Wednesday, September 19, 2007

GOOD NEWS: Second full value/direct measurement soil C trading scheme launched

The Carbon Coalition congratulates Coalition member Rod Rush for his part in the launch of soil carbon trading company CarbonLink Pty Ltd. “Carbon Link is in the process of verifying its first packages of soil carbon from several properties in eastern Australia. This carbon is expected to be available for trading in the coming months,” according to the company’s press release.

“We are still verifying our processes, but CarbonLink plans to aggregate carbon sequestered by groups of producers who commit to grazing management practises that over the subsequent 10 years will sequester and maintain the resource. For example, a 1 percent increase in organic matter over a 10-year period may capture about 50 tonnes of CO2 that is worth about $1000/ha gross before costs at current retail prices.

“There will be a proving period for each producer about how much CO2/hectare is being sequestered, with soils analysed in the first year of a commitment and then measured again in, for example, the 5th and 10th years to calculate any gains. Modelling may eventually be used as the science develops to support it.”

Terry McCosker, chairman of Resource Consulting Services (RCS), is the CarbonLink chairman. CarbonLink Pty Ltd is a foundation accumulator and broker on the Financial and Energy Exchange (FEX), which was officially opened on 19 September by Al Gore.

CarbonLink says it will be a foundation accumulator and broker on the FEX exchange, and be able to trade on international exchanges such as the Chicago Climate Exchange, the European Climate Exchange and the New Zealand Carbon Exchange.

Carbon Link Producer Information Pack

CarbonLink made the following information available to the Carbon Coalition some time before the launch and requested that we keep it confidential until the launch:

1. WHAT does Carbon Link do?

Carbon Link fulfils the following functions in the Carbon market
• Carbon Link will provide baseline soil carbon levels on you property. This is done through an extensive soil sampling programme, under a strict protocol determined by external bodies. Soils will be mapped by a soil scientist and the soil carbon determined by an independent laboratory. This level of sampling is required to get verified carbon.
• Carbon Link will arrange for and fund the verification of your soil carbon. Verification is a rigorous process of review by an independent third party, which certifies to a buyer, that the carbon being offered, actually exists. Verification is essential to be able to list the carbon with the exchange and registry. It will also make a difference to the price paid. Unverified carbon will not be purchased by the large emitters and will be discounted by the retail offsetters.
• Carbon Link will list your carbon with the Registry and the exchange. Carbon Link is the only soil carbon aggregator accredited by the FEX Registry. This means that it is Carbon Link’s role to put together many properties capable of selling soil carbon credits and aggregate large quantities of carbon offsets for the large emitters.
• Carbon Link can handle the sale of your carbon on the exchange. Carbon Link is a foundation broker with the FEX Exchange. As such we can advise on selling your carbon in relation to time and expected price. Selling decisions can be in your hands.
• In short, Carbon Link is a one stop shop for measuring, verifying, listing and selling your soil carbon sequestration.

2. HOW will Carbon Link fulfil the above roles?

Carbon Link will assist you as follows:
• You can book in to have your soils base lined for current carbon levels. This will be done in the order of the bookings, adjusted for regional considerations and weather eg some soils will need to be moist to do the sampling. The indicative cost for this service is $20/ha, however this may be adjusted for complexity or simplicity of the task eg flat even country will be less cost that hilly or uneven soils.
• We will produce a soil map of the area to be included in the sequestration. The sample locations will be recorded with sub metre accuracy with a differential GPS.
• Carbon Link will then determine via a model and experience, how much carbon you can sequester.
• Carbon Link will arrange for a visit from the verifier to inspect the site.
• Carbon Link will charge you a commission of 20% on the sale of credits. This commission covers the cost of modelling, verification, registry charges, brokerage costs and legals associated with the transaction.

3. WHAT are my obligations to Carbon Link?

The landholders obligations to Carbon Link include:
• Allowing the soil sampling team to visit the property.
• Allowing the verifier access to the site.
• Sequestering the carbon at or better than the rate agreed with Carbon Link.
• Implementing and maintaining a grazing management system which will give the plants and soil the capacity to sequester the agreed carbon level.
• Agreeing that the carbon sequestered, will remain sequestered for a minimum of 70 years, by who ever owns the land. The contract will state that any future owner of the land has the continuing obligation to maintain the sequestered carbon. You or any subsequent land owner will however receive annual payments to incentivise this arrangement.
• Signing a contract with Carbon Link which confirms the agreement.

4. HOW MUCH is carbon sequestration likely to be worth to me?

The following generalised assumptions are used to illustrate the potential of soil carbon sequestration. Depending on environmental conditions prevailing, soil type and management skill, the actual results will be up or down from the following assumptions.

General Assumptions

• It is possible to sequester 1% Organic Matter (OM) over 10 years (ie average increase of 0.1% per annum) in the top 10 cm and a further 0.63% in the next 20 cm of a soil profile.
• Soil Organic Carbon (SOC) is 58% of Organic Matter (OM)
• 58% SOC at a soil bulk density of 1.2g/cm3 = 16t SOC /ha
• 16t SOC /ha = 58t CO2e/ha (CO2e is Carbon Dioxide Equivalent, which is the trading unit).
• We assume the price is $25 /tonne CO2e (retail) for this example but it will vary with vintage and market (a vintage refers to the year in which the carbon is sequestered).
• We exclude 10% of the estimated SOC permanently from sale as a risk management strategy.
• Of the remaining 90%, 25% is excluded from sale until it is proven by soil testing, as an additional risk management strategy. We conservatively assume that this will not occur for 10 years.
• 10% of the remaining estimated SOC sequestered can be sold annually.
• The contract period is 70 years (which is based on the Australian Greenhouse Office “Greenhouse Friendly” Guidelines).
• Assume the Property area is 1,000ha.
• CO2e on 1,000ha is 58,000t
• 10% (5,800t) is permanently excluded.
• 25 % of the remaining 52,200t CO2e is kept in reserve (i.e. 13,050t CO2e is not for sale until its existence is proven by soil sampling).
• The remaining 39,150t CO2e has a market value of $978,750 (based on a constant price).
• Period of sequestration is 10 years

Value Calculation

The following Income is calculated using the above assumptions


Expected increase in Organic Matter 1.00%
Organic Carbon as a percent of Organic Matter 58%
Organic Carbon 0.58%
Soil Bulk Density 1.2
Soil Organic Carbon 16 tonnes per ha
CO2e Sequestered 57.6 tonnes per ha
Property Area (ha) 1,000 ha
Total Tonnes of CO2e produced 57,600

Permanently excluded from sale 5,760 10%
Saleable Sequestration (Gross) 51,840 tonnes
Reserved for sale 12,960 25%
Saleable Sequestration (Nett) 38,880 tonnes CO2e
Period of Sequestration 10 years
Saleable Vintage Quantities 3,888 tonnes CO2e

Average Price per Tonne CO2e $25.00 /tonne CO2e
Average Price received per vintage $97,200
Carbon Link Commission $19,440 20%
Income Retained for future payment Pool $19,440 20%
Nett Annual Income received by Landholder $58,320 per annum for 10 years
For 11 to 70 Years
Annual income from year 11 to year 70 $4,599 per annum
After 10 Years
Payout of 25% paddock reserve 12,960 tonnes CO2e
Price $40.00 /tonne CO2e
Commission 10.00%
Nett Received $466,560

TOTAL RECEIPTS per HA $1,325.70 per ha
TOTAL RECEIPTS per HA in 11 years $1,049,760
TOTAL RECEIPTS per HA in 11 years $1,049.76 per ha

1 comment:

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