NEWS FROM THE HUB OF CARBON FARMING!

Regional Carbon Market Summit - Leveraging the Carbon Market for regional prosperity

Why is it that all things to do with The Clean Energy Policy, the Land Sector package and the Carbon Farming Initiative are all ‘announced’ in the cities, and discussed at city conferences which cost a fortune to attend? After all, only Landholders can earn carbon credits in the CFI!

Many farmers interested in the CFI are now asking the following questions:

Q. What is happening on 1 July, 2012? What do I have to do?

A. Nothing. On 1 July, 2012 the Clean Energy Future program starts. The top 500 emitters of Greenhouse Gas will be required to pay a price on the carbon they emit. This will increase some input costs for farmers as those companies forced to pay the price on carbon pass on some of the increase to their customers. Eg. power costs.  But the huge increases in power bills in recent times have nothing to do with the price on carbon because that won’t start until 1 July, 2012. The dramatic price hikes predicted to be inflicted by the ‘carbon tax’ were based on worst case scenarios used in the political campaign against the price on carbon. As well, companies like Fontera have said they would avoid passing on increased power costs to its farmers. Farmers do not have to pay for their emissions on farm, despite the fact that Australian Agriculture emits more than the transport industry.  Instead the  plan is that farmers will be paid to increase the carbon in the landscape and reduce their emissions of methane from animals and nitrous oxide from fertiliser and other sources.

Q. How do we get paid to reduce our emissions?

A. The Carbon Farming Initiative (CFI) is  a government program that enables farmers to earn carbon credits which they can sell on the carbon market. The credits can be bought by companies that need to or want to offset their emissions. This is why they are called an “offset” – they allow emitters to bridge the gap while they invest in the changes they must make to be part of a low carbon economy. Offsets earned in Agriculture are known as “Australian Carbon Credit Units” (ACCUs).  

Q. What do we have to do to earn ACCUs?

A. A wide range of activities may be used to earn ACCUs. They include reforestation and revegetation and surrender of permits to clear, reduced methane emissions from livestock - eg., using tannins as a feed supplement for ruminants, incorporating Eremophila (emu grass) into feed for ruminant livestock, and manipulation of gut flora in ruminant livestock - reduced fertilizer emissions, manure management, reduced  emissions of nitrous oxide – including application of urea inhibitors to manure, application of urea inhibitors to fertiliser - and increased sequestration of carbon in agricultural soils. The types of projects that may be permitted include planting native vegetation, restoring drained wetlands, applying biochar to soil, and flaring methane from livestock manure.

Q. How much can we make from the CFI?

A. Nobody knows. The Government has set a fixed price for carbon of $23/tonne for the “Compliance” market (the market made up of those companies listed in the top 500 emitters). This will rise by 2.5% each year until 2015 when the price will float.  Not all CFI ACCUs will be eligible for purchase on the Compliance market. Non-Kyoto-compliant CFI ACCUs are restricted to the “Voluntary” market (the market made up of those companies and individuals who want to go carbon neutral to reduce emissions) which is expected to attract lower prices. The Government has put aside $250 million to buy Voluntary ACCUs to support the market. The prices are hard to predict. However, ACCUs are bankable, so farmers can wait for the right price before selling.

Q. Do some activities pay more than others?

A. Yes. For every tonne of methane you can avoid emitting (eg., by changing the diet of your cattle or sheep) you may earn 24 tonne of CO2-e.  For every tonne of nitrous oxide you can avoid emitting (eg., by changing the method and the amount of fertliser you apply) you may earn close to 300 tonne of CO2-e. (We are waiting for a Methodology to be approved for both Greenhouse Gases.)

Q. Why do scientists say soil carbon can make only a modest contribution to the efforts to reduce Global Warming?

A. Not all scientists say that. The world’s leading soil scientist Dr Rattan Lal believes the world's farmers control the largest installation of a biological technology (photosynthesis in vegetation across 5 billion hectares worldwide) that can extract billions of tonnes of carbon from the atmosphere, interrupting the rapid rise of Global Warming. He says farmers can draw down the equivalent of 50ppm (parts per million of CO2-e) from the atmosphere for 50 years. It just so happens that it will take only another 50ppm to the atmosphere before we reach 450ppm (which will increase Global temperature by 2°C).  We need to buy time for low-emissions renewable energy to reach critical mass. Change land management to turn agricultural soils and vegetation into a vast global carbon sink .  Soil is fully deployed, has critical mass, and massive capacity. Let’s get on with it.

Q. How do we get started? Who do we talk to?

A. The CFI is in the start-up phase. One by one, the long list of offset activities is coming on stream as “methodologies” are written for them. A methodology is a set of rules that enables someone to take it off the shelf and follow it like a recipe to conduct the activity and earn offsets in a way that is genuine and reassures buyers that they are getting what they are paying for. There are only 4 ‘meths’ available at this time: environmental plantings of native trees would be most relevant to the majority of farmers; flaring methane from manure ponds in piggeries; managing methane emissions from landfill; and reducing emissions from savanna burning.

Q. Can we cut out the Middleman?

A. The Government believes that farmers should be able to manage the process themselves. However, they will need the services of some third party because offsets are typically sold in bundles of thousands of tonnes, orders that few landholders will be able to fill. An ‘ aggregator ’ s responsibilities can include parcelling orders, pool management, registry maintenance, measurement, trading, and educating. As much as farmers love to cut out the “Middleman”,  direct trading makes up a small fraction of produce sold. Experience in markets overseas tells us that landholders will have choice of aggregation services from their farmers’ association, natural resource management bodies such as CMAs, suppliers such banks, agents or agronomy services, and dedicated aggregation services. The role of aggregator is difficult and requires substantial database management capabilities. Based on overseas experience, the cost of aggregation, insurances, etc. varied between 10% and 30%. Landholders will most likely choose to aggregate with the best price/lowest risk provider. (E., A farmers’ group could choose to form a cooperative to engage an aggregator.)

Q. Do we have to take land out of production in order to raise carbon levels in our soils?

A. No. The best process for increasing soil carbon levels involves active farming. Carbon farming includes all forms of grazing management, biological and biodynamic farming, composting, pasture cropping, soil inoculants, etc. And agroforestry and integrated use of trees can have a significant impact on production. Seasoned carbon farmers have discovered that they can plant 20% of their land to trees and maintain production while gaining many benefits, including increased biodiversity, landscape resilience, and lower levels of evaporation.

Q. Will they ask for the money back if we earn credits for increasing carbon in our soils or trees and subsequently lose it?

A. No. If you lose soil or tree carbon due to bushfire or drought or any other reason beyond your control, you will not be asked to pay the money back. The Program automatically puts 5% of the value of every sale into a ‘buffer account’ – called a Risk of Reversal Buffer – which covers the losses. You will be expected, however, to restore the carbon levels in soils or trees for which you had earned ACCUs. If you refuse to restore the carbon, the Program Regulator can request that you ‘relinquish’ (or hand back) the ACCUs you were paid in the first place. Your ‘carbon maintenance obligation’ sounds like a burden, but it means that you simply commit to continuing the land management practices that had led to the soil carbon levels previously achieved.

Q. If we plant trees today under the Environmental Plantings methodology, how soon can we be paid for it?

A. Theoretically, you can be ‘paid’ at the end of the first year. Practically, you would be likely to wait until there has been enough carbon captured to make it worthwhile to submit an audit report. You can claim ACCUs only after a reporting period closes. You can choose the ‘reporting period’ from 12 months at the minimum or any time up to 5 Years after commencement of the project. Each subsequent reporting period begins immediately after the last reporting period.

Q. How long can we expect the income from Environmental Plantings to continue?

A. The CFI law sets out the length of time that different activities can generate credits using an approved CFI methodology. This is known as a ‘crediting period’. Most projects have a 7 year crediting period. Reforestation will have a 15 year crediting period and native forest protection projects have a 20 year crediting period. The end of the crediting period does not mean the end of the project’s earning capacity. Projects can be approved for a further crediting period so long as the project activity remains eligible. (This sounds like enough time for someone to shift the goal posts. If you are signing contracts for a project like this, insist that the factors that will make activities eligible or ineligible are spelled out in the contract.)

Q. The prices that carbon credits are fetching now are too low to make it worth my while, according to many experts. Why should I bother?

A. No one has any knowledge of how the market for ACCUs will operate. Any opinion about the future is mere speculation, especially if it is based of misunderstandings. Eg. the price on international markets has plummeted in Europe for no other reason than the Global Financial Crisis forced companies with carbon offsets on their books liquidate these assets for cash flow. The rush to offload units depressed prices.  In the USA the year before, the Chicago Climate Exchange’s agricultural offsets price collapsed after President Obama failed to convince his Congress to pass an Emissions Trading Scheme (ETS) into law. The companies buying CCX units were doing so to prepare for the ETS which did not arrive. Unlike the USA, Australia is getting an ETS.  The CCX scheme also had problems with Additionality which the CFI solves. Another ‘fact’ experts quote is that Voluntary market units inevitably sell for less than Compliance market units. But, in Europe, voluntary units have sold for close to 10 times the price of Kyoto compliance units. So you see, speculation is useful only if it is based on facts, such as: 1. You can ‘bank’ your ACCUs and sit on them until the market price suits you. 2. No Australian farmer is likely to have enough sequestered carbon to sell until at least 5 years in to the project’s life. A lot has happened in the last 5 years and a lot can happen in the next 5 years. 3. Within that period, our major trading partner China has announced that it will have a nation-wide Carbon Trading system by 2015. It has started a  three-year trial in 5 provinces using a $10/tonne Carbon price.

Q. No farmer I know would sign a contract for 100 years, especially as many of them are close to retirement. The experts always mention the 100 years rule as a problem. What do you say to that?

A. While it is natural to imagine the worst thing that could happen, the facts are these: 1. Between 2001 and 2005, only 2.5% of Australia’s forests were impacted by wildfire each year. The odds are 37 to 1 of a fire event. The vast majority of wildfires do not kill the trees. The CFI requires that dead trees be replanted. 2. The Soil Carbon Methodology submitted to the Government’s expert panel by the Bridge Consortium (Carbon Farmers of Australia is a member)  offers an ‘self-insurance’/’mutual insurance’-type system that spreads the risk over pooled and stored units and over a number of farmers across climate zones. 3. “100 years liability” sounds worse than “100 years of healthy soils”.  But how hard could it be to continue treating the soil with respect and enjoying the benefits of soil structure, water efficiency, increased microbiological activity, more available nutrients, buffering against drought, greater resilience against disease, etc.? 4. If those "experts" are right and prices of soil carbon offsets never amount to much, your Permanence liability will never amount to much either. 5. 100 Years might seem to be set in stone, but there is no scientific reason for that period. It is not the amount of time in which a molecule of CO2 is held in the atmosphere. The CFI Legislation allows the Minister to set any other period. Carbon Farmers of Australia is seeking to have the 100 Year Principle reconsidered.

The permanent Domestic Offsets Integrity Committee (DOIC) has been appointed to replace the interim DOIC which was appointed in 2011 when the Carbon Farming Initiative (CFI) legislation passed into law. The DOIC is an independent expert committee charged with "supporting the environmental integrity of carbon offsets generated under the Carbon Farming Initiative." The new DOIC includes the following:

• Professor Timothy Reeves (Chair): Professor Reeves is an international consultant with expertise in the development and extension of sustainable agricultural productions systems and crop-livestock integration. He is a Professorial Fellow at the Melbourne School of Land and Environment, a director of The Future Farm Industries Cooperative Research Centre, was a Senior Expert for the Food and Agriculture Organisation of the United Nations (FAO) and was formerly the Director-General of the International Maize and Wheat Improvement Centre.
• Dr Tony Press: Dr Press has led one of Australia’s leading climate science bodies, the Australian Antarctic Climate and Ecosystems Cooperative Research Centre as CEO since 2009 and has been Chair of the Royal Tasmanian Botanical Gardens Board for many years. He was previously a senior executive on the Environmental Forest Taskforce in the Department of the Environment and Heritage and was the Director of the Cooperative Research Centre for the Sustainable Development of Australia’s Tropical Savannas.
• Professor Lynette Abbott: Professor Abbott is the Vice Dean of the Faculty of Natural and Agricultural Science and Professor in the School of Earth and Environment at the University of Western Australia. Professor Abbott is an internationally well known and respected scientist who has published widely in soil, agricultural and botanical research journals. Professor Abbott’s principle area of scientific expertise is within the agricultural sector with broad expertise in soil biology, including retention/protection of soil carbon.
• Ms Rebecca Burdon: Ms Burdon is the principal economist at the Australian Communications and Media Authority (ACMA). Ms Burdon has extensive international experience assessing the economic impact of existing and proposed regulatory interventions using statistical and econometric analysis and modelling. Prior to working with ACMA Ms Burdon assisted the NSW government with the development of the Greenhouse Gas Abatement Scheme, specifically with the rules governing the creation of NSW Greenhouse Gas Abatement Certificates from demand side abatement activities.
• Dr Brian Keating (CSIRO representative): Dr Keating is Director of the National Research Flagship on Sustainable Agriculture focusing on productivity, greenhouse gas abatement and sustainability challenges in Australian agriculture, forestry and land-use systems. Brian has 35 years experience in agricultural and natural resource management R&D with leadership roles including the Chief of the CSIRO Division of Sustainable Ecosystems (2004-2008) and a past Board member of Sugar, Rainforest Ecology and Management and Tropical Savannas CRCs. Brian has authored over 200 scientific papers covering diverse topics including soil and water management, plant nutrition, soil carbon and nitrogen cycling, crop physiology, farming systems analysis and design, bioenergy, simulation modelling, climatic risk management and food security. He is a continuing member of the Editorial Board of the international journal, Agricultural Systems.
• Ms Shayleen Thompson (Department of Climate Change and Energy Efficiency representative): Ms Thompson is the Head of the Land Division in the Department of Climate Change and Energy Efficiency. She has worked on international and domestic climate change policy and programs since 1995. The Land Division was established in July 2010 to provide a coherent and coordinated approach to climate change mitigation.

The DOIC's role is to assess methodology proposals for use under the scheme and advise the Minister for Climate Change and Energy Efficiency, who makes a decision whether to approve methodology proposals. The Committee also provides advice to the Minister on regulations specifying eligible activities under the Carbon Farming Initiative that are not common practice, known as the 'positive list'. The Minister for Climate Change and Energy Efficiency may also seek the Committee's technical and scientific advice on other offset matters.

Recently more than one or two people have accused us of having a vested interest in the outcome of the Carbon Farming Initiative. Well they're right! Here you see our vested interests. Our grandchildren -the ones who will feel the full brunt of Climate CHange when we won't be there to protect them. We do have an ulterior motive. We're not just doing this for farmers. We're doing it for these kids - Brody, Portia and Xavier. Now that we are getting towards the pointy end of the process of winning for farmers the right to grow and be rewarded for growing their soil carbon levels, it would be strange if those who have been against our campaign all along should not stir the possum at this late stage. 

Temporary destocking for deep regeneration before careful reintroduction sounds like a sound strategy and well worth funding by a temporary stewardship provision. Unfortunately this Government does not believe in the European practice of paying farmers not to grow produce. Witness what happened to the RM Williams Company's attempt to get carbon credits by locking up Henbury Station. There may be some money for it available in the $1bn Biodiversity Fund introduced under The Carbon Farming Initiative. There may be some money available for research under the Action On The Ground program run by DAFF. David Pollock might even be able to use grazing management intensively on a small area of Wooleen to generate revenue while saving the rest... Evan Pensini of Cheela Plains Station in the Pilbara has been trying to perfect the formula for capturing carbon in the rangelands for more than 10 years. Across a small section of his 133,000 hectare property west of Paraburdoo, he manages a mob of cattle by cell grazing. He says the paddocks are closely monitored to ensure ground cover is restored. "We've basically tripled our carrying capacity since we've been implementing the system and we've had some extremely dry years in amongst it as well, but the whole object of is the point that you're only grazing when you've got that food on offer."

Under the impression that David Pollock had destocked his station Wooleen permanently, we put a series of questions to him after his story appeared on Australian Story. WHile he and partner Frances have not turned the property into a 'national park with no income', their radical destocking strategy has forced a lot of graziers to consider their own stiuation. As David says, most could not afford to do it. Here are their answers to our questions:

Farmers are running way out in front of agronomists and advisers, adopting biological systems that advisers don't understand, according to Patrick Francis, editor of Australian Farm Journal. Plant nutrition and advice is in a state of confusion, he says. Few understand the function of soil organic matter and carbon.

“Farmers are adopting new systems that are far more sympathetic to soil health and increasing organic matter levels. They have precision farming technology to monitor impacts but their advisors knowledge of what’s happening to soil biology is rudimentary at best. Most advisors have a background in soil chemistry and physics and don’t understand what’s happening to the soil food web as organic matter increases. It’s why many (advisors) continue to recommend annual inorganic fertiliser applications even though responses are often uneconomic,” Mr Francis says. “There are now so many questions being raised about the plant, soil, water, carbon interface that piece meal research programs need to be converted into a concerted, national, across systems approach with at least a 21 year time frame."

Australia needs a dedicated Soil Health CRC. “Farmers are looking for better direction about holistic farming systems, compatibility of inputs, levels of inputs, alternative inputs and their consequences for food nutritional content,” he said. A classic example is the impact of increasing soil carbon on populations of free-living nitrogen fixing bacteria. Their implications for soil health and cost of production are likely to be enormous. Many farmers don't apply inorganic fertilisers in some years but still achieve as good as if not better yields than those applying them. But the one common denominator is increasing soil organic matter and carbon. “The major changes on these farms are stubble retention, legume cover crops and often controlled traffic. On their own, or combined, organic products like composted manures and soil biology enhancers, means there are all sorts of implications for the soil food web. And how does the soil food web react to conventional fertilisers and pesticides. For instance, what is the impact of herbicides and fungicides on rhizobia, the bacteria that work symbiotically with legumes to fix nitrogen? There is no research data from Australia on this subject but the door has been opened overseas to suggest there is a problem. And if there is with rhizobia, what is happening to other soil species?”

“A soil health CRC needs to operate without barriers between biological, chemical and holistic approaches," he says.

Finley High School principal Bernie Roebuck spoke at the Murray Darling Basin Plan consultations in Deniliquin last December. It is an amazing depiction of life in a community threatened by climate. Society has got to make a choice between the sentimentalism of rural communities vs the sentimentality of environmental flows in a river system.

My name is Bernie Roebuck and I am currently the principal at Finley High School. Previously I was principal at Deniliquin High School and for a two-year period worked as a principal consultant across all schools in the Riverina.
Though I might be called a “blow in” by some standards I have lived and worked in communities in the Murray Valley for 34 years. My grandfather settled in Deniliquin during WWI and my father was born in Deniliquin in 1919. My children have all been born in the Murray Valley and two have started their working lives there. So “blow in” maybe, but for 96 years and four generations my family have lived in this part of the world and it gives us a claim of having a vested interest in the future of Riverina communities.

The leadership of the major farmers' groups in NSW and VIC have redefined leadership as walking backwards into the future on the issue of carbon trading. "NSW and Victorian farmer groups are urging producers to be wary of locking into long term carbon trading, " reported the ABC recently. "Both groups see little financial benefit for producers from the new carbon trading to begin in July. NSW Farmers Association's senior vice president and head of their sustainability taskforce, Sam Archer, says the returns are not there due to falling global carbon prices and restrictive land management."Potentially low commercial benefits, restrictions on land use practices, the onerous land use permanence requirements of 100 years, and as we have seen overseas, a high transactional cost (so) all of which I would encourage people to err on the side of caution." The President of the Victorian Farmers Federation, Andrew Broad, says farmers reject the notion of a carbon economy. "Globally we have been fools by making our agriculture less competitive and we think somehow that we are saving the planet."

The comments are poorly informed. EG., the low prices currently on offer reflect the global financial crisis as companies realise the value of offsets they have on their books for liquidity purposes. Now is the perfect time to buy some cheap offsets to cover your future liability. A farmer sitting on offsets would be wise to keep sitting until better prices are available. Few farm commodities are as bankable. These gentlemen may not be aware (because they are not engaged in the process) that there are several insurance and buffer mechanisms being proposed to reduce the 100 Year risk. Sam's complaint about 'restrictions on land use practices' seem odd since he has his own scheme called the National Ecosystem Services Scheme (ESS) which would see farmers paid for land stewardship - which involves 'setting aside marginal land' for ecological 'goods and services'. The only difference between the CFI system and Sam's Scheme is how the farmer is paid. We believe in markets. Sam believes in taxes: "Potential funding for the scheme could come from a GST on fresh food..." Whoa! Australians love their farmers, but not enough to pay 10% more for food. And governments tend to find it difficult keeping their hands off a GST. Stewardship payments are handouts which institutionalise the top-down, dependency relationship traditional for farmers. They can be switched on or off at will. In The Land's Year of the Farmer supplement recently, Mr Archer said his proposed ESS could become "the cornerstone of Australia's response to climate change..." But it has no connection to Climate Change. Why is the carbon market anathema to many in agriculture? Why are those involved in it seen to be ethically compromised? This has motivated some to propose "Market Based Instruments" which are not markets at all, but schemes that pit farmer against farmer to compete for handouts.