Australian Airline Qantas Invests in New Carbon Credit Fund

A photo taken on Aug. 20, 2023, shows a line-up of Qantas planes at Sydney's Kingsford Smith Airport. William West/AFP via Getty Images

Australia’s national carrier Qantas will invest $80 million (US$53 million) in a carbon credits fund managed by Silva Capital.

Mining giants BHP and Rio Tinto, also part of the Australian Stock Exchange, will join Qantas as founding investors.

The fund aims to raise $250 million to manage Australian Carbon Credit Units produced via land reforestation projects.

Silva Capital develops carbon sequestration projects in Australia by acquiring or leasing agricultural land to secure carbon credits.

This investment will help Qantas meet its “compliance obligations” and achieve its climate targets by providing high-integrity carbon credits.

“Importantly, the fund will also help scale quality, nature-based carbon credits in the Australian market with social and economic benefits for local communities,” Qantas explained.

Qantas will fund its share of the project via the $400 million Climate Fund, which it first announced in May 2023.

Qantas Chief Sustainability Officer Andrew Parker said the fund would help Qantas increase its carbon market strategy and “positively shape” the development of the overall industry.

“We’re continuing to evolve our carbon portfolio to not only include high-quality, high-integrity carbon projects but also align to nature-based solutions. Through our Climate Fund, we continue to turn our attention to Australian projects that create ecological and economic benefits,” he said.

Parker explained that carbon offsets would help Qantas achieve its climate targets.

“For hard to abate sectors, such as aviation, high-integrity carbon offsets will play an important role in achieving climate targets. We expect the demand for carbon offsets to continue to grow into the future and it’s going to take partnerships across industries to enhance the overall availability of high-quality, high-integrity carbon credits,” he said.

Silva Capital said the fund will focus on developing mixed-use agricultural and environmental projects in Australia to develop carbon credit units at scale.

“Carbon market participants and financial investors will be invited to participate in the Fund to gain access to a supply of credits and attractive financial returns,” Silva Capital explains on its fund page.

“Silva Capital’s projects are designed to complement and enhance farming activities.”

Qantas is also investing in the Sustainable Aviation Fuel Financing Alliance as part of an aviation biofuel push. The company has also invested in a Queensland biofuel production facility, which is a partnership between Jet Zero Australia and LanzaJet.

Silva Capital is a joint venture between investment managers Roc Partners and C6 Investment Management.

Airline Climate Change Targets

Qantas was one of the first airlines in the world to agree to net zero by 2050. It also aims to reduce carbon emissions by 25 percent of 2019 levels by 2030. The airline has already achieved a 20 percent reduction in emissions.

The national carrier also plans to have 10 percent of its fuel mix comprised of Sustainable Aviation Fuel (SAF) by 2030, and for that figure to rise to 60 percent by 2050.

Qantas said human-induced climate change is a “significant issue for the aviation industry” and has committed to Paris Climate Agreement targets in its latest annual report (pdf).

On July 24, Qantas CEO Vanessa Hudson said, “Aviation is one of the hardest sectors to decarbonise and it’s going to take partnerships across industries like this to help close the gap between supply and demand.”

Meanwhile, competitor Virgin Airlines is aiming to cut its emissions by 22 percent by the year 2030, and net zero by 2050.

Virgin Australia’s owner, Bain Capital, an American investment firm, pointed to the airline’s fleet renewal program as a key driver to meeting this goal.

According to Virgin’s statement, 35 new Boeing 737 aircraft will help deliver 15 to 17 percent emissions reductions per seat per trip.

On the flip side, Air New Zealand has recently removed its 2030 emissions reduction target and will withdraw from the U.N.-backed Science Based Targets initiative.

New Zealand’s national carrier, also listed on the Australian Stock Exchange, scrapped its goal to cut carbon intensity by 28.9 percent by 2030.

“Many of the levers needed to meet the target, including the availability of new aircraft, the affordability and availability of alternative jet fuels, and global and domestic regulatory and policy support, are outside the airline’s direct control and remain challenging,” the airline said on July 30.