Sunday, November 21, 2010

Highlights of Draft Design of Carbon Farming Initiative, Part 2

What is the difference between the CFI and NCOS and CPRS and ETS? It's simple: The CPRS (Carbon Pollution Reduction Scheme) was a proposal by the Rudd Government for a "Compliance"-based "Cap & Trade" market for emissions offsets. That is an ETS or Emissions Trading Scheme. "Compliance" means 'compulsory'. "Cap & Trade" means emitters must change their business practices to reduce their emissions to reach a target level or 'cap'.. If they cannot reach that target in the timeframe given (called a Compliance Period) they must purchase 'offsets' or 'permits' from emitters who exceeded their targets and earned credits by doing so, or from companies earning credits by generating renewable energy or from companies earning credits by sequestering or capturing and holding CO2 in forests. Under the Rudd CPRS scheme only 1000 companies were required to meet a target in each compliance period. They were the 1000 top emitters. They could purchase offsets from local or international companies. The NCOS (National Carbon Offset Standard) was designed to operate alongside the CPRS 'compliance' market by providing a "Voluntary" scheme. It makes available to Australian companies and consumers a source of Australian offsets that they can purchase to offset their emissions so that they can make an advertising claim that their products etc. are carbon neutral or simply to make contribution to the climate change effort by offsetting a family's emissions. The NCOS covers only domestic offsets offered to voluntary buyers. The Carbon Farming Initiative completes the set. It covers domestic and international markets, both compliance and voluntary. The only market not covered is the market that is yet to start: the CPRS or the national domestic compliance market.

Who are the buyers?

Demand for CFI credits is expected to come from foreign governments seeking to meet their Kyoto obligations, as well as companies overseas seeking to meet their obligations under national or regional schemes, such as the EU Emission Trading Scheme. CFI credits could also be attractive to companies operating in markets dominated by the voluntary market, such as Australia's traditional trade partner Japan. One important category of buyers not mentioned in the Consultation Paper are consumers overseas who are fans of the country and have a soft spot for Aussie farmers. Back at home, some companies need offsets to meet obligations where State Governments have introduced their own compliance schemes.

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