2026.

Mr Mahony believes measuring and improving one's natural capital goes hand in glove with better productivity and better production on farm.

"That was what AgForce designed Ag Care for - it's to be able to measure it and effectively reward those people who do a good job and give an example for those people who want to know how to improve it," he said.

"I embrace it as I see it as a way of rewarding good producers and giving you a benchmark so you know where you stand because at the moment without it you're really operating blind."