Thursday, April 01, 2010

Why is a market for soil carbon offsets important?

In recent weeks we have been astonished to hear two executives from biofert companies say that they thought the market for soil carbon offsets is either not important, not going to happen, or not very meaningful anymore. This is a complete disconnect between perception and reality. The Government is building the trading structure and developing standards while the Minister declared only last month "You will get cash" for soil sequestration. For biofert companies, this market could mean a tidal wave of business. Even at a slow rate of take-up of soil C trading by farmers, any valuation of such a company facing such an immediate prospect would be very bullish. But it seems that some people have been talked out of their belief in trading - the Pushback has had an impact. Here's proof:
“We understand that carbon credits are important, but that should be the added bonus of achieving exceptional soil health which then achieves greater things for the farmer. The first aim is to get the communication out there on how to achieve healthy soils, which creates healthier people and a healthier world. And if we happen to get some money back for it well that is just a great bonus!”
Many people feel that the prospect of farmers receiving money for storing carbon in Australia’s agricultural soils is not as important as the benefits of higher soil carbon levels. These benefits of soil carbon include less erosion, better soil structure, better water retention, higher levels of nutrient availability, and potentially higher production. Healthy soils mean heathier food and healthier people. There are also environmental benefits, such as greater biodiversity. And the capture and storage of carbon in soils represents a major interim solution to the crisis of Climate Change.
To agree with the proposition that it can be “one before the other” or that “one is more important than the other” is not the issue. The goal is the same, the benefits of soil carbon, whichever is chosen.
But it is “both together” for the fastest restoration of the environment and quickest response to Climate Change. And “both together” for natural justice for farmers. And “both together” to boost the health of rural communities and local economies. The urgency of the need for widespread action by farmers makes the financial incentive essential to speed uptake.
The Carbon Coalition Against Global Warming has campaigned for 5 years to see a market for soil carbon offsets established in Australia for one very specific reason: to see ALL the benefits of soil carbon sequestration delivered. The market offers the fastest pathway to the critical change in land management that farmers must make for the dominoes to start falling – a change they have been slow to make to date.
The restoration of Australia’s 400 million hectares of agricultural soils requires investment that should be thought of as a ‘recapitalisation’ of our greatest national asset, our core productive resource, our soils. Soil has been ‘decapitalised’ – left to run down as the nutrient value and capacity have been mined – in an unsustainable way. Just like a manufacturing company that fails to maintain its machinery, Australian Soils Inc is headed for insolvency.
It should not be thought of as Conservation. Nothing is being conserved (ie. left the same). Everything will change for the better – new models of farm biodiversity, new modes of production, new energy flows, new attitudes to resources, new relationships with communities at all levels. It is a reversal – because nearly every aspect of Australian agriculture has offended against the basic principles of Nature since it landed here as British agriculture, outside its relevance zone.
To recapitalise our major asset could cost billions. Who will pay for it? Governments have spent $15billion in the past decade on natural resource base programs – and the Murray-Darling ran dry during that decade. Governments have proved unable to solve the problem and are reluctant to continue with the old model. They favour action closer to the grassroots – farmers’ groups are being funded with money previously spent by national and state agencies. The soil carbon offset market is a further step towards the grassroots – drawing in the average farmers who would not join a group.
To change the soil we must first change the people who manage the soil. For rapid change to occur, we must short circuit the long, slow cultural change process. The incentive of payment plays an important role in changing the people.
To make the change to land practices that store carbon is not easy or cheap. For most farmers it means changing the practice of generations, moving out of a comfort zone that is wrenching to leave. A farmer’s approach to farming is an important part of their identity and position in a rural community. There is strong pressure to conform and the farmer changing practice runs the risk of being ostracised by neighbours. This is because neighbours interpret the change as a challenge to them. They hope the risk-taker fails.
Organisations such as the South Australian NoTill Farming Association provide members making the change with a buddy support system for this reason.
The capital investment needed to move to “Carbon Farming” practices varies. “Wire and water” for a time-controlled grazing operation can cost many thousands of dollars. An application of a biofertiliser can cost a fraction of the cost of traditional fertiliser.
But it is the internal costs of new practices that can cause the most pain. For instance, a grazier who sells half a flock rather than overgraze pastures and bare the soil to erosion has effectively halved their wool cheque for that year and may find that price movements mean the cost of restocking is far higher than the price they received for the stock they sold. There is no compensation for such behaviour.
There are only two approaches to getting farmers to change land management practices:
1. “Extension, Education, and Encouragment” approach.
This is the current model. It has achieved the current rate of change. Government is not likely to increase funds for this model, as it is defunding agencies formerly engaged in these activities.
2. Soil Carbon Offsets Trading.
This method has not yet been trialled in Australia. It provides a direct cash incentive for behaviour change. The money is provided by Greenhouse Gas Emitters who buy the offsets. The risks of entering a change management regime are weighed by the farmer against the reward of the revenue. It aligns with the Government’s belief that markets should provide services where they can.
A famous study of the rate at which farmers will make a change found that a shift from a traditional seed corn to a more productive hybrid seed corn by extension and education took 14 years. This rate of uptake was possibly faster than we could expect for soil carbon – given that the benefits are not widely understood and don’t immediately result in higher economic returns from their produce.
The researchers tracked each farmer as they changed and developed a model of adoption, commonly known as the Bell Curve of Adoption. It reveals that adoption is driven by different types of farmer, depending on their attitude to risk. The fearless Innovators rush in to satisfy their need to be at the front. The other groups watch the group in front of them. The Early Adopters are also anxious to be among the front-runners, but they won’t move until they see Innovators doing it. The bulk of the market – the Mature Market – is still driven by who they can see adopting the change. Laggards rarely change.
For such a process to take place when;
- a change in land management promises gradual increases in soil carbon;
- co-benefits could take many years to become obvious;
-very few farmers understand the concept of soil carbon;
-the downside risk is perceived to be high;
many poorly-informed and mistaken ideas about soil carbon trading have been promoted widely,
…would suggest a slower process than the corn case. Closer to 25 years than 15.
Why is it important to restore Australian soils quickly? Two words: Food Security. The area to Australia’s north has been tagged as one of the top 3 regions for the collapse of food systems due to extreme climate change. Australian and international security bodies predict 40 million climate change refugees could be moving in our area within 50 years.
The world will need to grow twice as much food in 50 years’ time with the same amount of soil and the same amount of water.
At the same time, the Food & Agriculture Organisation of the United Nations, the World Bank, the USA , the EU and food and farming organizations believe the world’s agricultural soils have the capacity to draw down the equivalent of 50ppm for 50 years – stalling the process of Climate Change long enough for alternative sources of energy to reach critical mass and replace carbon emitting power generation.
The sooner the world’s farmers start returning carbon to the soil, the sooner the process of regeneration of the natural resource base can begin, building a buffer against inevitable increases in temperature and reduction in rainfall.
Educational experts know that it is easier to change attitudes by first changing behaviour. “Learning by doing”. Behaviour Change becomes Cultural Change as the farmer sees and feels the change in the landscape – and comes to value a carbon-rich environment.
As a farmer, living and working in a rural community, and travelling throughout Australia meeting farmers who have been doing the right thing for decades, I have observed:
• Few farmers say they are not interested in the money. The love of the benefits runs through their veins. But to describe carbon credits as ‘a great bonus’ is to ignore the financial tightrope most agriculturalists walk. No source of revenue can be taken lightly. And the farmer should be given the right to make their own decision as to which is more important.
• Non-farmers expect Farmers to perform environmental services for free. No other profession or career requires this of its practitioners. At the same time, society refuses to pay a fair price for their produce. If the ecological cost of producing the food was included in the price at the store, consumers would rebel.
The relegation of soil carbon offsets to “just a great bonus” puts the cart before the horse. We need the offset to pull the farmer through to the rewards and benefits of soil carbon.
The “Great Bonus” Idea may have started in the GRDC – the research agency most actively opposed to soil carbon offsets: “Carbon credits are like FlyBuy Points – a nice bonus, but don’t go shopping just to get them,” said Dr Martin Blumenthal, GRDC Manager, Agronomy, Soils and Environment at a GRDC workshop about on-farm carbon accounting. It quickly gained currency among scientists who doubt that Australian farmers can grow significant amounts of carbon in soils, nor that they could hold any that they sequestered. Jeff also feared that they would suffer losses if they tried trading because of the dangers of drought and fire. But there is no scientific evidence that proves Australian soils cannot sequester significant amounts of carbon. Second, there is no scientific evidence that proves that Australian farmers cannot hold the carbon sequestered for the period specified in an offsets contract. For example the potential of biological fertilisers and inoculants has yet to be studied.
The motives behind these statements are fears held that farmers might be lured into signing contracts that they could not fulfil, causing them damage. These fears are realistic and justified, but are no reason not to consider entering into contracts if the conditions are acceptable.
Risk management is built into offset contracts because the sponsors of these projects cannot afford to have farmers lose out, if only for the sake of their on-going operation. Scientists can be forgiven for not knowing these risk management practices.
For instance, no soil carbon trading program has a contract period of 100 years or anything like it. The longest period in operation or even proposed is 5 years. Farmers are reluctant to enter into longer contracts. But the “behavour change becomes attitude change becomes culture change” process takes over to make the changes last.
No soil carbon trading program forces the individual farmer to carry the risk of losing carbon to bushfire or drought. The Chicago Climate Exchange (CCX) and its affiliates use a "Buffer Pool" of credits. For every 5 tonnes of CO2-e a farmer submits in the CCX world, only 4 can be sold. 20% are retained in a vault, never to be sold, as a surety against catastrophic or man-made losses. To reflect the increased danger of bushfire and drought in Australia, the Prime Carbon system puts one tonne in the vault for every tonne sold. The farmer is therefore part of a large collective self-insurance system.
The Carbon Coalition did not campaign for farmers’ rights to trade soil carbon offsets, to deliver these same farmers into danger.
The Government has announced that the first soil carbon offsets market can start from 1 July, 2010. Farmers need help to access the opportunity that offsets present.
First they need unbiased information about risks and returns and how to manage those risks. They need to be equipped to make decisions.
Second they need to be ‘aggregated’ – pooled with other growers for their mutual protection and to be able to trade in marketable volumes.
And third they need to know they can trust their advisers.
The best source of these three elements is a supplier whose knowledge and integrity they already rely upon. You could fit that role. You could add these services to your existing offering, within the same ethical framework you currently maintain.
Carbon Farmers of Australia is a not-for-profit organization that represents growers interests as an extension of the role its principals played fighting for the rights of farmers to trade soil carbon as convenors of the Carbon Coalition. We offer training, access to all available trading programs, advice, advocacy, and aggregation services – delivered through host service providers.
The role of the farmer is critical to our chances of navigating to a safe future where the world’s population can be fed and our grandchildren’s children can sleep safely in their beds.
We can play our part by making sure the farmer is paid fairly for what they grow – including soil carbon.

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