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Clear definitions of property rights in carbon are required to ensure the viability of carbon offset trading in Australia, Mr John Sheehan, Carbon spokesperson for the Australian Property Institute (API) said today.

"It is clear that the capture of carbon will occur primarily in forests commonly known as carbon sinks. This will require a clear property right to ensure the security of investments.

"The Institute has been calling for a robust debate on the issue of land based carbon sinks as there has been almost no attention given to the property rights which are needed to underpin any offset scheme," Mr Sheehan said.

Mr Sheehan said the recent defeat in the Senate of the Carbon Pollution Reduction Scheme (CPRS) Bill now provided the Government with the opportunity to get the detail of the legislation right.

"Whether Australian Emissions Units (AEU’s) under the CPRS are ultimately created or whether emissions offsets to a carbon tax are adopted, it is clear land based carbon sinks will underpin the emerging market in emissions offsets," Mr Sheehan said.

"Existing property law and titling does not permit robust property rights in carbon to be created at the level of security and transferability that the community has come to expect from existing property rights such as Torrens Title.

"For trading in land based carbon sinks to be a reality, there needs to be a lot of attention given to just how the property rights in carbon are separated from the existing property rights in land

"The Government now has the time to go back, redraft the legislation and clearly define a property right in carbon. This is necessary to ensure the viability of any form of carbon offset scheme," Mr Sheehan said.

Mr Sheehan said that trading in carbon credits sourced from Kyoto compliant forest projects may well fail unless security of tenure can be provided to purchasers and in particular banks and other financial institutions who will fund the emerging Australian carbon market. 

"The purchasers of carbon credits sourced from land based carbon sinks can be expected to be major ASX listed companies, who will seek funding from the banks, who will demand robust security to underpin large loans to these companies.

"This security needs to be provided by a robust property right in carbon," Mr Sheehan said.
"This issue, through the Institute’s Carbon Property Rights Committee, has been raised on a number of occasions with both the Government and Opposition.

"We are concerned that neither Minister for Climate Change, Senator Penny Wong or  Shadow Minister Assisting the Opposition Leader on Emissions Trading Design Andrew Robb appreciate the need for urgent detailed attention to be given to the issue of land based carbon sinks. 

"The API would welcome any opportunity to work with the Government and Opposition on this important issue to ensure the success of the emerging Australian market in carbon," Mr Sheehan said.