Lack of consent from indigenous bodies stall some HIR carbon projects in Australia

A portion of Australia's Human-Induced Regeneration carbon projects are struggling to obtain credits as they have been unable to secure the required consents from indigenous bodies amid dragging negotiations and a failure to agree on the revenue share, experts and market sources told S&P Global Commodity Insights.

HIR projects involve the generation of Australian carbon credit units via the storage of carbon by regenerating native forests through activities such as managed livestock grazing, control of feral animal activity and ending the chemical destruction of regrowth. The method expired in September 2023.

Platts, part of Commodity Insights, assessed the price of HIR ACCUs at A$34.10/mtCO2e ($22.36/mtCO2e) on July 26.

A total of 466 HIR projects were registered in Australia, accounting for about 25% of total carbon project registrations, according to data from the Clean Energy Regulator.

These projects represented about 34% of the total ACCUs issued in fiscal year 2023-24 (July-June), making it one of the biggest contributors to carbon credit generation in the country.

However, 169 of these HIR projects have been registered conditionally due lack of consent from project interest holders, which may include landholders, banks, regional governments and registered native title bodies corporate.

While a project can be registered conditionally, it will not be issued any ACCUs before getting all the approvals. HIR projects have five years to get all the required consents after registration.

However, a majority of these 169 projects lack consent from native title bodies, according to market sources.

Around 116 HIR projects are on properties that have native groups as interest holders and more than two-thirds of these lack consent, according to Climate Friendly, one of Australia's biggest project developers, which citied the data to CER.

"I think it's more than two-thirds that haven't been dealt with," said Benjamin Halliwell, managing director at Jabiru Capital, an Australia-based consultancy.

Stalled negotiations

Market participants said a sizable number of projects lacking native title consent was unable to reach an agreement on revenue sharing with the indigenous groups.

"The reason why we haven't seen the consents being given is because sometimes the native title parties are seeking a higher percentage than perhaps what the landowners and the project developers are prepared to offer," said Elisa de Wit, partner at Melbourne-based law firm Norton Rose Fulbright Australia.

Earlier, project developers were able to get consent at 2%-3% share but then it increased to around 5%, with the market currently around 5%-15%, market sources said.

"If you have budgeted on 5%, which most did a few years back, it is definitely not settling there," an HIR project developer said.

A higher share increases project costs as it reduces the revenue for landowners and project developers.

Time and logistics

Getting consent can also become logistically difficult if multiple native title bodies are involved.

"Distances are far, costs are high and when there can be 20 participants, it is difficult to get all in one place at one time which is what is required," the project developer said.

The delay in consents was impacting projects throughout Australia, especially in Western Australia and South Australia, sources said.

"I have heard of one or two developers that really are giving up on projects, and not even bothering to negotiate, leaving landholders without developer support and projects at risk of never issuing credits," a second project developer said.

"The process commonly takes 6-12 months prior to project registration working with all partners and consent holders to ensure there is support for project registration, and it commonly takes a further 12-18+ months to finalize all the partnership details and prepare for audit," said Skye Glenday, co-CEO of Climate Friendly.

Climate Friendly has seven additional consents across five projects that were in advanced discussions with different native title holding groups, Glenday said.

"It's a complex process and you need to be committed to allow the necessary time for that process to unfold," said James Schultz, CEO of Greencollar, another major Australian project developer.

Greencollar said 26 of its registered carbon projects were still going through the native title consent process.

Legislative clarity

The projects' delay in getting native consents could have the potential to limit supply of HIR ACCUs, according to the Carbon Market Institute, Australia's national carbon body.

"It's a huge debt load that developers are carrying that looks to not be supported by projects that are actually issuing credits," the second developer said.

When the program was originally introduced, consent was compulsory before registration but the government changed the rules in 2014, allowing developers to get consent afterward, de Wit said.

However, a government-backed independent panel recommended(opens in a new tab) in 2023 to remove the option of conditionally registering ACCU projects on native title lands before obtaining consent.

Legislative clarity was needed from the current government regarding implementation of the panel's recommendation, the CMI said.

The way the government implements the panel's advice will have a material impact on future registration rates, the second project developer said.

Some of the buyers with experience in working with native bodies, such as miners and fossil fuel companies, understood the issue and have been raising it with the developers, Halliwell added.