Carbon Farming Investment Co-Financing

Jack Willis, Curtin University, COP29 Fellow

Executive Summary

The Australian Carbon Credit Unit (ACCU) Scheme, established under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth), was designed to drive carbon abatement while creating new income streams for landholders. However, despite strong national uptake, the scheme’s complexity and cost structure have made it difficult for smaller participants to engage effectively. Independent farmers, First Nations groups, and rural communities face particular challenges, with only 8% of projects led by sole proprietors and just 1.2% by Indigenous organisations. These barriers are largely due to high entry costs, including the need to hire technical experts, along with rigorous compliance and monitoring obligations.

Although programs such as the Carbon Farming Outreach Program (CFOP) and Indigenous-led training initiatives have improved awareness and capacity, they do not address the core issue of affordability. To improve equity in the scheme, three policy options were assessed: providing subsidies for technical consultants, expanding operational training, and implementing a government co-financing model.

The third option, government co-financing, offers the most promising path forward. By covering a portion of upfront costs in exchange for a share of future ACCUs, this model enables early-stage participation while allowing landholders to retain control of their projects. It addresses financial barriers, supports high-quality project development, and better aligns community-led efforts with national climate objectives. It is estimated that a 30% share of future ACCUs in exchange for covering 50% of the upfront project costs can yield an  annual return on investment of 1.99. For the model to succeed, it must be supported by strong governance structures, transparent oversight, and clear eligibility criteria that prioritise social and environmental benefits. With these measures in place, co-financing presents a practical and inclusive way to broaden participation in carbon farming and strengthen land stewardship across rural and Indigenous Australia.

Problem Identification

The Australian Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) was established to incentivise carbon abatement projects, supporting national climate goals while creating economic opportunities for participants. However, despite its success in facilitating large-scale carbon farming projects, the current framework unintentionally limits the participation of smaller-scale independent proponents including farmers, remote communities and Indigenous groups in vegetation and agricultural methodologies. Among the 2,400 projects registered with the Clean Energy Regulator (CER) to date, sole proprietors account for only 8% of all registered projects, including only 29 (1.2%) led by Indigenous organisations. The sector is dominated by specialist corporations such as AGRIPROVE, who alone hold approximately 20% of all projects, highlighting an imbalance in access to the scheme.

To ensure the integrity of the ACCU scheme, a complex and costly project registration, monitoring and management process exists, demanding proponents to independently seek out the relevant exercise. Endeavours such as the Carbon Farming Outreach Program focus on upskilling project managers with foundational skills in carbon accounting. However, as outlined in the Carbon Credits (Carbon Farming Initiative) Rule 2015 (Part 3, Division 1, Section 13(f)), it is expected that significant portions of project initiating and management are to be outsourced to the experts relevant to the project methodology. The expectation of prospective proponents to pay thousands of dollars in upfront expert consultation fees before ever receiving payment from the credits generated by their project, remains a significant barrier in equitable accessibility to engaging in the ACCU scheme. 

Context

ACCU Scheme

The Carbon Credits Act 2011 (Cth) is a federal mechanism that allows ACCUs to be generated via a suite of approved methodologies. ACCUs can then be sold on the private carbon market, or via the public ACCU Scheme, which utilises a reverse auction approach that aims to purchase the most amount of ACCUs for the best price. The type of project is referred to as a ‘methodology’, which are the approved technical guidelines and rules established by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) that outline how specific projects should be designed, implemented and monitored to ensure legitimate abatement outcomes.

Each ACCU represents one tonne of carbon dioxide equivalent (tCO2-e) that has been reduced or sequestered through an approved methodology. The number of credits awarded to a project is based upon the expected net abatement observed over the project's life, with the credits themselves paid in instalments as project managers submit audit reports. These credits can be sold to various buyers, including the Australian Government through the Emissions Reduction Fund (ERF), private organisations aiming to meet voluntary emissions targets and international buyers. ACCUs are tradable in both regulated and voluntary carbon markets, and large emitters under the Safeguard Mechanism, introduced in 2016, can use ACCUs to meet emissions caps. This system has catalysed new revenue streams, low-emission practices and broader triple-bottom-line benefits through a total of 2,141 projects as of 2024 (Clean Energy Regulator, 2024). 

Globally, there is growing recognition of the environmental and social benefits of carbon abatement projects. The involvement of local and Indigenous communities is particularly valuable, as their traditional knowledge and strong connection to Country can enhance the success of carbon abatement efforts. This is especially true in agricultural and land-based methods such as reforestation, vegetation management, savanna burning, and regenerative land practices, where Indigenous stewardship can contribute to more effective and sustainable outcomes (Bandiaky-Badji et al., 2023). Despite good intentions, the current framework of the Carbon Credits Act 2011 effectively excludes independent entities from engaging in projects as a result of complex technical jargon, stringent reporting requirements, and a complicated transactional system. Collectively these create high barriers to entry that obscure the goal, and the benefits, of caring for Country. These barriers range from the upfront financial costs to perform baseline calculations as well as costs for ongoing measurement and monitoring, to technical barriers regarding the registration, compliance and documentation of a project (AgriFutures Australia, 2023).

Project Application Process & Requirements

Each carbon farming project must follow one of the approved methodologies approved under the Carbon Credits Act 2011, which outlines the standardised procedures for carrying out, monitoring, and reporting project activities. These ACCU Scheme methods cover projects across agriculture, energy efficiency, landfill and waste, mining, oil and gas, transportation and vegetation; with a variety of specific methodologies outlined under each sub-category. 

Vegetative methods, for example, include projects based around reforestation, revegetation, managing safe burning practices, and protecting native vegetation at imminent risk of clearing. Under the current framework, projects seeking to generate ACCUs must meet strict eligibility criteria through a complex proposal process. Key requirements include project registration with the CER, proof of additionality, forward abatement estimate, onsite emissions estimate, proof of land tenure and proof of a risk management strategy. In this context, the additionality requirement is only met if the carbon sequestration would not have occurred without the carbon credit project occurring, hence ensuring the project genuinely contributes to emissions reductions.

These criteria are essential to ensure projects are additional, verifiable, and contribute to Australia’s carbon reduction goals. Vegetative projects require detailed geospatial data and ongoing monitoring, such as soil sampling, biomass measurements, and drone-based vegetation tracking. Such projects independently seek out the necessary experts for the initial project submission and throughout the project lifecycle, thus setting the precedent for active expert engagement per the Carbon Credits (Carbon Farming Initiative) Rule 2015, Part 3, Div 1, Section 13(f). Proponents must also demonstrate their ability to comply with their chosen methodology, including baseline data collection, continuous measurement, risk management, data handling, reporting, verification, and legal compliance. ACCUs are issued only after verified carbon abatement and project approval.

ACCU Project Accessibility

The significant upfront financial and administrative burdens associated with starting a carbon farming project pose a major barrier for many potential proponents. As a reference for the costs of expertise required, Carbon Sync estimated that for a 1000-hectare soil carbon sequestration project, proponents could expect to pay $13,380 for sample collection and $20,710 for sample testing and analysis per crediting period, totalling over $300,000 for a 25-year project lifespan to a specialist in emission accounting (Carbon Sync, 2024). Additionally, the complex and technical nature of the methodologies adds an additional layer of inaccessibility, demanding strict scientific monitoring processes and analysis as well as comprehension of the relevant legislation and jargon.

The challenge of meeting these requirements is often further fuelled by the geographical limitations of many vegetative and agricultural carbon farming projects, with rural or remote locations struggling to source the required experts across data scientists, agronomists, remote sensing and project management, all of which are necessary to abide by project methodologies. While larger landowners or corporations may have access to specialised consultants and environmental experts, smaller remote participants can often struggle to find affordable and accessible assistance. As a result, the carbon farming sector remains largely dominated by larger, more resource-rich organisations, leaving smaller, less capable communities excluded from the environmental and economic benefits of the scheme, further widening the inequality gap for rural and remote Australians.

The current method of addressing this adopts a grants-based approach under the Carbon Farming Outreach Program (CFOP) by DCCEEW which aims to train and advise proponents on implementing lower emissions technologies into their practices. The initial $17.5 million program was allocated an additional $27.8 million to deliver online training and informational resources. Following its implementation in Q2 2023, a total of 359 projects were set up in the following 12 months, in comparison to the 309 projects set up in the 12 months prior, with vegetative and agricultural methods dominating in both periods (Clean Energy Regulator, 2024).  Alternatively, the Aboriginal Carbon Foundation (ABCF) delivers a training course tailored to Indigenous proponents across Far North Queensland, the Gulf of Carpentaria, the Top End of the Northern Territory and the Kimbery (Aboriginal Carbon Foundation, n.d.). The ABCF course makes up for the lack of tailored support delivered by CFOP for Indigenous proponents, but in both instances, there remains the outstanding upfront financial burden of beginning a project.

Policy Options

1. Extension of the Carbon Farming Outreach Program to Subsidise Carbon Farming Specialists.

   
   

 A possible option for addressing the lack of accessibility is subsidising the costs of environmental consultants, legal advisors, data analysts, etc., for ‘high priority’ projects. The adherence to complex methodologies and reporting criteria demands the involvement of such specialists. Reducing the financial burden of accessing expertise could encourage the development of carbon farming projects in locations that would otherwise struggle. Under this option, high priority would be allocated to projects that indicate significant environmental co-benefits, an obvious socioeconomic need, a high degree of community engagement or challenging project location. Further, by centralising expertise, it may be possible to negotiate bulk rates, thus reducing the net capital outlay required.

Integrating this into current practices could include extending the grants available under the Carbon Farming Outreach Program to target the development of new carbon abatement projects carried out by such target communities, mostly under agricultural and vegetative methodologies. By easing the financial and administrative burden of accessing technical expertise, this approach enables landholders such as farmers and First Nations peoples to focus on applying their deep, place-based knowledge of the land. Rather than being forced to split their attention between land stewardship and navigating complex administrative, legal, and technical systems, they can rely on specialists to manage compliance. This respects their expertise while maintaining the integrity of carbon market standards.

A barrier associated with this approach is that the financial burden is not eliminated; it is only shifted to the government, requiring public funding to be diverted from other essential climate change mitigation programs or community support services. Similarly, by focusing too much on external experts, there is a danger that local and Indigenous knowledge which is integral to sustainable land management practices is at risk of being undervalued or overshadowed. If this knowledge is not incorporated into the expert-driven projects, it could lead to misalignment with community values and priorities, thereby decreasing community buy in and participation

2.  Investment in Carbon Farming Operational Training

   
   

Investment in intensive carbon farming training for Indigenous communities, landowners and Indigenous organisations presents a significant opportunity to empower these groups with the technical knowledge and skills to accompany existing understanding of Country required to engage successfully in carbon farming projects. Focusing on skill development could improve the uptake of independently managed carbon farming projects and reduce reliance on external consultants, enabling more self-sufficiency in the long term. One of the key benefits of such training is that it could help bridge the present knowledge gap between technical demands of carbon farming and the practical realities faced. The current CFOP training takes the form of an informative overview of carbon farming projects. However, investment into a program such as ABCF to include materials outlining measurement and data analytics best practices, structures for creating farm operation and risk management plans, and other skill-based training has potential.

Furthermore, by investing in training, these communities could gain the skills not only to comply with existing carbon farming methodologies, but also to innovate in ways that are culturally and environmentally appropriate for their specific regions. One of the primary challenges for such an idea is the initial investment in designing a comprehensive and culturally appropriate curriculum, delivering ongoing educational support, and ensuring that training methods are accessible to people with varying levels of technical literacy. While carbon farming training could enable more self-sufficiency, it may also lead to a reliance on ‘one-size-fits-all’ approaches that do not account for the complex, diverse environmental, social and economic conditions across Australia's regions.

3. Project Co-Financing Model

Under this model, the government would contribute to eligible upfront project costs (with a focus on technical assessments, baseline data collection, and registration with the Clean Energy Regulator) in exchange for a proportionate share of the ACCUs generated by the project. The share of credits allocated to the government would be determined based on the level of investment, project risk, and expected yield, and could be applied to the total credit stream or a defined tranche within a specific timeframe.

This approach reduces the upfront financial burden for project proponents while allowing the government to participate in the environmental benefits and financial gains if the project succeeds. Importantly, it preserves full ownership and decision-making authority for landholders over the project’s design and execution. This makes the model especially well-suited for First Nations groups, small-scale farmers, and community cooperatives, who often have limited capital but valuable local land management expertise. Although this model operates on the assumption that existing training materials and guidance are adequate to support proponents through project management, it substantially eases the pressure of covering upfront expenses and allows the ACCUs accrued to contribute to any ongoing costs of outsourcing expertise if required.

Policy recommendation

Option 3, the creation of a government co-financing model, is recommended as the most viable pathway to encouraging project development from independent proponents. All project methodologies require the outsourcing of domain expertise, thus making it an unavoidable hurdle to maintain the credibility of the ACCU scheme. However, by contributing to upfront costs, the model significantly eases the initial pressure on proponents to self-finance and independently launch their projects, making it more feasible to engage the necessary technical expertise from the outset. This mechanism aligns financial incentives between proponents and the state, while preserving full landholder control over project design and delivery. The model is designed to complement existing support structures without replacing the autonomy of community-led initiatives and can be tailored to prioritise projects in underrepresented areas or those with high environmental and cultural co-benefits. 

The share of credits allocated to the government could apply to the total lifetime issuance or be limited to a defined tranche within a specific timeframe, allowing flexibility in how risks and returns are shared. This structure positions co-financing not only as a form of support but also as a strategic public investment, with the potential to generate revenue through the sale of ACCUs or contribute toward national emissions reduction targets. By enabling the engagement of skilled expertise at key stages, the model also improves data quality and regulatory compliance, reinforcing the overall integrity of Australia's carbon markets while supporting financially accessible project development.

Using a basis that 50% of the upfront costs are covered by the program, each project would require an average investment of roughly $46,250, with a target of 100 supported projects per year being targeted. If this investment affords a 30% share of future ACCUs it follows that from an annualised cost of $4,625,000 a revenue of $9,187,500 per could be anticipated, based upon average project size and ACCU spot price in 2024.

Costs

To reduce investment risk and ensure strategic use of public funds, proponents may be required to submit a project brief before a final investment decision is made. This brief would outline key project characteristics, including size, location, expected methodology, associated risks, and proposed mitigation strategies. Based on this information, the government would determine a proportionate share of upfront costs it is willing to cover in exchange for a defined percentage of ACCUs generated. Alternatively, proponents may propose an initial ownership share for the government, with funding allocated accordingly based on the government’s assessment of risk and abatement potential.

Drawing from recent program data, cost benchmarks can be established to guide co-financing expectations. Under the Carbon Farming Outreach Program, $17.5 million in training grants supported 359 projects in its first year, suggesting an average of approximately $48,700 per project dedicated to expert consulting and project design (Clean Energy Regulator, 2024). Further, according to the Clean Farming Foundation (2025), each project typically undergoes at least one initial audit and modelling assessment, which can cost between $25,000 and $40,000 depending on project complexity. If specialist technical services like soil sampling are procured independently, the maximum estimated cost for such services is approximately $13,800 per project (Carbon Sync, 2024). In 2024, 152 new project developers registered across all methodologies, with over 80% of projects in vegetation and agricultural methods (Core Markets, 2025). A realistic and impactful policy goal would be to support 100 new single-project proponents annually, representing those most likely to benefit from co-financing and least able to self-fund technical project setup.

The table below outlines the expected cost structure per project, along with the government’s co-financing (assumed at 50%) in return for an assumed 30% ACCU ownership. These values are used as a basis, in reality the proportion of upfront costs and requested government ownership would vary project-to-project, informed by the information outlaid in the aforementioned project briefs to inform investment suitability.

Estimated Co-Financing Cost Breakdown (Per Project)

Cost Category	Estimated Upfront Costs	Government Funded Portion (50%)	Notes
Expert Consultancy	$48,700	$24,350	Average consultancy cost from the CFOP deployment.
Initial Audit	$25,000	$12,500	Conservative limit provided by Carbon Farming Foundation.
Baseline Sampling	$13,800	$6,900	Sampling estimate from Carbon Sync.
Administration	$5,000	$2,500	Additional staffing costs.
Total Upfront Cost	$92,500	$46,250

Annual Government Budget for 100 Projects

Average government contribution (per project)	$46,250
Target total projects	100
Total annual government outlay	$4,625,000

In 2024, the Clean Energy Regulator reported a total of 18.74 million ACCUs issued across 2,141 projects, indicating an average of 8,750 ACCUs per project per year (Core Markets, 2025). This benchmark allows us to estimate both the scale of potential revenue and the return on public investment through ACCU shares.

Estimated ACCU Yield and Revenue Return

Average ACCU quantity (per project)	8,750
Government share of ACCUs (30%)	2,625
Total ACCUs (100 project basis)	262,500
ACCU spot price (2024)	$35
Estimated government revenue	$9,187,500
Estimated return-on-investment	1.99

The implementation of an intermediary liability involves an active duty of care that requires intermediaries to monitor and take action against harmful content on their platforms (Machado and Aguiar, 2023). An intermediary liability would function similar to the tort of defamation in Australia, operating as a strict liability where an intention to publish material needs to be established with no requirement to prove an intention of the internet platform to spread misinformation. 

Following s 2 of the Online Falsehoods Act (SGP), an internet intermediary service would be defined as "a service that allows end-users to access materials originating from third parties or through the internet.” The definition for misinformation would be adopted from s 13(1) of the withdrawn Misinformation Bill 2024 as to mean content that is “reasonably verifiable as false, misleading or deceptive” and is “reasonably likely to cause or contribute to serious harm.” 

This amendment would narrow the scope of the definition of misinformation in operation to solely apply to “AI-generated or manipulated image[s], audio or visual content that resembles existing persons, objects, places, entities, or events and would falsely appear to a person to be authentic or truthful” (Artificial Intelligence Act 2024 (EU)).

Risks

Although the proposed co-financing model presents a compelling mechanism for enhancing equity in carbon ACCU projects, several risks must be considered to ensure its long term effectiveness and integrity. Projects may underperform due to environmental variability or management challenges, limiting ACCU generation and reducing returns on public investment. Regulatory non-compliance remains a risk, particularly if proponents lack experience resulting in project rejection or credit forfeiture, thus this option is reliant on the existing training programs to be sufficient in conveying the appropriate project management skills. 

Administering and monitoring co-financing agreements across diverse project types will increase complexity and require dedicated governance capacity. Market volatility also affects the value of ACCUs, introducing fiscal uncertainty. Critically, the model may create or appear to create conflicts of interest, as the government would hold a financial stake in projects it also regulates. To protect market integrity, clear institutional separation between funding and regulatory functions is essential, alongside transparent credit allocation and independent verification. Without robust targeting and support mechanisms, there is also a risk that better-resourced actors capture disproportionate benefits, undermining equity goals. Finally, the use of public funds for private projects demands accountability and clear evidence of climate and community benefit to justify opportunity costs and maintain public confidence.

References

Clean Energy Regulator. (2024, June 14). Australian carbon credit units (ACCUs). In Quarterly Carbon Market Report – March Quarter 2024. https://cer.gov.au/markets/reports-and-data/quarterly-carbon-market-reports/quarterly-carbon-market-report-march-quarter-2024/australian-carbon-credit-units-accus

Solange Bandiaky-Badji, et al. “Indigenous Stewardship for Habitat Protection.” One Earth, vol. 6, no. 2, Feb. 2023, pp. 68–72, https://doi.org/10.1016/j.oneear.2023.02.002.

AgriFutures Australia. (2023, November 20). How to break down the barriers to carbon farming. https://agrifutures.com.au/news/how-to-break-down-the-barriers-to-carbon-farming/

Clean Energy Regulator. (2024, November 28). Quarterly carbon market report – September quarter 2024. https://cer.gov.au/markets/reports-and-data/quarterly-carbon-market-reports/quarterly-carbon-market-report-september-quarter-2024

Aboriginal Carbon Foundation. (n.d.). Carbon farming and core benefits management (10722 Nat) course. Retrieved June 15, 2025, from https://www.abcfoundation.org.au/what-we-do/training

Commonwealth of Australia, Department of Climate Change, Energy, the Environment and Water. (2015). Mapping guidelines for the Carbon Farming Initiative methods [PDF]. Retrieved from https://www.dcceew.gov.au/sites/default/files/documents/cfi‑mapping_guidelines.pdf 

Commonwealth of Australia, Department of Climate Change, Energy, the Environment and Water. (n.d.). Nature repair market.

Commonwealth of Australia, Department of Climate Change, Energy, the Environment and Water. (n.d.). CFI mapping guidelines [PDF]. Retrieved from https://www.dcceew.gov.au/sites/default/files/documents/cfi‑mapping_guidelines.pdf 

Commonwealth of Australia, Department of Climate Change, Energy, the Environment and Water. (n.d.). Consultation: Native vegetation regeneration — have your say [Webpage]. Retrieved from https://consult.dcceew.gov.au/native‑vegetation‑regeneration‑new‑requirements/have‑your‑say/view/16 

Commonwealth of Australia, Clean Energy Regulator. (n.d.). Reforestation and afforestation methodology under the ACCU Scheme. Retrieved from https://cer.gov.au/schemes/australian‑carbon‑credit‑unit‑scheme/accu‑scheme‑methods/reforestation‑and‑afforestation‑method 

Western Australian Department of Primary Industries and Regional Development. (n.d.). Getting ready to apply: ACCU Plus Round 2 [PDF]. Retrieved from https://www.agric.wa.gov.au/sites/gateway/files/Getting%20Ready%20to%20Apply_%20Round%202%20ACCU%20Plus.pdf

Nationally Recognised Training — Central Goldfields (Vic). (n.d.). Carbon farming and core benefits management (10722 NAT) [Course details].

Australian Bureau of Statistics. (2017). 7121.0 – Agricultural Land and Water Use, Australia, 2015–16. Retrieved from https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/7121.0Main+Features12015-16

CORE Markets (2025). The ACCU market in 2024: A review of the biggest volume year in the scheme’s history. Coremarkets.co. Retrieved from https://coremarkets.co/insights/accu-market-in-2024-review-of-biggest-volume-year-in-scheme-history

“The Basics of Carbon Project Auditing  - Carbon Farming.” 2025. The Carbon Farming Foundation. 2025. Retrieved from https://carbonfarming.org.au/the-basics-of-carbon-project-auditing/ 

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