A recent study conducted by the Carbon Market Institute (CMI), in collaboration with AgriFutures Australia’s Carbon Initiative Program, has shed light on the detrimental effects of a lack of professional guidance on farms with carbon projects.
The research reveals that these projects have often been perceived as burdens rather than assets, leading to a negative impact on property values.
Greg Noonan, a consultant at CMI, explained that the study involved working closely with various stakeholders in the carbon farming supply chain to develop a guidance paper titled “Valuation of Rural and Agribusiness Properties.“
The aim of this paper is to improve valuation practices and address the challenges faced by farmers with carbon projects.
Australia’s carbon farming scheme has been in operation for approximately 11 years, encompassing projects related to vegetation, changes in agricultural practices to sequester carbon into soils, and efforts to reduce methane emissions.
Valuers play two crucial roles in this market. Firstly, if a carbon project has a permanence element and there is a mortgage on the property, the bank must provide consent to the project.
In such cases, the bank commissions a valuer to assess the impact of the project on the land value. Secondly, valuers are relied upon by investors interested in the carbon industry to assess the project’s value.
Historically, valuing carbon projects has been challenging due to the industry’s relative novelty, complexity, and niche nature. Specific skills are required to understand how these projects function and their potential impact on land values.
However, as carbon farming becomes more widespread, there is an increasing demand for valuers with expertise in this field across Australia.
Shaun Salter, a valuer and farmer from Fraser Valuers in Queensland, emphasised the need for continuous knowledge development among valuers and banks to provide clients with the best possible advice.
Salter highlighted the challenge of gaining knowledge in a relatively new market, often constrained by non-disclosure agreements that limit access to relevant data for valuation purposes. Salter also encouraged producers and landholders to proactively educate themselves and expand their knowledge base.
As the carbon farming industry continues to grow, it is crucial for professionals, including valuers and banks, to enhance their understanding of this market.
By doing so, they can provide accurate assessments and guidance to farmers with carbon projects, ensuring that these projects are recognised as valuable assets rather than encumbrances.