We put our Plantation Feasibility Report to the test in the Central Tablelands of NSW.
Using our plantation forestry carbon feasibility financial model, we crunched the numbers on a project in NSW. By planting a 1,500 hectare short-rotation pine plantation, the project was modelled to draw down 268 gross tonnes of CO2 equivalent per hectare across the project lifetime. We explored what this means practically and financially.
But first, let’s summarise some key project details…
| Region | Central Tablelands, NSW |
| Farm size | 1,800 hectares |
| Project size | 1,500 hectares |
| Current land use | Lifestyle & small grazing operation |
| Rainfall per annum | 709 mm |
| Climate zone | Mild temperate |
| Project goal | Drawdown 268 tonnes of carbon dioxide equivalent per hectare across the project lifetime, equating to a net 232,082 ACCUs. |
| Project strategy | Plant and manage a 14-year rotation Pinus radiata plantation under Schedule 1 of the Emissions Reduction Fund (ERF)’s 2022 Plantation Forestry Method. |
| DIY opportunity | To reduce costs under a DIY Standard Setup Services package, the landowner will coordinate all eligible interest holders and government approvals. |
Remind me what a feasibility report is all about?
If you haven’t yet, have a squiz at some of our background reading to understand a plantation forestry carbon project and the value of a feasibility report:
Now that you’ve had a read, you’ll understand that in report documents we provide financial modeling and practical advice which will:
- Help you assess your opportunity,
- Optimise returns, costs, and co-benefits, and
- Get you firmly on the path to delivering a successful project.
Now let’s crunch the numbers for this project…
| Average carbon price over 25 years* | $35 | $55 |
| Landowner carbon unit over 25 years ** | 232,082 | 232,082 |
| Gross profit at 25 years | $7.8M | $12.5M |
| Gross profit per hectare per annum, over 25 years | $232 | $370 |
| Cost to produce each carbon credit | $1.20 | $1.20 |
| Upfront cost | $21K | $21K |
| Additional lifetime costs | $261K | $261K |
Project cost & revenue estimates at $35 and $55 average ACCU spot price, across 25 years for a medium-cost project.
* See www.accus.com.au to make your own price assumptions.
** Factors in CFF fee structure at the time of publication.
Numbers looking strong! What are the feasibility numbers based on and what do they tell us?
We crunch the numbers for our feasibility reports using a detailed financial model, which calculates a range of possible returns based on some key assumptions. These assumptions include the following, as explained for the context of our NSW customer.
Full Carbon Accounting Model (FullCAM) Yield
It’s important to note that there is no real-time carbon measurement under the plantation forestry methodology. Instead, the projected carbon yield that will be stored in your project’s trees, plantation products, and debris across a 25-year crediting period is calculated in advance using the government’s FullCAM tool. Here at CFF, we use this model to work out your project’s indicative average yield per hectare in our feasibility report. Combining this metric with your project’s scale and assumptions on costs and carbon price allows us to analyse the project’s profitability.
Gross Profit
I.e. Gross profit is profit after the deduction of direct project costs.
Whereby, direct costs are the compliance costs of pursuing a carbon project, as modelled in the feasibility report. The direct costs associated with the implementation of the plantation activities, such as seedlings, inputs, fencing, or forester advice beyond the scope of the project, are excluded. These are assumed to be part of plantation business operations.
Project Methodology
In this case, we have assessed the feasibility of a project under the Emissions Reduction Fund’s (ERF) 2022 Plantation Forestry Method. Modelling in this report is based on the set of rules under which this method awards carbon credits. For instance, yield deductions must be applied to plantation forestry projects for harvesting and thinning events.
Varied Cost Modelling Based on Assumptions
Based on these assumptions, we model at least three alternative scenarios from low to high cost. For our NSW customer, all scenarios consistently indicated a strong opportunity for a commercially viable plantation forestry carbon project. For instance, even under the high-cost scenario, for a 1500-hectare project, the customer could expect:
| Upfront cash layout | $28,500 |
| Additional lifetime costs | $350,500 |
| 25-year gross profit @ $35 per tonne | $7.7M |
| 25-year gross profit @ $55 per tonne | $12.4M |
| Carbon units over 25-years | 232,082 |
High-cost scenario, for a 1500-hectare project in the Central Tablelands, NSW
What other analysis is provided?
The feasibility report looks beyond a one-dimensional analysis of projected revenue and costs. Instead, we examine the impact of a range of variable success drivers, making recommendations to help maximise returns and productivity. These factors include the impact of varying project sizes, carbon prices, project permanence options, and CFF service delivery options. For our NSW customer’s project, some of our recommendations included:
The larger the project the higher the yields
Project scale provides a clear advantage, particularly when applied at critical mass. A larger project accrues more credits and drives economies of scale by spreading fixed costs across more hectares. We recommended the largest project size that was viable within the context of the customer’s broader operation.
25-year project permanence
Permanence is the period in which you are prepared to continue your project activities. Either 25-year or 100-year permanence can be chosen, with 20% fewer credits being awarded to projects with 25-year permanence. We modeled the impact of both permanence periods on project returns and explained the impact of project management obligations across these timeframes. As this customer prioritised reducing carbon reversal risk and longer-term land-use flexibility over increased profit, we recommended a 25-year project permanence period.
Our flexible approach
Our fee-for-service model provides farmers with the flexibility to pick and choose from our menu of services to match their project requirements and budget. Through this flexible model, it is very possible to lower the costs of a plantation carbon project. To achieve this, we recommended the customer:
- Coordinate the on-ground project activities, as well as eligible interest holders and government approvals themselves to minimise third-party project management costs.
- Provide detailed site information (maps, photos, field notes etc.) to limit the need for site visits by consultants.
Next Steps
There’s a lot more to unpack in a plantation carbon feasibility report, but we hope you’ve enjoyed this quick taster the analysis our reports provide.
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 hello@carbonfarming.org.au or give us a bell at (08) 6835 1140 to be connected with one of our project facilitators.
Disclaimer: The service fees outlined in this document are relevant at the time of publishing. We endeavour to keep our service fees up to date across the Carbon Farming Foundation content, however, suggest reaching out to our team (at hello@carbonfarming.org.au) prior to embarking on a pre-feasibility presentation or feasibility report, to ascertain the most up-to-date costings.
