Removing Barriers to Soil Carbon Offsets Trading

The value to Australia and the world that could arise from widespread adoption of farming techniques that sequester carbon is so great that removing the barriers to market for soil carbon offsets is worth considerable effort. This paper suggests a new line of enquiry for those working on this opportunity.

Unique substance

Soil carbon is a unique substance. It has many benefits for soils, including:

• increasing productivity
• reducing salt infestation
• improving water-holding ability
• building soil structure
• reducing erosion
• building soil microbe activity
• improving soil nutrients

It also has a positive impact on biodiversity. Landscapes which increasing soil carbon levels also experience a significant expansion of species numbers, both above and below ground.

The most important benefit of the soil’s ability to absorb carbon from the atmosphere by photosynthesis is the impact on the Carbon overload in the atmosphere which is commonly believed to be causing global warming and climate change.

Of all solutions suggested for reducing emissions in future (such as solar, wind, nuclear power, clean coal or forests), none has the capacity, capability, or critical mass to start sequesting the large amounts of CO2e already loose and wreaking havoc in the atmosphere. Only soil can play the critical role of a secure bridge to the future for the next 30 years while other technologies grow to critical mass.

The ability to trade the soil carbon they grow would also provide farmers and graziers with a new income stream, a welcome change of fortune in a sector of the economy that has been suffering from declining terms of trade and severe drought.

In light of these benefits, soil carbon deserves to be treated as a special case when being considered for admission to the global trading system.

Barrier to trading soil carbon

The lack of a system of Measurement, Monitoring and Verification (MMV) that satisfies the accounting principles of the Kyoto Protocols has been the major barrier to trade in soil carbon for more than 15 years. Despite millions of dollars in research grants, books, papers, conferences, and government enquiries, we are no closer to a solution. Although we know more about soil carbon, the “practical difficulties” remain unresolved.

The Garnaut Enquiry Issues Paper identified two major barriers to trade:

1. “A difficulty in the development of any offset project is the transaction costs in baseline setting, accreditation, monitoring, measurement and reporting, ensuring additionality, and preventing ‘double counting’ with actions covered by the scheme”.

2. “While significant at the national scale, agriculture and forestry emissions sources and sinks are often small, diffuse and difficult to measure and verify at the individual entity level. Sources and sinks are frequently small relative to the measurement effort required.”

The Prime Ministerial Task Group on Emissions Trading Report agreed:‘factors that suggest initial exclusion of the agricultural sector from an emissions trading scheme ... that is, the lack of reliable measurement methodologies at the farm level and the complexity and cost of verifying emissions.’

CRC for Greenhouse Accounting’s John Carter, (program leader on soil carbon) was even more definitive: “Soil carbon is more difficult and expensive to measure and verify than carbon in tree plantations. …. These types of measurements require expensive mechanical sampling and laboratory measurements. Soil carbon is spatially variable, even at quite fine scales… High spatial variability increases the amount of sampling (and, hence, analysis costs) required to precisely estimate soil carbon stocks. ’ (Australian Farm Institute, Strategic Roundtable Conference, Future Agriculture, 2–3 November 2006, Sydney)

This mercurial nature of soil carbon is at the heart of the problem.

Soil carbon challenges Kyoto system

The conclusion that soil carbon has attributes which make it unsuitable for inclusion in an accounting scheme would indicate that the accounting scheme was the problem, given the potential benefits of soil carbon. The accounting scheme was established to facilitate a market only because the global community wanted to encourage widespread adoption of desirable practices.

The design of the Kyoto accounting system was based on application to less complex sources and sinks. It was originally devised to manage the sulphur dioxide/acid rain emissions reduction program. History guided the hands of those who migrated the SO2 model to CO2e.

However, the IPCC must be brought to understand that its purpose is not to produce a perfect accounting model. It’s purpose is to deploy the resources of its member nations to urgently remove CO2e from the atmosphere.

If the world’s 5.5billion hectares of agricultural soil were able to sequester 0.5 tonne of Carbon/hectare/year, it would remove 20billion tonnes of CO2e. Half that or half that again, and again, and there remains a significant contribution to restoring balance in the atmosphere. Only an IPCC that has forgotten its raison d’etre could allow worship of rules to blind them to their duty.

An approach for soil carbon trading

“If you always do what you’ve always done, you’ll always get what you always got.” The path to a soil carbon trading system does not appear to lie in the direction of more scientific knowledge alone. Other disciplines must be engaged, as Dr Rattan Lal declared . Integrated teams of economists, scientists, traders and agronomists must contribute to a solution that meets the needs of the market.

The solution could lie in reframing the question. Instead of asking:

“How can we measure soil carbon more accurately to meet the needs of the Kyoto accounting system?”,

...we could ask:

“How can we measure soil carbon to assure a buyer of offsets that they
have received what they wanted?”

Study the buyer. What are they buying? A tonne of CO2e removed from the atmosphere and stored.

Are they buying a particular tonne? Or a non-specific tonne?

Why are they buying it? To use it to offset an emission? To know that it is disabled as a gas.

Does it matter to them that they are buying an ‘aggregated tonne’ from a large ‘aggregated pool’ of tonnes that have been ‘equalised’ ie., flux is statistically ‘compressed’ (peaks and troughs equalised)? The buyer buys from an aggregated pool of tonnes as part of an aggregated pool of buyers. The significant variations at individual tonne level are eliminated by statistical smoothing.

This is not an original idea:

• This approach was first noted by Sandor and Skees who say that we need not worry about how much carbon is sequestered on an individual paddock, because, while estimates at an individual level may be flawed, the error has ‘typical statistical properties’ and that estimating many individual parcels and aggregating them into a single parcel will improve the estimate significantly. (Sandor, R. L. & Skees, J. 1999. Creating a market for carbon emissions. Choices 3rd Quarter, pp 13-17.)

• A similar note was sounded by the Australian Farm Institute: “if measurement or estimation systems are robust and unbiased… the aggregate result for the combined scheme will be relatively accurate due to the effect of combining many estimates together.” (The New Challenge for Australian Agriculture: How do you muster a paddock of carbon?)

• Wholesale aggregators are already commonly used in carbon markets and the system for aggregation exists. The Australian Greenhouse office already recognizes the benefits of aggregation in forest sinks, called ‘carbon pooling’. Dr Lal also sees the way forward in pooling: “[A protocol to trade C credits] will require development of routinely usable techniques to measure change in soil C pool at landscape level over a time span of 1 to 2 yr.”

• The concept is in tune with the call by Dr John Kimble for a ‘real world’ approach to soil carbon measurement, based on what is known about the behaviour of soil carbon.

Therefore we need to know how far such a solution can take us and where are its flaws.

Reducing the cost of MMV

There are several options for removing the barrier of cost of measurement:

1. Aggregated Sampling & Analysis: The current price of sampling is high on a per unit basis. But in the real world each landholder is not likely to be negotiating with a laboratory for sampling services. They will form buyer groups. Aggregators will negotiate on behalf of large numbers of landholders. The Government could play a role in tendering the entire Australian sampling opportunity to get the lowest per unit cost.(See point 7 below.) What price for core sampling 130,000 properties in Australia?

2. Predictive Ratios: Exploit the statistical properties of soil carbon flux to build predictive ratios. Baseline with 100cm cores, calculate the ratio of soil carbon in top 30cm over the total sample, and all monitoring samples thereafter need only be 30cm to measure total 100cm. Similarly, reduce the number of samples required by building predictive ratios between initial 200 samples and 20 samples per unit. Further, the statistical relationship between the individual samples and a single ‘bulked up” sample may enable the sampling to be dramatically reduced. The questions arise: what degree of uncertainty is acceptable to the Kyoto accountants? What tolerances will they allow soil carbon given the extraordinary uncertainty factors they allow other sources and sinks? What degree of accuracy (individual unit vs aggregated) would satisfy a buyer?

3. Simplified System: By stripping unnecessary elements from the testing regime and retaining only those needed to achieve our purpose (carbon sequestered), we can further reduce costs. Do we need to map soil types? Do we need to measure anything other than total carbon? How often do we need to measure bulk density?

4. Hybrid MMV system: The number of core samples could be reduced if a combination of visual audit and/or remote sensing were incorporated. An annual visual aduit could cover the following “Indicators” or proxies: • increased groundcover and therefore biomass • increased perenniality & therefore produce more biomass • increased biodiversity of plants species and wildlife in and on the soil • reduced soil disturbance and compaction.

5. Advance on Sales: Aggregators can advance the farmer the cost of measurement against future sales.

6. Revenue Context: Any cost for sampling should be considered against the price of carbon. This has ranged from $1 to $40 and some estimate it will reach $100 when the big 3 emitters (USA, China, India) finally enter the market.

7. National Carbon Baselining Programing: The Australian Government spent $15billion between 2000 and 2007 on environmental and NRM action, and ear-marked a further $10billion for the Murray-Darling rehabilitation. A significant part of this expenditure could be avoided if Australian landholders change their land management practices to grow soil carbon. Against this saving, the Government could consider offering carbon baselining to every landholder as a means of encouraging them to change their practices, by linking access to Government support and tax concessions to the direction of the landholder’s soil carbon score. (Soil carbon is a good key performance indicator for measuring land stewardship, soil fertility, biodiversity, and a range of ecological and environmental indicators.)

There are many avenues for removing cost as a barrier.

Do we have the time?

There is no time for new 3 year research projects. Three years is too long to wait. The time has come for learning by doing. Take action and monitor results. Assume we are wrong and look for evidence of it. The risk of not doing something is now greater than the risk of doing the wrong thing.

RSVP

This paper is full of holes. Information is missing. Assumptions are challengable. If its weaknesses can be addressed and none are fatal, perhaps – with goodwill and a focus on the purpose of the global effort to stabilize climate – it can form part of a solution based on aggregated ideas and pooled resources. Please respond.

Michael Kiely
Carbon Coalition
02 6374 0329
michael@carboncoalition.com.au