Thursday, April 18, 2013

EU Carbon Crash Good News

Don't panic! DON'T PANICKKKKKK! The collapse of the price for some units on the European Carbon Exchange is GOOD NEWS FOR COMPANIES PAYING A CARBON TAX! It is GOOD NEWS FOR BUYERS OF OFFSETS... Now is the time to BUY BUY BUY!!!!

The Carbon Market is a real market. Prices go up and down as a result of Supply and Demand. Right now there is OVER-SUPPLY - There are too many sellers chasing too few buyers in Europe.

The price is right for buyers who want to bank their cheaply-procured units until they are needed.

The low price makes it easy for landholders to sign up for 100 years because you can buy enough to cover your entire liability.

Why Over-Supply? Two reasons: 1. European governments grossly over-allocated units to the extent that there are a billion and a half units excess to requirements choking the market. 2. These same governments gave the world the European Financial Crisis. The European Financial Crisis is the villain; price for Certified Reductions Units reached US$24 before the Crisis and 40¢ after it.

The EU came up with a plan to support the price: it wants to put a billion units on ice until 2015. On Tuesday it was rejected, 334 votes to 315. Confidence in the EU's capacity to manage the problem collapsed and with it the price.

Three things happen in 2015 which will have a big impact on this situation: 1. China - the biggest holder of units - enters the market as a seller, bringing demand on a scale never seen before. 2. The year 2015 is a full two years from now. They say a week is a long time in politics. It is even longer in carbon markets.

Crash? What Crash?

This "crash" started back in 2008 and continued on to this latest event. The spot price for Certified Emissions Reduction units has been a slow-motion train wreck for months and years.

The role of governments in these markets is a debate worth having.

Wednesday, March 20, 2013

Itain'twhatyoudoit'sthewaythatyoudoit

 What does Soil Carbon Research Program (SCaRP) tell us?   

This could be baffling. After 3 years and $25m the message coming out of the Soil CarbonResearch Program seems to be: land management decisions have little impact on the amount of carbon sequestered in the soil. Rainfall zone and soil type have a big impact on soil C levels, but not the farmer. I don't get it. We lost 50% of our soil carbon in the last 100 years. What caused that if it wasn’t the impact of soil management practices?

After analyzing 20,500 samples from 4500 locations, the largest soil sampling exercise in Australia’s history, the researchers concluded that no practice was any better than any other at improving carbon levels in soil.  No grazing method or tillage practice or any other management approach stood out. (See Table 1.)

SCaRP vs Chan:



CSIRO’s Dr Jeff Baldock, who managed SCaRP, says the soil sampling was not conducted to quantify sequestration of carbon in soils. “The three year duration of the study would not allow estimates of carbon sequestration to be derived with high certainty. The samples therefore are a baseline measurement of the soil carbon stocks within the various combinations of soil type by management regime within each agricultural region,” he says.
While the impact of climate, soil type and management regime was studied, there was an ingredient missing: the farmer. The skill level of the farmer in the agricultural practice that they nominate will affect the result. That skill level could be directly related to the length of time the practitioner has been practicing. Every successful practitioner will tell you that it can take several years to get their system right. It is not a matter of simply applying a ‘practice’ to an area of land to get a standard response.[1]
Overlooked in the first analysis were a group of “high performance” soil carbon managers who have demonstrated a potential well beyond the average. “These ‘outliers’ present a challenge for the conventional estimation of the potential of Australian soils to sequester carbon. If these outliers can do it, it can be done.

Dr Baldock acknowledged this in his report: “Differences in the way individual landowners implement practices in response to personal preferences or business requirements may also contribute significantly.” He points to a case study where the water use efficiency of continuous cropping systems ranges from 60% to 90% across a region due to landowner abilities and preferences. “Under these conditions, differences in the input of carbon to a soil will result and soil carbon values will vary even under similar soil, climate and topographic conditions.”
In his presentation of the results of the SCaRP, Jeff Baldock pre-empted the shift in the paradigm: that it is not the management practice we must study to understand the potential for soil carbon, but the particular farmers in whose hands the practice can produce the results that led Professor Ross Garnaut  to estimate that soil carbon could account for 40% of Australia’s emissions. "We need to catch and analyse samples that do not fit current calibrations," says Dr Baldock. The absence of a pattern is "at least partially due to variability that existed within management classes." Here he identifies the existence of high performance carbon farmers. Farmers don't perform uniformly within a management class - many are average, and some are very good. When you average them the results tell you nothing about the potential of the class. There is no allowance for skills, time spent learning the technique, incentive of carbon offsets, etc. 

As the old song goes...

"It ain't what you do, it's the way that you do it.
"It ain't what you do, it's the way that you do it.
"It ain't what you do, it's the way that you do it.
"That's what gets results."

[1] Another issue that could influence the outcome would be the combination of practices, which is common. Eg. grazing management and pasture cropping and/or compost tea inoculant applied to the same paddock.






Wednesday, February 13, 2013

I want the icing and the cake

When you hear soil carbon offsets called 'icing on the cake'.  This saying says there ain't much cake to be had anyway and it could all disappear tomorrow... In other words, don't take the money unless you don't need it. The new Guidelines for Submitting Methodologies reveals that the architects of the CFI regulations believe they have made the sequestration in soil and vegetation so unattractive that few will get involved. It says that landholders should only consider environmental plantings or soil carbon projects that improve productivity or have NRM benefits. This is because the Permanence Principle (or 100 Year Rule) is not likely to be attractive unless it is 100 Years of benefits for the farmer.  Trees should not be planted for offsets, in the first place. Landholders could consider trees for unproductive or eroded areas, or those that provide shelter for stock, create corridors for wildlife or improve water quality. They don’t want forests planted on land that has more profitable agricultural uses. We agree, but who is to say what is degraded and what is profitable? A good carbon farmer can turn degraded land around.

•  “10 WAYS TO STAY SANE AND SUCCESSFUL ON THE WAY TO A METH” by Carbon Farmers of Australia.  Only $15.00. (Satisfaction guaranteed.)








                                                                                                                                                                                                                                           

IT’S MINE… NO, IT’S MINE!

A word to the wise for those clinging to their  IP, there is provision to keep some information confidential. “However, if the DOIC decides that the protection of confidential information would prevent the public from making a proper assessment of the methodology proposal, the DOIC may choose not to progress the application.” In fact the Government is insisting that a Creative Commons Licence be signed as part of the application process: “The Government is supporting the development of methodologies that have broad application by facilitating collaboration between scientific organisations, industry associations and private companies and individuals. This is to minimise scheme complexity and maximise opportunities for landholders under the CFI. It will also reduce the cost of administering the scheme. The methodology template contains a creative commons ‘BY’ licence for applicants to sign.                


• ARE YOU IN A METH?   No matter, you will thank your lucky stars when you get your hands on a copy of  “10 WAYS TO STAY SANE AND SUCCESSFUL ON THE WAY TO A METH” by Carbon Farmers of Australia.  Only $15.00. (Satisfaction guaranteed.)





                                                                                                                                                                                                                                           

BOTTOMLINE is the baseline


Setting a baseline for a project has changed dramatically in the new Methodology regime. Instead of one baseline approach there are now 5 or 6, based on the principle that the more accurate the baseline is as a reflection of the likely trajectory of the volumes moving through sources and sinks within the boundaries of the project before the project starts, the more accurate the accounting of the change in land management will be. This will need more than one type of baseline to cover the variety of situations. For instance, in some circumstances, it could be assumed that, the trend in emissions and sequestration will be the same in the future as it has been in the past in the absence of a project. In these cases it would be reasonable to derive baselines from historical emissions data or carbon stocks. This is called a Historic Baseline, looking backwards. Looking forwards, Baselines can be set using projected or modelled estimates of future carbon stocks or emissions under various scenarios. A baseline scenario for a projected baseline must describe the activities driving the future trend in carbon stocks or emissions, and provide evidence to justify why it is reasonable to assume this trend would indeed occur. But wait… there’s more! Baselines may be constant, ratcheted or indexed, it depends on what the trend in emissions would have been in absence of the CFI project. Constant baselines are set at a fixed level. Ratcheted baselines change over time, reflecting a pre-existing trend in emissions…  declining or increasing. Indexed baselines are based on a particular variable which directly affects the project emissions and sequestration, for example, rainfall or herd size.



Reforestation project with constant baseline. In this example, the baseline assumes a continuation of the past land use (e.g. pasture that was clear of trees) in which the carbon stock was low and unchanging. In the project scenario the carbon stock increases over time due to sequestration in the growing trees, and is levelling out as the forest matures.


 In this example, the declining baseline indicates that a reduction in emissions was expected in absence of the project (for example, representing a pre-existing trend of reducing fertiliser use over time). The projected emissions under the project scenario demonstrate the additional reductions in emissions from fertiliser use delivered by the project.



In this example, the increasing baseline indicates that emissions are expected to rise in absence of the project. Emissions also rise under the project scenario, but at a lower rate than the baseline (for example, through improved pasture management practices that reduce the rate of carbon loss from soil). Thus, the project provides emissions reductions from the ‘business-as-usual’ baseline; these reductions are additional and can be credited under the CFI.

In this agricultural example, the baseline and the project emissions are indexed against a variable, in this case the number of animals within the greenhouse gas assessment boundary. The project activity reduces emissions by a fixed 30% on the baseline, while the indexed baseline is used to account for fluctuations in herd size included in the project over time.

•  DO YOU NEED HELP? With getting a project up on your property? With a Methodology? With preparing a submission for a Methodology Determination? With the Purchase of Offsets? With measuring your Carbon Footprint? Carbon Farmers of Australia is Licensed to give advice on the CFI. Call 612+6374 0329


                                                                                                                                                                                                                                           

• THE COMPLEXITY INDEX hits a new high!


A landholder seeking to increase soil carbon levels or reduce emissions from from fertiliser to earn offset credits now has a new layer of complexity: you have to calculate the effects of background variability such as climate or rainfall. So says the  new Guidelines for Submitting Methodologies. A dry spell could inflate the impact of an N2O suppression project. The reverse – extra rainfall – could boost soil carbon stocks. The trouble is that the farmer would be getting more than they should if rainfall was normal. (What’s normal?) “The purpose of such adjustments is to ensure that reported abatement (and hence crediting) provides an accurate reflection of the impact of changes in management practices on carbon stocks over time. Unless such adjustments are made, credits could be issued for temporary abatement.” The Department does not dictate how to measure variability. That’s up to the to the meth applicant to suggest.

•  DO YOU NEED HELP? With getting a project up on your property? With a Methodology? With preparing a submission for a Methodology Determination? With the Purchase of Offsets? With measuring your Carbon Footprint? Carbon Farmers of  Australia is Licensed to give advice. Call 612+6374 0329

 A SPECIAL INSIDERS REPORT. Only $15.00. (Satisfaction guaranteed.).


A license to print money


(For the uninitiated, a "Methodology" is a license to print money. A "meth" as we call them is a set of rules that, if you follow them, can lead to riches. (The piggery near Young generating power to heat the stalls using methane from manure is looking at $90,000/year in offset credits.) But the road is long and winding... The new version of Guidelines for Submitting Methodologies  is handy for those on the road.

• KISS the METH (Keep It Simple, Stupid): • Farmers are supposed to take a methodology off the shelf and put a project together. The DCCEE believes that the barrier to this is the language in which the methodologies are written. From here on, then, the methodology must provide step-by-step instructions with enough detail to “allow replication of the project by any project proponents wishing to apply the methodology.” Instead of a description or “explanation of the activities, the methodology should resemble a series of rules, requirements and algorithms.” “These rules should be sufficiently detailed to allow any project proponent to read the methodology, replicate the process and obtain the expected results. “ And just as the methodology should be easily understood by the proponent, the  methodology proposal must also be written with “clear, unambiguous, complete and precise instructions” so it can be easily assessed by the DOIC.

• CHARTING a course: Where possible a proposal for a methodology should use charts, diagrams, graphics and process flow charts to assist understanding of the activity description.

• NO SALE: The owners of trademarked or proprietary products can’t write a starring role for them in their meth by making their product a compulsory ingredient. The Methodology “will instead provide general descriptions of any technologies, equipment or products needed to undertake abatement projects.” The DCCEE says this allows methodologies to have broader applicability and remain current as new and improved technologies or products come onto the market.  The ingredient owner can enjoy first mover advantage. The DOIC is likely to move on a meth “with broad coverage or those that are very straightforward … ahead of proposals that are tailored towards individual projects or those which are very complicated.”

 A SPECIAL INSIDERS REPORT. Only $15.00. (Satisfaction guaranteed.).