origin in $20m carbon deal

Origin in $20m carbon deal
Author: Angus Grigg
Date: 23/11/2004
Words: 416
Source: AFR
Publication: Australian Financial Review
Section: News
Page: 5


Origin Energy has signed Australia's largest carbon offset agreement, paying up to $20 million to plant trees in the NSW government's greenhouse gas abatement program.
Under the deal, sharemarket-listed company CO2 Group will plant up to 6500 hectares of oil mallee plantations in western NSW, which will remain in place for at least 100 years.

The arrangement is the first signed under the emissions trading scheme established by NSW Premier Bob Carr after the federal government refused to ratify the Kyoto Protocol.

"As far as we are aware, this transaction is the first Kyoto-compliant carbon-sinks deal under an emissions trading system anywhere in the world," said Martijn Wilder, the head of Baker & McKenzie's Climate Change Group and the legal adviser to CO2.

The NSW scheme, in effect, commits the state to the Kyoto climate-change agreement, which has been signed by most developed countries except the US and Australia. NSW will aim to keep emission levels at 108 per cent of 1990 levels by 2012.

The NSW scheme, which runs between January 2003 and December 2012, requires 17 electricity retailers and a handful of generators to offset 100 million tonnes of carbon, with a nominal price of $10.50 per tonne.

Carbon is being traded on the spot market in NSW at between $8 and $13 a tonne. This takes into account offset agreements being tax-deductible at the nominal company tax rate of 30 per cent.

The NSW government estimates there will be demand for 6.1 million tonnes of offset credits in 2004, nominally worth $64 million. Over the life of the scheme, more than $500 million worth of carbon will need to be offset.

The value of the deal has not been disclosed, but industry sources suggest it's worth between $15 million and $20 million over its seven-year life.

The trees which absorb carbon dioxide from the atmosphere and lock up carbon in their branches and leaves will be planted mainly on wheat properties and have the added advantage of helping to prevent soil erosion and salination, and will also act as a windbreak for stock.

Andrew Grant, managing director of CO2, said the agreement proved native trees could be used to mitigate climate change and address land degradation in mid- to low-rainfall regions of rural Australia.

"The contract will require the establishment of the largest dedicated carbon-sink project ever undertaken in Australia," he said.