Cutting out the middleman

This article was published in The Guardian on 17Oct21 and was written by Natasha May and Gabrielle Chan – you can find it here

An Australian farmer-owned mutual has been established to give landowners greater access to the growing environmental goods and services markets as the world transitions to net zero.

More than 80 farmers, conservationists and landcarers behind Regen Farmers Mutual have designed a new brokerage model to reduce transaction costs and enable farmers to aggregate their market power to sell environmental services.

According to a CSIRO report, Navigating an Uncertain Future 2030, the Australian environmental market is set to be worth more than $48bn by 2050 – twice the combined value of all meat, grain, tropical fruit and cotton industries.

Agriculture now accounts for 13% of Australia’s emissions but is increasingly seen as a potential carbon sink.

Environmental service markets are burgeoning nationally and globally as companies seek to buy services to ameliorate their emissions.

The agriculture minister, David Litteproud, has begun a pilot program, designed by the Australian National University, which pays farmers for reducing emissions and improving biodiversity.

Andrew Ward, a Regen director, said a farmer-owned broker wholly aligned with its land managers represented “a once-in-a-lifetime opportunity”.

“If you look at the history of water markets and the regulated carbon offset markets, there is good reason for farmers to be reluctant about these coming changes,” Ward said.

“The problem is if we’ve got speculators and people who don’t have a skin in the game around biodiversity and soils, we end up with dysfunctional markets that aren’t linked to the land.”

Under the mutual model, Ward said 80c of every dollar earned would go to the farmer, 10c to shared infrastructure, training and education, and 10c to the mutual for technology and negotiation.

“We want to see the carbon market supporting the national resource management plan of that bioregion,” he said.

Green Collar is Australia’s largest “environmental markets investor, natural resource manager and conservation-for-profit organisation”, which handles environmental services contracts for farmers and land managers, among others.

Its senior policy adviser, Mike Berwick, said the company would typically take 30c in every dollar earned, leaving the farmer with 70c.

“Now, people say, ‘Oh that’s a lot.’ And it does sound a lot but the transaction costs are pretty high. So for that money, Green Collar does all the reporting, admin, monitoring, and so on. It’s quite complex, with some specialty skills.

“And Green Collar also carries the risk. If the project fails, it’s us that has to deliver the credits not, not the landowner, so that’s a big deal.”

Berwick said farmers regularly accessed services in finance, agronomy, science and other areas, and environmental services were no different.

It’s not just understanding the benefit you are giving your own property but the connection it has as part of a bigger area

Amy Watson

Other companies charge higher commissions but there is very little public transparency around commission rates, as they are negotiated individually with farm businesses.

Regen’s architects are hoping farmers can coordinate to achieve better outcomes for the environment as well as the collective return.

Ward gave the example that the cooperative of farmers working together could connect populations of birds across their properties that otherwise might not have had a corridor connecting them.

Another way coordination could bring large-scale change would be bringing together farmers in catchment, valley and coastal areas to reduce the impact and costs of floods, and retain water to limit the impact of drought.

Amy Watson, who owns a certified organic lime orchard and runs cattle on a farm in Mary Valley in Queensland, was one of the 100 farmers who co-designed the mutual. She said it would benefit smaller producers to tap into a much wider market and diverse opportunities.

“Often the farmers who have benefited from the carbon transactions are much bigger farmers because you need much more land to capitalise on carbon accrue, as opposed to with biodiversity there are more layers that can make up ecological value,” Watson said.

“It’s not just understanding the benefit you are giving your own property, but the connection that it has as part of a bigger area and ecosystem.

“For me it’s about biodiversity, not just carbon.”

Wendy and Peter McDonald, who own a small mixed farm in Caldwell in south-west New South Wales, where they irrigate pasture and run a merino flock, have been part of the Regen pilot, which ended last week.

The couple said they had never conducted any transactions as part of the emissions reduction fund but that the pilot had helped them learn how to evaluate their farm and understand its intrinsic value in terms of soil and biodiversity.

“We want to be able to keep learning and put in place good programs not just for our generation but generations to come, and protect and enhance the natural assets and biodiversity we have on our farm,” Wendy McDonald said.

Ward said farmers were critical to the environmental market and should not be left without power.

“Combined, the members of the mutual have the ability to shape markets in their favour for once,” he said. “It will also create a mechanism to attract private sector capital to invest in credible and appropriately structured transactions.”

Read the article in the Guardian – here