Out of the woods? The trouble with Australia’s carbon farming industry

It’s one of the country’s main climate policies but critics dispute its impact and locals complain the practice has led to soaring land prices, write Frances Vinall and Michael E Miller

Mulga trees grow thick on Carol Godfrey’s Tinnenburra Station in southern Queensland (Photo by Matthew Abbott for The Washington Post)

Carol Godfrey gazed out her helicopter cockpit at the miles of mulgas glowing green and gold in the dawn light. For decades, the bushy trees had been little more than a last resort for farmers needing to feed their cattle in the arid Outback. But recently, the humble mulgas have become a hot commodity.

It’s not the hardwoods themselves that are valuable, however. It’s what they store: carbon.

A few years ago, during a severe drought, Godfrey and her husband Lindsay, the former mayor of Cunnamulla, had almost been forced to sell this sprawling family farm in southern Queensland. But then they turned to carbon farming. Last year, carbon credits earnt them half a million dollars.

“We were so close to being wiped out,” the 68-year-old says over the roar of the chopper blades. “Now, no matter the weather, the carbon income comes in regularly every year.”

Carol Godfrey prepares her Robinson 22 at first light to inspect the vast property where she manages cattle and a carbon project (Photo by Matthew Abbott for The Washington Post)

In the “mulga belt,” which stretches into northern New South Wales, is the unassuming centre of Australia’s roaring carbon-farming industry. In this area alone, roughly 150 properties have collectively made at least $300m (£250m) from carbon credits in less than a decade, according to government records.

Carbon farming – in which landowners are paid to preserve, replant or regenerate carbon dioxide-storing trees and vegetation – is becoming big business given the climate crisis. As more than 70 countries race to cut greenhouse gas emissions to as close to zero as possible, they are scrambling to create markets that enable big polluters to write off some of their emissions by buying carbon credits.

The Australian government has long touted its $450m-a-year carbon market as among the world’s most reputable. So the challenges it is facing now could offer key lessons for other countries embarking on their own journeys to net-zero emissions.

We certainly lead the world in state-sponsored greenwashing. I’ve yet to see a carbon project that is legitimately avoiding or reducing emissions at the level that it says

In recent months, Australia’s main climate policy has come under attack from academics, environmentalists, politicians and even some of those making money from it. Critics claim that most Australian carbon credit units, known as ACCUs, lack integrity and do more harm than good by giving big polluters licence to continue business as usual.

“We certainly lead the world in state-sponsored greenwashing,” says Polly Hemming, a carbon market expert at the Australia Institute, a think tank in Canberra. “I’ve yet to see a carbon project that is legitimately avoiding or reducing emissions at the level that it says, and now carbon credits are being used to justify new gas and coal projects.”

Many years ago, the Godfreys cut large circular mounds into a clay pan paddock that had been destroyed by overgrazing (Photo by Matthew Abbott for The Washington Post)

The growing carbon criticism led Australia’s centre-left government to commission an independent review, which was released last month. It recommended some changes but overall found the market “essentially sound”, paving the way for an expansion under an administration whose promise to reach net zero by 2050 hinges on ACCUs.

“Australian carbon credits are a vital part of the net zero,” climate change minister Chris Bowen said recently. “In many ways they’re the ‘net’ in the net zero.”

Doubts linger, however, including in mulga country, where locals complain that carbon farming has led to soaring land prices and disputes over fire risks and feral animals. Even some carbon farmers say carbon projects sometimes let mulgas grow amok to maximise profit.

“They let it thicken right up, and you can’t get through it and it’s horrible and it’s not biodiverse,” says Graham Finlayson, who runs five carbon projects in the area. “There’s definitely some valid concerns around methodologies.”

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When Australia created its carbon market – the Emissions Reduction Fund – in 2014, it enabled companies to voluntarily buy ACCUs to shrink their carbon footprints. It also required the country’s 215 largest polluters – mainly coal, oil and gas companies – to offset pollution beyond certain limits. But the limits were set so high they had little to no effect, according to Andrew Macintosh, an expert who helped design Australia’s carbon market but has emerged as its leading critic.

Instead, almost all of the credits have been purchased by the Australian government with the aim of aiding efforts to meet its international climate pledges. That meant the same agency was not only accrediting carbon projects but was also their primary customer – a conflict of interest, critics argue.

Carol Godfrey checks on her cattle and other farming infrastructure as she flies above Tinnenburra Station (Photo by Matthew Abbott for The Washington Post)

“The metric of success is more credits pouring out the door,” says Macintosh, an environmental law expert at the Australian National University.

In the mulga belt, the biggest issue is – unsurprisingly – the trees.

“Avoided deforestation” projects are supposed to protect forests that would otherwise be cleared. But Macintosh and ecologist Don Butler say many carbon farmers claim credit for sparing mulgas they were never going to chop down. Similarly, other projects earn ACCUs by allowing the natural regrowth of mulgas in cleared areas. But many claim credit for regrowing trees that were already there or would have grown anyway, critics say.

“Human-induced regeneration” also assumes that farmers can boost regrowth by reducing livestock grazing. Macintosh and Butler argue that the main factor is not land management, but Mother Nature.

“When it rains, you get regeneration. When it doesn’t, then you get tree die-off,” Macintosh says.

To prove it, the two academics analysed satellite imagery of 169 projects of human-induced regeneration. In all but one case, they found that the projects fared no better than surrounding areas. Instead, tree and vegetation cover fluctuated with rainfall.

The entrance to Kenilworth Station, owned by a Malaysian businessman on the outskirts of Byrock, New South Wales (Photo by Matthew Abbott for The Washington Post)

Among the many properties that appeared to be earning carbon credits while providing little to no additional environmental benefit, according to Macintosh and Butler, was Kenilworth Station, just outside the one-pub town of Byrock, New South Wales.

They found that tree cover at Kenilworth plummeted during a 2017-19 drought even more sharply than in the surrounding area. Yet the project continued to receive millions of dollars’ worth of ACCUs. “Something is not right here,” Macintosh says.

Kenilworth also illustrates how fossil-fuel corporations are capitalising on the carbon market: the project is managed by Select Carbon, which is part of Shell, the oil and gas giant and one of the world’s biggest polluters.

Select Carbon declined requests to tour Kenilworth and interview someone about the carbon project.

The Mulga Creek Hotel is the only public meeting place in the small town of Byrock (Photo by Matthew Abbott for The Washington Post)

When we visited the project in December, the gates were padlocked. A faded phone number on a sign reached a caretaker who directed questions to Ray Handini, the Australia representative of Lee Kim Yew, the Malaysian resort and hospital tycoon who owns the property. Lee and Handini did not respond to multiple requests for comment.

But Select Carbon rejected the accusations, insisting the project is well run and closely monitored. Chief executive Dean Revell said in an emailed statement that the company carefully assesses “canopy cover changes in the project area over time to confirm the carbon abatement is real.”

“Select Carbon supports the development of quality offsets with a high level of integrity,” he said in the statement.

Last year, Macintosh and Butler called Australia’s carbon market a “fraud on taxpayers and the environment”. Australia’s Clean Energy Regulator disputed their claims, arguing that the academics did not have access to complete data showing that the system’s methods are sound.

How can injecting many millions into the community at a time when there wasn’t much other income during a drought not be a good thing?

Yet, the market has also been questioned by some of those benefiting from it, including the Godfreys. The couple could earn more carbon credits if they got rid of their cattle. But they believe light grazing is actually good for the land.

As Carol Godfrey uses her two-seat helicopter to check on far-flung water tanks and stray cows, she scoffs at how “greenies” thought she should run her farm. “I’m still here 50 years later, so I must be doing something right,” she says. “And I have the land in a better condition than when I got here.”

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One evening just before Christmas, the Godfreys and the Finlaysons, who are neighbours, gather for a beer. Lindsay Godfrey cracks open a bottle of Great Northern – and his frustrations.

“Out here in this part of the world, there are some who don’t have carbon who are not very happy about it,” he said.

A Christmas party at Carol and Lindsay Godfrey’s house (Photo by Matthew Abbott for The Washington Post)

“The town was dying a long time before carbon,” he says as Graham Finlayson nods. “How can injecting many millions into the community at a time when there wasn’t much other income during a drought not be a good thing?”

But in towns such as Cunnamulla or Byrock, carbon farming is blamed for the Outback’s dwindling population as sheep and cattle stations that once employed dozens now grow mulga; although sheep and cows are huge emitters of methane, so are themselves a significant source of greenhouse gas.

Land prices are a sore point. The price per acre skyrocketed from less than $20 in 2010 to more than $100 at recent auctions, people in Byrock, the closest town to Kenilworth Station, say. Some got rich; others are resentful.

Lee’s company, Beautiful Gold International, agreed to buy the station for about $1.6m in 2013, according to land records. It was registered as a carbon project two years later. In the eight years since, Kenilworth has made at least $8m of carbon credits, by Macintosh’s estimate.

Some change is underway. The independent review into Australia’s carbon market last month recommended increasing transparency, removing some of the regulator’s responsibilities to reduce conflicts of interest, phasing out avoided deforestation projects and boosting indigenous involvement.

Graham Finlayson and his wife Cathy Finlayson inspect an experiment where they caged off a native shrub from cattle to measure the impact of grazing (Photo by Matthew Abbott for The Washington Post)

The Labor government has vowed to legislate the recommendations and tighten limits on the country’s top 215 polluters, finally forcing them to cut emissions or offset them with ACCUs. But Australian prime minister Anthony Albanese warned that deeper changes would risk "disrupting the system so that it loses support.”

Macintosh and Butler warn that without disruption, bogus carbon credits will undercut Australia’s emissions cuts.

“A lot of people have looked at Australia’s system and called it the world’s best,” Macintosh says. “So if we don’t get it right here, what chance do other countries have?”

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