Saturday, July 16, 2011

Getting serious about risk & return

The Opposition Direct Action plan promises to achieve ‘lowest cost’ abatement by inviting farmers to tender their best price for soil carbon offsets in a market with only one buyer – the Government. Australian farmers won’t line up to sell a government soil carbon at bargain basement prices. The plan would pit farmer against farmer in a race to the bottom to see who could cut their throats the fastest. Farmers are gunshy after a protracted scare campaign about soil carbon sequestration convinced many that trading soil carbon is dangerous. And, as with any market, the higher the perceived risk, the better the money advantage has to be. The price of $8 to $10 a tonne has been floated by the Coalition. The responsibilities of a Carbon Farmer are high, including holding the carbon in the soils for 100 years. There’s too much uncertainty with this program. It can be cut off at any time. Knowing the pragmatism that surrounds Direct Action, there is too much risk for a farmer to take for a few dollars a tonne. In a Clayton’s market, farmers face a ‘take it or leave it’ attitude with only one buyer. As for the assertion that the price could be zero because farmers take up sustainable farming without the promise of offsets, why haven't they done it already? Get serious.

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