Considering Expanding the Size of Your Carbon Project?

Often in life, fully-formed plans don’t come together perfectly or at precisely the right time. Carbon farming is no different! If there’s a chance you might need to take a staged approach to your project – rather than just going through this process once – then having a clear understanding of your options will be a big help.

Quick disclaimer from the outset: this blog contains general guidance on consolidating or diversifying carbon project areas. It’s not a one-size-fits-all subject, and we highly recommend contacting us directly to chat about what best suits your situation.

If this is your first taste into understanding soil carbon farming, we recommend checking out these two articles for some background knowledge.

• Soil Carbon 101
• Understanding the Different Areas in a Soil Carbon Project

When might I consider adding new project areas to my initial project rego?

If you’re looking to sequester new and additional carbon over a new area, sometimes the smartest move might be to register an entirely new project. However, if a similar opportunity opens up pretty quickly after an initial project registration, then adding the new area to your existing project might be the better choice.

Here are some example scenarios where you might weigh up these two choices:

• You’re testing the waters carefully – it’s your first carbon farming project, and you want to get some experience before scaling down the line.
• You’ve just registered your project, and as timing would have it, you now have a chance to acquire the neighbour’s property. It would be ideal for integrating some shelterbelts and windbreaks there too!
• You’re still convincing some recalcitrant stakeholders of the carbon farming opportunity on one of your holdings. But the improved long-term market outlook might just get them over the line!
• You supply a major food brand with carbon neutrality ambitions and have noticed some early carbon farming adopters within the supplier group. You understand they’ve grouped together and registered a project after striking a deal with the brand for managing funding and credit shares. You and other landholder suppliers are weighing up the opportunity to join them.

What are the key considerations I should be aware of?

As you would have noticed, there are many reasons why you might want to expand a carbon crop. We frequently get questions about adding additional project areas after the rego is approved, so we have listed some factors you’d be wise to consider when weighing up how to scale up.

Know what’s possible under your method

The first cab off the rank is considering the rules for your project type. Depending on whether you’re running a soil, environmental planting or plantation forestry carbon project, you’ll have slightly different options when it comes to project variations.

Plantation & environmental planting carbon projects:
It’s technically possible to add new project areas to plantation or environmental planting projects at any time in the 25-year crediting period. However, the crediting period for a project is finite – meaning that for every year you delay adding a new project area and start sequestering carbon on it, your capacity to be rewarded for carbon yields reduces accordingly. In other words, it may be wiser to vary your project sooner rather than later to minimise the impact on total returns (check out our blog on the topic here).

Soil carbon projects:
For soil carbon projects, new areas can’t be added after the first reporting round, which occurs at a time of your choice from 6 months to 5 years after your project start date. So, after weighing up other considerations, registering your maximum project area at the outset might be your sensible approach, no matter your methodology.

Prioritising cost reductions

Project feasibility is crucial – so what are the cost implications of starting additional carbon crops? Well, in ascending order:

1. Register the whole project from the outset: From an ‘economy of scale’ perspective, the most cost-effective choice will likely be registering your maximum project area from the get-go, in other words, spreading your compliance costs across maximum land for the best deal on a per hectare basis.  
2. Undertake a project variation: But of course, as you’ll have noted from our scenarios, you may not always be ready to register your whole project area simultaneously. Varying your project to add new areas is generally a more streamlined and efficient process than registering a new project, costing less. Plus, a project variation early in your 25-year crediting period will have a minimal negative impact on yielding potential, as most of the crediting period will remain to acquire credits.

   The other important impact is saving on ongoing costs. Once you’ve expanded your project size, you’ll likely not add significantly to your original budget for offset reporting and auditing, as these costs apply per project and not per area. (There may be a need for one extra report depending on when the project area variation occurs). If reducing lifetime costs is vital to you, varying an existing project tends to be much more attractive than starting a new one.  

3. Register a new project: Where (1) or (2) aren’t possible or feasible, registering a new project may be the way to go. Going through project registration, establishment and ongoing management for an entirely new project will cost more than a variation. However, having set up a project once before, you’ll have a clearer understanding of the process and may have the capacity to reduce your reliance on third parties. Thus it’s possible that your second rego may cost less than your first. This approach may be favourable if you would prefer to keep projects independent of one another for greater flexibility.

Maximising the use of your crediting period

Depending on your project objectives, you may prioritise an approach that reduces costs, maximises returns, or finds a sweet spot in the middle. We won’t go into more detail on how crediting periods work in maximising yield here. Suffice it to say that the sooner you sequester carbon from the project start date, the greater your opportunity to maximise your crediting potential. This is why the decision to vary or register a new project will be significantly influenced by timing.

However, there is a bit of flexibility here.

The crediting period of your project doesn’t necessarily have to commence from the date the regulator approves your project- you can defer your start date for up to 18 months.

So, suppose you are managing different timelines for two different project areas; you may be able to adjust your start date to ensure that carbon sequestration for both areas over a 25-year timespan is captured most effectively by your 25-year crediting period. This is particularly with methods using FullCAM, where you can undertake model simulations to identify the optimal start date. 

It’s also generally helpful to know if you must delay your new carbon sequestration activity for unforeseen reasons. Keep in mind that another variation procedure is required to change your project start date. It’s a simple process, which CFF can also quote for under our fully flexible service model.

Location and project complexity

Sometimes particular features of a large or more complex project may dictate your compliance choices.

For instance, if your project identifies with one of the following, then this may dictate that you run various projects rather than consider varying a single project.

• Planning carbon sequestration activities of various kinds across multiple holdings in multiple regions or states.
• Have differing interest holders or convoluted ownership or loan structures.

Another point to consider in this space is potential succession plans or portfolio management flexibility. In a simplified sentence, a property with a single carbon project is much easier to sell than a property that is part of an ‘aggregated’ project or one with multiple projects.

Stakeholder approvals

To take a quick step back on this one, let’s look at some of the main consents or approvals you’ll encounter when managing a project:

• Legal right: You will require the written approval of registered landholders to register your project.
• Eligible Interest Holder (EIH): While EIH consent (permission from stakeholders like mortgagees, lessees and easement holders) isn’t required at project rego, your project will be conditional until EIH approval is given. You are required to submit this before your first offset report.
• Local Government Approvals: Depending on the nature of your project and jurisdiction, you may require Council approval for your project, and the process can take several months. Much like EIH consent, project registration can go ahead while you wait for local approval, but your project will be conditional until such time as local approval is gained and submitted. And you’d need local approval before commencing your changed management activities to ensure you comply with federal and local laws.

So how would a project variation impact these approval processes?

You may need to both seek these approvals for any new holdings you register and re-seek consent for the existing project activities. This is a bit of an administrative burden, though not insurmountable, and may also need careful thought in the context of effective stakeholder management.

Understanding permanence and risk management

Last but never least: permanence and risk! For a standard project, the permanence period commences at the first credit issuance after you lodge your first offset report. Your obligation to maintain your project’s sequestered carbon runs for either 25 or 100 years. If a new project area is added, the permanence period for the entire project resets and commences at the first credit issuance for the new project area. 

Long story short, if you and your stakeholders are not concerned about your ability to maintain total project carbon stocks for the additional years, this may not be a huge concern. If the extended timeline doesn’t match your plans or risk appetite, you may want to consider separating the projects.

Congratulations! 

You’ve reached the end of our thoughts on managing the scale-up of carbon crops! It’s a lot to take in, and everyone’s situation is different, but hopefully, we’ve helped clarify a few things. Don’t be a stranger about reaching out to talk through your opportunity and ‘its complexities – we’d love to hear from and help you to expand your carbon activities!

Ready to find out more?

Explore our range of educational resources in our Carbon Farming Education Hub where we frequently publish educational articles, webinars, and guidebooks. 

When you’re ready to explore the feasibility of undertaking a carbon project on your property, email us at [email protected] or give us a bell at (08) 6835 1140 to be connected with one of our project facilitators.