Forestry based carbon offsets for miners

AJM: Under the Government’s proposed CPRS what direction do you think mining companies will go in terms of mitigating their emission?
MB: As far as we can tell there will only be two really viable domestic options open to mining companies who will be caught by the new Emissions Trading Scheme: technological improvements and forestry-based offsets. Given that most Australian mining companies are already operating at “world’s best practice” standards in terms of technology, that really only leaves tree plantations for domestic carbon offset solutions. Their third alternative of course is to simply line up every month for the Government auction to buy permits which means they will obviously be subject to market volatility and an ever reducing supply. This however is not a particularly environmentally friendly option.

AJM: What is a carbon sink? What services can your company provide to mining companies?
MB: A carbon sink is just the technical name for a large-scale tree plantation that has been planted for the purposes of sequestering carbon from the atmosphere. Our company is in the business of undertaking those plantations on behalf of major emitters. There are two principal advantages for mining companies who are considering our product. Firstly they will not be subject to the expected sharp market price increases for Government issued carbon permits because they will have created their own patch of carbon credits (via our tree plantations) at pre-determined prices that could last for up to 30 years. Secondly, the Government is planning to release less and less Government issued permits every year to achieve their carbon reduction targets. Companies who engage our services to undertake large-scale tree plantations will in effect be guaranteeing their own supply of permits. Our company will undertake the initial plantation, manage it on an ongoing basis and deliver the carbon permits to the emitter.

AJM: Do you have any agreements with miners currently, and what are the nature of these?
MB: We are currently at various stages in our negotiations with a number of major industrial companies who are seeking to guarantee the price and supply of carbon permits into the future. We are expecting that as we edge closer to the introduction of the CPRS, most companies will be seeking forestry offsets of some description. The deals in this space are generally very large and take a considerable amount of time to negotiate. Companies with the “early mover” advantage will obviously be able to secure the best land available and will be able to achieve the scale that they require.

AJM: Where will the land be sought to create carbon sinks and how will they be regulated? How can they prove their ‘emissions saving’ credentials?
MB: Land used for carbon sinks will mostly be in the wheat belt of Australia. Our company has an ongoing program of land acquisition across the country with a heavy focus on the West Australian wheat belt. Our product is the Mallee Tree which is able to grow well in low to mid rainfall areas such as the wheat belt. We are expecting that the CPRS will be regulated by a Government appointed “Scheme Administrator”. Carbon Conscious has undertaken a massive research and development phase in the wheat belt of Australia to prove up carbon sequestration rates. In fact we have sampled more than 7,000 trees and measured their carbon storage against their age, soil and rainfall conditions. We now have some very significant IP in this area designed to give emitters absolute confidence when they sign with us.

AJM: What do you think the price will be of carbon credits at the introduction of an Emissions Trading Scheme, say in 2010, and then five years into it?
MB: Government Treasury modelling is based on a start price of $25 per ton. Even at this projected starting price we are only looking at a 5 per cent reduction by 2020. If the Government adjusts the 5 per cent by 2020 figure at some stage then who knows what will happen to the price for a carbon permit. Carbon is a whole new commodity that is here to stay. It is very exciting to be involved at the pointy end of a new market place which will no doubt provide many good investment opportunities but more importantly, will have a positive effect on the environment in which we live and will leave behind.