Sowing the Seed of Change : Why Australia's Land Sector Needs a Carbon Price to Encourage Mitigation of GHG Emissions and Promote Sustainable Land Use

In 2014, the Australian Government amended the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) to establish an ‘Emissions Reduction Fund,' (‘ERF') which the Government will use to purchase ‘carbon credits' from greenhouse gas (‘GHG') emitters who have voluntarily agreed to carry out eligible GHG emissions mitigation projects. The Government expects that the ERF will help Australia to achieve its prescribed GHG emissions mitigation target. While the ERF may encourage mitigation of GHG emissions generally, it is unlikely to lead to substantial mitigation of GHG emissions from agricultural or forestry activities, or encourage sustainable land use practices in Australia: the ERF is a win-win for GHG emitters in this sector. In order to achieve both of these objectives in the land sector, the paper argues that the direct financial assistance provided by the ERF must be complemented by a carbon pricing mechanism, such as a carbon tax. This issue is explored by asking two key questions. First, why is the ERF unlikely to lead to any substantial mitigation of GHG emissions in the land sector, or support sustainable land use practices in Australia? Second, how can linking the ERF to a carbon tax, improve the likelihood of achieving tangible mitigation of GHG emissions and sustainable land use practices in Australia's land sector?