The spot price of carbon has just hit $50 per unit, climbing 16 per cent in just a couple of weeks to set a record.
The market for carbon is developing rapidly after new rules for voluntary trading were set at COP26 and the global business community gets behind the net-zero movement.
Key players from around the world and Australia discussed the changes at the Emissions Reduction Summit in Sydney.
Marion Verles, chief executive of global certification body SustainCert, said Article 6 of the COP26 agreement laid out the framework for the new system.
"There is very specific language around setting baselines, defining additionality, tracking sustainable development impacts, establishing grievance mechanisms and ensuring adequate consultation with stakeholders."
It also closed a loophole for double dipping by stating that each country's abatement figures needed to be "adjusted" to account for offsets sold to big companies, airlines or other voluntary carbon market buyers.
What does it mean for farmers?
If a farmer cuts methane emissions from their herd by feeding it methane-reducing additives, storing more carbon in the soil or increasing the biodiversity on farm, they cannot sell those credits and still claim to be net zero afterwards.
SustainCert surveyed 60 corporates and other groups involved in carbon trading to understand where companies are heading on this issue and the consensus according to Ms Verles is that you cannot do both.
She said companies were starting to realise that if they wanted to lower their scope-three emissions, they had to make sure there was no "carbon evasion".
Sustainability now driving profit
The way the share market and investors are looking at carbon trading is changing.
Andrew Duncan, head of debt capital markets at investment bank HSBC, said companies thinking about sustainability were attracting more capital.
"All investors are looking at this and saying whether or not you're doing green initiatives, giving more disclosure or setting targets — this is part of good governance and good risk management, and share markets and bond markets are rewarding those who are active."
New methods being trialled
In Australia, the federal government is considering approvals for new methodologies for earning carbon credits under its Emissions Reduction Fund.
The buzzword now is "stacking" credits — getting an income from several sources.
Skye Glenday is the chief executive of global not-for-profit Climate Friendly, which partners with farmers, foresters and Indigenous groups to develop new projects.
The organisation is working on a pilot study with the CSIRO to trial new methods on a Queensland property called Bareeda.
And while new methods are being trialled, the Clean Energy Regulator is looking at setting up a trading desk for credits so landholders will not have to go through a middleman to find a buyer.
It's a complex world, but as the carbon price climbs higher, more farmers are looking at what it takes to play in the carbon trading market.
