Make no mistake: carbon trading is going to be a fact of life. What that means for agriculture is largely in the hands of the farm sector.
Last week, Federal Climate Change minister Penny Wong made it clear at the CarbonExpo 2008 conference that there are no last-minute second thoughts from government about carbon trading and the Carbon Pollution Reduction Scheme (CPRS).
But it was the fact of the conference itself that really jolted home to me the realisation that carbon has arrived as a new commodity.
The conference hosted about 1100 people from 24 countries. The place was solid with suits—development bankers, financiers, carbon traders and technology company execs prominent among them. They were there to get in on the ground floor on a business that by 2050 is expected to be turning over $10 trillion—more than today's oil industry.
The overwhelming impression is that serious money is heading into carbon. Globally, about $64 billion went that way in 2007.
Where the money goes, agriculture can’t afford not to follow.
But while the business community is focused on the opportunities offered by carbon trading, the prevailing conversation in the Australian agricultural sector is about the potential for disaster.
There’s no question that the early iterations of the CPRS will be imperfect—in fact, it’s never going to be perfect—and it will create winners and losers. If farmers focus on the costs, and not the opportunities, they stand to be among the losers.
Right now, we know one thing about the CPRS: ag isn’t in it. That means we can be fairly certain of a second fact: farmers will become the recipients of extra costs passed down from suppliers, and carbon costs deducted from farm products by those they supply.
Because the CPRS is going to have a "soft start", and because hopefully the government has enough common sense not to kill the golden goose and so buffer agriculture from any extreme flow-on costs of the CPRS, farmers are unlikely to initially feel much pain.
Ag is going to be asked to carry its weight, however, whether it's within or outside the CPRS. The screws on this scheme are tightened gradually. By 2020, if business goes on as usual, they might begin to really hurt.
But only if farmers fail to harness carbon as a commodity.
Farmers work with the ultimate solar-powered system, the plant kingdom, which has the ability to take excess carbon from the atmosphere and turn it into something useful—including grain, meat, timber, and soil fertility.
Businesses across the planet increasingly want a new plant-generated product, carbon, and agriculture is uniquely placed to supply it—and at the same time increase its soil fertility, its ability to harvest rainfall, and grow crops and pastures.
It's a matter of applying a little human ingenuity and joining the dots.
There are currently some gaping holes in this plan, notably the interface that links carbon-conservation farming with carbon accounting systems. But the inexorable power of the market is at work. The holes will be fixed—roughly to begin with, but enough to get some momentum.
All that agriculture needs from Canberra is a carbon trading environment that provides incentives to sequester carbon, and incentives to trade in it. That job done, Canberra should get out of the way.
Like any other farm commodity market, the main business of carbon trading will be between farmers, who have to learn how to stack this new commodity away on their farms, and the markets that are beginning to materialise.
Get this trade working, and it could be an overwhelming positive for agriculture. Not only does it give farmers the ability to mitigate the extra costs that will come with the CPRS, it can boost the productivity of every other commodity they produce. What other commodity does that?
Carbon trading is new, and for most it will demand a whole new set of skills. But right now, there's no reason to suppose that it’s a negative for agriculture. It may be just the opposite.