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index-based insurance schemes are already wide- spread (Hazell et al. 2010). More importantly, government could expand existing emissions trading systems by providing enabling conditions (e.g., tax offsets) to encourage farmers to use their marginal land for the purchase of insurance. Fostering the establishment of plan- tations for carbon storage would reduce carbon di- oxide levels to further facilitate the environmental (e.g., increased land dedicated to natural values), economic (e.g. faster production recovery from climate disasters), and social (e.g. reduction of socio-economic hardship of producers impacted by climate disasters) benefits. Key efficiency drivers of these innovative prop- erty management solutions include: • The opportunity cost of land. Normally, marginal land is not used for productive pur- poses; however, this approach will allow the use of marginal or surplus land for carbon plan- tation purposes; • Timeframe. Timeframe is an important par- ameter, especially for insurance industries and farmers, since they will engage in long-term contracts; further, access to long-term farm data to verify insurance claims will reduce mor- al hazard; • Affordable premiums. Longer-term inter- action with the insurance industry will lead to better understanding of climate-related risks, providing the possibly of cheaper/more afford- able insurance premiums, and opportunities for sustainable insurance products; and • Economies of scale: Greater uptake of insur- ance products will increase the possibility of ag- gregation by insurance companies, which will enable the sector to reach economically viable scales. This is expected to reduce transaction costs for individual small-scale producers and to reduce barriers to participation in carbon contracts (e.g. plantations). Aggregation can enhance economies of scale, reduce transaction costs and enhance the long-term sustainability of carbon and biodiversity projects. In summary, innovative property management
solutions are expected to allow growers to divers- ify their income streams and smooth year-to-year income variability linked to climate-related risk. These include access to markets that provide fi- nancial rewards for increasing vegetative and soil carbon sequestration, and the development and availability of affordable crop insurance to protect financial losses from climate disasters. By Shahbaz Mushtaq, Jarrod Kath, and Kathryn Reardon-Smith Centre for Applied Climate Sciences, University of Southern Queensland, Toowoomba, Queensland, Australia, 4350 Email: Shahbaz.Mushtaq@usq.edu.au References Hazell, P. et al. (2010). International Fund for Agricul- tural Development and World Food Programme. Kath, J. et al. (2018). Weather and Climate Extremes, 22, 1-9. Mushtaq, S. et al. (2020). Climatic Change, 161(3), 465-478.
Shahbaz Mushtaq
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