Brokers: profiting from the carbon tax

Brokers: profiting from the carbon tax

Brokers: profiting from the carbon tax

As the introduction of the Government’s new carbon tax approaches on 1 July, what is the type of product that insurance brokers can profit from? Is there a multi-million dollar market waiting in the wings?

Insurer Vero has given its ‘carbon sink’ cover an extra push this month as the controversial new tax introduction date nears.

The cover is designed to protect Australians who plant and grow forests for their long-term benefits in sequestering carbon. Vero is preparing for significant growth with this product and brokers should look to offer suit from this and similar offerings.

“We’re in touch with investment companies and planters,” said Vero’s Adam Davies, leader pricing and portfolio. “The market could grow to around $500million in 10 years.

“Once the trees start to mature and sequester carbon in about two to three years, the demand for carbon sink insurance is going to increase. We’re at the beginning of the journey right now.

“With the Carbon Farming Initiative approved, there are a lot of investors wanting to put their dollars into plantations.”

Vero has partnered with Insurance Facilitators – a niche underwriting and distribution agency which specialises in this field.

Insuring trees that will stay in the ground for 99 years or more, carbon sink insurance supports carbon offsetting and is environmentally focused. It applies only to trees planted for the long term and not grown for commercial purposes.

“As we get further down the path of global warming and pressure increases on big companies, the investment in carbon forests is only going to increase,” continued Davies.

Vero claimed carbon sink insurance attracts two customers: the crop farmer who plants trees on other sections of their land and the investment company that uses marginal land to plant large quantities of eucalyptus.

If a tree is 20 years old, it has sequestered a significant amount of carbon which is measured, then sold as a carbon credit. Companies buy carbon credits to offset their greenhouse emissions.

If the tree falls or burns, it releases carbon back into the atmosphere. The carbon credit no longer exists and the farmer must refund the money paid for it. This is where carbon sink insurance steps in to cover the loss.