In outback Australia, years of drought have left many rural properties "flogged out" or degraded, but experts say they are now set to skyrocket in value due to their carbon potential.
Carbon farming, a practice that focuses on destocking land to regenerate bush to store or sequester carbon, is an important pillar of efforts to reduce greenhouse gas emissions.
Tim Lane, national client manager at property valuers Herron Todd White, said degraded land would be of greater interest to investors than well-maintained properties.
"Properties that don't have a lot of tree coverage, have soil degradation, not a lot of … grasses … they will be seen as more attractive," Mr Lane said.
Because land that is degraded has the potential to recover, any improvement would increase the amount of carbon sequestered on that property, making it potentially more valuable for the purpose of carbon farming than premium, healthy land.
Carbon project developers, including South Pole and Regenco, predict that with Australia's commitment to reduce emissions by 43 per cent by 2030, demand for carbon credits will grow quickly.
"So it will be really interesting to see how they balance out the demand for carbon credits but also the cost of sort of remediating degraded land and where the trade-off is there," Manager of Agriculture with South Pole Alice Debney said.
Valuers bring on carbon staff
Herron Todd White, one of the largest independent property valuation and advisory groups in Australia, now has six staff nationally in its "carbon team".
Mr Lane said the carbon market was still evolving, but the property market had been catching up, as highlighted by a recent sale in the Northern Territory.
"The value of the carbon opportunity as a percentage of the overall property was somewhere in the order of about 18 per cent premium for the carbon opportunity over and above what you would consider the agricultural use of that property," he said.
"Whether that 18 per cent or so is justified, only time will tell, but there is a lot more interest and a lot more activity in the sector."
Smaller-scale opportunities
Ms Debney said project developers to date had focused on large parcels of land, around 500 hectares or more, but that could also be set to change.
"We might see that if the price of a carbon credit goes up substantially, that could open up some of those smaller land holdings to being eligible for these projects," she said.
"That would be really great because I do actually speak to a lot of smaller landholders who are really keen to have an impact on either increasing their soil carbon stocks or achieving carbon neutrality."
Restoring public confidence
Managing Director of Regenco Greg Noonan said banks would also play an important role in the development of the industry.
"The banks have all committed publicly to helping grow this market and support their customers into environmental markets and so that will take some time," he said.
"I think it's really important that we take them on the journey and arm them with the same sort of information and skills."
Mr Noonan said the Chubb review, currently underway, would go some way to addressing integrity problems within the industry.
Recently, critics have raised concerns about so-called "meaningless credits", which have resulted in increased emissions.
"I think fundamentally, we have a responsibility to restore or improve public confidence in the validity of what we're doing and that has to be a priority for all participants," Mr Noonan said.
"We need to use best current day technology to make sure that the integrity of the offsets that we generate are unchallengeable."
