Climate Change Law Delay Stalls Demand for Carbon-Storing Forest Projects

Carbon Conscious Ltd., an Australian company that plants gum-trees to absorb greenhouse gas emissions, said demand from customers for forests has stalled after the nation shelved climate-change laws.

“We were having quite a detailed conversation with a particular client, which has pretty much stopped since the government made the announcement,” Chief Executive Officer Peter Balsarini said in a telephone interview yesterday. “We’ve certainly stopped fielding interest in Australia.”

BP Plc, Europe’s second-largest oil company, and Origin Energy Ltd. last year hired Carbon Conscious to plant as many as 40 million eucalypt trees on less-arable farmland. Australian Prime Minister Kevin Rudd delayed the climate change bill on April 27, and will assess actions taken by other nations at the end of 2012 before reintroducing it in parliament.

Carbon Conscious, which has slumped 72 percent since the start of the year in Sydney trading, will plant about 6 million seedlings for BP and Origin in Western Australia this year, Balsarini said from Perth. Melbourne-based competitor CO2 Group Ltd. has dropped 48 percent.

“It is unfortunate that the early movers and innovators in the low-carbon economy are now being burnt by the lack of political will,” said Seb Henbest, a Sydney-based analyst for Bloomberg New Energy Finance. “Climate change is not going to go away and so the introduction of a carbon price at some point in the future is inevitable.”

Carbon-Storing Trees

Carbon Conscious plants mallee eucalypt trees that absorb and store emissions in their leaves, twigs and roots. Planting the trees would generate permits tradable under the pollution reduction laws Australia has now delayed. About five trees are needed to absorb 1 metric ton of carbon, according to Balsarini.

“We’re fortunate. We’ve got some clients and we’ve got plantings over this year and next year,” Balsarini said. “Those plantings come with 15-year management revenue streams.” Carbon Conscious will plant as many as 4 million trees in 2011, he said.

Carbon Conscious plans to sell shares and convertible notes to raise about A$3.87 million ($3.2 million), the Perth-based company said yesterday. The funds will be used to acquire land and finance planting, Balsarini said.

Inpex Corp. has hired CO2 Group for a pilot project to offset emissions from its proposed Ichthys liquefied natural gas venture in Australia’s Northern Territory. Woodside Petroleum Ltd. in June expanded a 50-year plantation management agreement with CO2 Group.

Greens Party

Rudd’s legislation to cut emissions by at least 5 percent was blocked in the Senate by the Greens party and the Liberal- National coalition last year, creating a possible trigger for an early election.

The government’s climate plan would have taxed companies with high emissions like energy, steel and cement makers and offset the charges with free emissions permits and financial compensation.

“It doesn’t make a lot of sense that to achieve a unilateral 5 percent cut in greenhouse emissions, the government is now waiting to assess commitments from other nations before moving ahead with its domestic carbon-trading scheme, which it has acknowledged is the best policy,” New Energy Finance’s Henbest said.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

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