CFI "green tape" to be reviewed

The "shibboleth"that crippling regulations will make consumers sufficiently confident about the environmental integrity to pay high prices for abatement offsets will be tested in the enquiry into the Australian financial system, announced by the offices of the Prime Minister and Treasurer. Australian Carbon Credit Units are formally financial instruments and anyone dealing in them (except farmers selling on their own behalf) must have an Australian Financial Services Licence. This requirement brings ACCUs into the purview of the enquiry.
The government aims to, among other things, "reduce the regulatory burden... wherever the benefits to... consumer protection are questionable." The issue is tagged as "Gold-plating the CFI". The Government plans a "root and branch examination of the nation's financial system". It said: "The inquiry will make recommendations to foster an efficient, competitive and flexible financial system, consistent with financial stability, prudence, integrity and fairness. This should result in less costs, lower fees and greater efficiency in the allocation of capital."

See 100 Year Old Deal-killer

17. Soil Carbon Measurement solution

Problem: A significant cost for soil carbon sequestration is measurement, monitoring and verification. A farmer buying such services as a single purchaser would face a major cost decision. Practical solution: But were the farmers aggregated into a buying group they could negotiate a significant discount.  This would be relatively easy to arrange in a mature market. But in a start-up market – with uncertainty in the minds of many due to misinformation – it would be hard to find an aggregator willing to take the risk without a monopoly or a Government initiated scheme which operated as a competitive tender.

16. Low cost abatement

Problem: Soil Carbons are not by their nature low cost. The term “low cost abatement” has been the touchstone of the Government’s campaign for a Direct Action Carbon Farming Initiative. At times it was expressed as “Lowest Cost Abatement”. The Government has flagged that it will be the sole purchaser and that it will achieve this by conducting “reverse auctions”. The Government’s “Low cost” is read by farmers as “Low price” to them. Farmers are traditionally price-takers, not price-makers. Farmers suffer from poor terms of trade. They are given to cutting each others’ throats in a race to the bottom. The incentive to invest is not a simple matter of price. The decision to seek Australian Carbon Credit Units is a complex trade-off of risks vs rewards. Farmer engagement will be determined by three elements: Price, Costs, Risk. (See Appendix F below) Practical solution 1: To convince a farmer to take a low price for a crop (eg. soil carbons) we would need to offer low costs (eg. Green Army help to plant; low cost measurement -  see below) and low risks. (eg. 100 Year solution).

APPENDIX  F:  Low cost abatement

The term “low cost abatement” has been the touchstone of the Government’s campaign for a Direct Action Carbon Farming Initiative. At times it was expressed as “Lowest Cost Abatement”. The Government has flagged that it will be the sole purchaser and that it will achieve this by conducting “reverse auctions”.“In a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers undercut each other.” (Wikipedia) Farmers are traditionally price-takers, not price-makers. Farmers suffer from poor terms of trade. They are given to cutting each others’ throats in a race to the bottom. The incentive to invest is not a simple matter of price. The decision to seek Australian Carbon Credit Units is a complex trade-off of risks vs rewards. Farmer engagement will be determined by three elements: Price, Costs, Risk.

1. Price: The land sector is often characterised as a source of ‘low cost abatement’.  This implies that the cost of abatement activities is low in that sector and that farmers will be willing to take low prices for abatement. Both assumptions are questionable. The farmer is an entrepreneur. They will invest only if it makes financial sense - that after all costs have been covered, there is sufficient profit to make it a better use of the capital invested. Abatement activities must compete with other investments. DAFF in conjunction with the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), recently produced a study entitled “Costs and potential of agricultural emissions abatement in Australia – a quantitative assessment of livestock abatement under the CFI.” ABARES concluded that the effect of the CFI on agricultural emissions is highly sensitive to the carbon price and will be modest at low to medium carbon prices. In addition, ABARES concluded that under current carbon prices in Australia, farmers would not adopt many of the known emissions abatement technologies for livestock, without a significant reduction in their cost. 

2. Costs: Abatement activities entail costs:  eg., fencing, site presentation, seed or stems, and planting for revegetation can cost more than $3000/ha;  biochar suppliers are aspiring to get prices of the char itself down to $150/tonne, applied at up to 10-20 tonnes/ha, repeated every 3 to 5 years; wire and water for grazing management can cost $50,000+ for an average-size grazing enterprise. The notion that ACCUs are simply “icing on the cake” assumes that the changes are so patently good for the soil (eg. fertility and soil health) or animals (methane conversion to meat) that they will be taken up by farmers upon hearing of them… Farmers, naturally, are comfortable with their current practices. Anything new entails risk.

3. Risk: There is a direct relationship between risk and reward: Risk costs money. The more risk in an investment the more time and resources required to obtain information about it and monitor it. The importance of a loss of $X is greater than the importance of a gain of $X, so a riskier investment will attract a higher risk premium. Risk is therefore something that must be compensated for, and the more risk the more compensation required… the higher the price expectation of the seller.

The Carbon Farming Initiative is a high-risk activity for farmers simply because few understand it. It is a complex program; it cannot be taught in a 2-day workshop. The CFI Integrity Standards are structured so that farmers are exposed to high levels of perceived risk. Eg., The 100 Years Rule requires that the farmer guarantee sequestered carbon levels for a period of three generations, with the project period (when obligations apply) lasting at least 5 times longer than the crediting period (when revenue flows). This is a significant risk and a major barrier to engagement.

Further adding to the risk for farmers/investors is the sudden linking of Australian and European prices from 2015 onwards when EU units can be imported into Australia, Australian carbon units cannot be exported to Europe until July 2018. EU prices have been subject to a long decline due to the on-going financial crisis and an oversupply of 1.2 billion permits. There are proposals to retire these units en masse from Phase 3 of the EU ETS, which starts in 2013. This may lead to European allowance prices recovering from below €7 to €19 (AU$23) in 2015. The ease with which units can be rendered valueless by government decree is further evidence of risk and uncertainty. Building links with a financially-troubled Europe to share its carbon finance system is difficult to understand. Risks facing farmers in this new market include those that are known, understood and manageable and those that are not. Market-driven risks are known, understood and, to some degree, manageable. Risks arising from shifts driven by politics are not. The uncertainty is greater and risk is higher with policy shifts, which are less predictable and complicate an Initiative already poorly understood by farmers. Risk will drive price expectations and price will drive take-up.

 

15. NGERS into NCOS?

Problem: The Direct Action market may become too small to absorb Australia’s agricultural offsets. Practical solution:  The majority of entities caught up in the previous Government’s major carbon tax net (emitting 25,000+ tonnes of carbon annually) were reported to be in favour of there being a price on carbon when it was first imposed. This goodwill might be used as a platform to encourage emitters to aspire to “Carbon Neutral” status via the National Carbon Offset Standard (NCOS). The program needs attention. It charges an outrageous amount of money (up to $25,000) for use of the NCOS logo to publicise the entity’s involvement. It has not invested sufficiently in building awareness of the program or the logo for enrollees to derive value from it. This is a major disincentive. The Government could encourage Direct Action by individuals and corporations by operating a system of recognition: publish the list annually; publicise new additions; stage an award system; etc. This system could be made more significant were the offsets earned by entities covered by the NGERS or opting into it able to be counted towards our national target of 5% below 2000 levels by 2020.  

14. Climate Action Volunteers

For those who are concerned that the world is not doing enough about Climate Change, the Government encourages them to join grassroots organisations like Landcare/Coastcare or similar, purchase CFI farm-based offsets from local farmers, or businesses can ‘go carbon neutral’ via the NCOS (National Carbon Offsets Standard). The Voluntary Market provides farmers with alternative outlets for offsets. The assumption that the Voluntary Market will always be characterised by low volumes and low prices is questionable. In the past 12 months, the price of Australian domestic voluntary offsets has exceeded international compliance permits.(eg., REDD Forests in Tasmania $9.50, EU ETS $7.00). Qantas entered into an agreement to buy more than 1.5 million tonnes of carbon credits from Henbury Station in central Australia in 2012. Dubbo’s Transforce Bulk Haulage – the first heavy transport fleet to achieve carbon neutrality– chose to pay $12 for offsets when units were available for $2.30 and less . The Voluntary Market has yet to fulfil its potential as a means of building community engagement in abatement. Regional development programs, alliances of local organisations, woven together by outreach techniques, could create demand for Voluntary Market offsets, ensuring a market after the Fund has finished.

13. Calculator settings too conservative

Problem: Releasing the most farmer-unfriendly/most conservative editions of Methodologies first damages the CFI’s image among potential proponents. Bad word of mouth about the first edition robs later, more farmer-friendly ones. A Methodology for Quantifying Carbon Sequestration by Permanent Environmental Plantings of Native Species using the CFI Reforestation Modelling Tool. The Calculator settings are too conservative. The first farm-based offsets methodology established the reputation of the CFI among farmers as difficult, costly, and a poor deal. The Methodology applies to “the establishment of permanent environmental plantings which have the potential to attain a crown cover of at least 20% and a height of at least two metres.” This is the official definition of a ‘forest’ in Australia under the Carbon Farming Initiative. Accompanying the Methodology is a Reforestation Modelling Tool, which helps define the project area, and assist in estimating emissions and removals from the project, to enable the calculation of ACCUs generated by the project. But the Modelling Tool (Calculator) dictates a very high planting density, ie. 500-1000 per hectare, far higher than that necessary to attain 20% crown cover. This is more in line with an old-style investment forest than a “Grassy Woodland”. Woodlands are a category of vegetation differing from forests and rainforests by the height, spacing and crown cover of the component trees. They are defined as 'ecosystems that contain widely spaced trees with their crowns not touching' (David Lindenmayer, Mason Crane and Damian Michael, Woodlands, a disappearing landscape, CSIRO Publishing, 2005)  "Projected Foliage Cover' is the percentage of the soil surface that is shaded by the tree crowns. In woodlands it is usually between 10 and 30%...” Given that a lone paddock tree could reach 10 metres crown cover on its own, the density of planting of 1000 trees could theoretically cover the entire surface area of a hectare. A Grassy Woodland would be more attractive to a grazier because it does not lock the land up for 100 Years. The Methodology allows occasional “grazing” from 3 years after planting. In fact, grasslands need grazing or burning to prevent build-up of dead and oxidising vegetation which can block the emergence of fresh grasses. A Grassy Woodland would cost much less to establish due to the simple arithmetic of cost per stem planted. A Grassy Woodland represents a smaller risk of fire killing the trees due to the lower density of fuel reducing the heat generated. A Grassy Woodland costs less to re-establish should it be destroyed. A Grassy Woodland fits the definition given in the Methodology for Quantifying Carbon Sequestration by Permanent Environmental Plantings of Native Species using the CFI Reforestation Modelling Tool. Practical solution: Make the methodology determination meet the dimensions supplied in the official description of a CFI Forest for consistency.

12. Green Army smart application

Problem: Green Army funding not generating offsets: A unique combination of three elements of the Direct Action plan can create high returns for the Government’s investment in climate action. The three elements are: 1. The Green Army of 15,000 17-to-24-year-olds who will work in teams of 10; 2. The target number of trees to be planted in the Government’s current tenure, 20 million. 3. The CFI Environmental Plantings offset methodology that enables farmers to earn carbon credits for permanent plantings. Practical solution 1: Concept: many farmers find the cost of fencing, preparing the ground, buying the stem stock or seed stock, and planting too expensive, despite being willing to commit a piece of their land to a carbon planting. By bringing the two programs together, the farmers could be motivated to participate and the young volunteers could have some exposure to farm life. The permanence of the planting is guaranteed; enduring far longer than a weed clearance project.  In many rural districts there may not be many projects of the type described in the Direct Action brochure: walking tracks and board walks. The blending of the programs creates opportunities for farmer, volunteer and the Government/Community. Practical solution 2: Incorporate all planting activities into the CFI environmental plantings to earn offsets to help meet the 2020 target.

11. The high cost of Common Practice

Problem: The national survey of farming practices will be difficult and costly for little return. Even an expert cannot draw the distinction between rotational grazing, cell grazing, pulse grazing, time controlled grazing, crash grazing , and grazing management to the satisfaction of all.  Practitioners tend to use these terms inter-changedly. Training organisations use different names for their grazing systems. Tillage systems are also subject to multiple naming variations within categories. And the terms “biology” or “biological” are used in various combinations to cover a wide array of processes and product types. Biochar researchers have ‘characterised’ 80 different variations (based on feedstock, soil type, temperature and residence times) that have different functionalities (eg. adding carbon to soil, supressing N2O, suppressing methane emissions, boosting microbiology, etc.) Unless the survey designer and the data collectors understand what they are looking at, the quality of the data suffers. Practical solution: Replace Common Practice with a simple formula:  new activity x individual. Is the activity new for the enterprise? If it is, it is Additional.

10. Common Practice impossible to determine

Problem: The concept of Common Practice, as currently applied, creates unnecessary uncertainty.  Uncertainty creates risk and risk discourages action. Potential proponents cannot be sure if an activity will be declared “common” at between 5% to 30% penetration.  The assumption that a market will continue to grow through a take off point along a smooth curve driven by carbon offsets, after the offsets are no longer available, is unsound.  There is no research into what happens to the shape of a Curve of Market Adoption when the incentive driving buyers up the curve is changed. One indicator could be what happened the response to changes in availability of rebates for solar energy installations in the 5 years to 2010.

No provision has been made for reversal of trends, such as is apparent in no-till cultivation.  A national survey of no-till use by farmers in 2008 found between 45% and 90% of cropping operations in major grain producing regions use the technique. This would eliminate no-till as potentially Additional. But there are three other elements acting to reverse the trend into no-till: 1. Difficulty getting through vegetation afer recent good rainfall years.  2. Weed resistance to herbicides. 3. Extension services (eg. NSW DPI) are encouraging reintroduction of traditional tillage under the heading “strategic cultivation”, ie. as a solution to resistance. (Rick Llewellyn and F. H. D’Emden, Adoption of no-till cropping practices in Australian grain growing regions, GRDC, 2010) Practical solution:  Allow proponents to submit combinations of activities as an “activity” for the purposes of assessment for Common Practice. Carbon farmers commonly apply a portfolio of practices to a paddock, eg. no-till and natural fertilisers; eg. grazing management and pasture cropping. This reflects actual practice, widens the range of options available to the farmer, and maximises soil carbon sequestration.

9. Biochar blocked by economics

 Problem: Biochar has proved itself to be an effective means of increasing growth in plants by significant amounts in many soil types and feedstock. But it achieves these results applied at 10 to 100 tonnes/ha, in pots, economically unrealistic in the paddock. Practical solution 1: innovative use of smaller amounts (250kg – 1tonne/ha) combined with other natural nutrients. Practical solution 2: seek innovations that deliver multiple ‘profit points’, eg., use biochar as feed additive to increase production; compost the resulting manure as high-value alternative fertiliser. Offsets are possible for soil carbon in the biochar, soil carbon as the result of compost application, and reduced emissions of nitrous oxide from substitution of N fertiliser. Breakthrough needed: a CFI methodology for biochar from woodchips.

8. Collaboration speeds solutions

Problem:  The collaboration of scientists and farmers could speed the development of abatement methodologies by providing the process with complementary insights and a sense of urgency. As convenors of 9 gatherings of scientists and land managers – Soil Science Summits and Carbon Farming Conferences - since 2007, we have promoted the spirit of collaboration and knowledge exchange in order to speed the development of opportunities for farmers to contribute to the global response to climate change. Methodologies for biochar (chicken manure) and Soil Carbon are delayed by “business as ususal” time-frames required by scientists ‘writing’ official methodologies solo. Practical solution: set a deadline after consulting scientists about real world time scales. The Biochar and Soil Carbon methodologies are on the workbench, both potential sources of soil carbon offsets. Government could build multi-skilled teams for methodology development because it is much more than a scientific activity. It is a task that requires actuaries, commodity analysts, market economists, marketing experts, etc., and farmers. To help unpick the Gordian Knots that cannot be unpicked alone.

7. Accounting for Erosion: More complexity

7. Accounting for Erosion: More complexity

Problem: The Department is planning to force soil carbon methodology proponents to measure the impact of erosion and deposition on the calculation of on-farm abatement.  “How could erosion/deposition be included in the abatement calculation?” Erosion (and hence deposition) is caused by soil being exposed to the elements. Soil carbon cannot be accumulated when earth is bare.  Thus it can be assumed that there will be an inverse correlation between soil erosion (reductions) and soil carbon (increases). The good carbon farmer receives topsoil from paddocks of poor farmers. It would add unnecessary complexity to try to calculate the soil trading account. (See APPENDIX D) Practical solution: Abandon the requirement to track erosion and deposition and account for it in carbon accounting on farm. It would be conservative to do so.

APPENDIX E: Urgent need for action on wind erosion

A good example of the way a lack of proportion can create unnecessary complexity and thus delay can be seen in the case of dust. In a recent Soil Carbon Stakeholders Reference Group Meeting, Draft Sampling Design Method and Guidelines, Annotated Agenda, 8 November, 2013: “Note that a full methodology will contain information on how to calculate project-level abatement including the treatment of uncertainty and erosion…” The Department has discovered yet another area of uncertainty that will delay soil carbon offsets trading while scientists find a way to incorporate this new reason to discount a farmer’s return on soil carbon increases into the calculation of on-farm abatement.

Although CSIRO research scientist Dr Adrian Chappell says: “soil organic carbon lost through dust is not a major contributor to Australia’s total emissions”, he goes on to list a series of facts that make it sound like it is and the only solution is more scientific study. These facts include the following:

• Dust contains carbon and clay which hold the bulk of soil nutrients. 

• Dust emission depletes soil nutrients at the source… and enriches soils where dust is deposited. 

• Carbon stored in our soils helps sustain plant growth. 

• Millions of tonnes of dust and carbon are blowing away.

• It is uncertain where all that ends up.

• With the frequency and intensity of dust storms likely to increase in Australia, the impact of wind erosion would also increase.

The inevitable conclusion then follows: “This redistribution of carbon needs to be better understood so we can improve our land management practices to better protect our soils.” Naturally we cannot trade soil carbon offsets while these newly-discovered levels of uncertainty remain unstudied and unresolved. 

But Dr Chappell’s paper could just as well be a call to action to use our existing knowledge to make an immediate impact on the levels of soil carbon loss. We already know how to protect our soils from erosion: increased ground cover. And we know where we need to see this increase: on agricultural lands.  And we know how to achieve it: get farmers to change their land management practices to reduce over-grazing and unnecessary baring of earth by cultivation and ploughing.  This change in behaviour will increase soil carbon levels – and farmers can earn soil carbon credits. In fact, we are on the point of achieving a methodology so farmers can start to earn soil carbon credits by changing their land management practices, increasing ground cover and reducing wind erosion.

We welcome Dr Chappell’s action in highlighting the role of the agricultural land manager in the source of wind erosion and soil losses: His work underlines the need for an effective incentive to change the behaviour of many land managers. “Wind erosion is a natural process, exacerbated by land management practices. Dust is lost from agricultural lands when management decisions that affect the percentage of ground cover retained and the soil aggregation level have not taken into account climatic conditions,” he says. “Circumstances which encourage sustainable land management have improved greatly, but not all land holders have adopted these management practices, and it is for this reason that accelerated wind erosion still occurs. 

“Wind erosion levels increase dramatically when ground cover levels (the percentage of soil covered by vegetation) drop below 50 per cent (Leys 1999). Land management practices that lead to overgrazing and excessive cultivation of ground cover can result in cover levels below 50 per cent, and during drier periods this increases the likelihood of wind erosion. In February 2012 the largest dust event in NSW since early 2010 was associated with burning and cultivation of cropland, which resulted in low ground cover levels in north west Victoria and far south west New South Wales (Office of Environment and Heritage 2012, http://www.environment.nsw.gov.au/resources/dustwatch/DWNL120430.pdf).

Dr Chappell’s research paper “Soil organic carbon dust emission: an omitted global source of atmospheric CO2” was published in the journal Global Change Biology.

6. New layers of complexity

Problem: Changes to the  Guidelines for Submitting Methodologies have added a new layer of complexity and expense and delay: proponents have to include the effects of background variability such as climate or rainfall when calculating a business as usual baseline. A dry spell could inflate the impact of an N2O suppression project. The reverse – extra rainfall – could boost soil carbon stock. The farmer would appear to be getting more than they should if rainfall was normal. (What’s normal? How can we calculate against weather patterns that are presumably ahistorical – affected by climate change?) “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 permanence of abatement is not a function of background variability.) The complexity and expense of such a requirement far outweighs the need to eliminate the element of luck from the transaction. In many cases, getting more rain than the neighbours is not a matter of luck but planning. Revegetating the landscape can have the effect of creating a ‘micro-climate’ – cooling the air above and attracting more moisture. Practical solution: Abandon background variability as a requirement. Nothing will be gained or lost.

5. Counting Deep Soil Carbon

Problem: A Soil Carbon methodology that is blocked by 30cm depth requirement of the National Accounts, allows no access to the carbon below 30cm. Carbon is commonly distributed 33% in the top 10cms, 33% in the 10-30cm profile, and 33% below. (Soils Officer, CWCMA) Practical solution 1: use the increase below 30cm as “conservativism” buffer, to avoid reducing payment to grower. Practical solution 2: develop a global voluntary market methodology branded with reference to quality assurance by 30-100cm security buffer (ie. conservativeness buffer). Practical solution 3: The Government can claim use of these additional tonnages to meet its target.

4. Common sense costs less

4. Common sense costs less

Problem: A Nitrous Oxide methodology is blocked by the demand that an alternative fertiliser used to substitute for synthetic N fertiliser needs to demonstrate a link between activity and abatement to be added to the Positive List. IE., that the substitute works as a substitute. Practical solution: The practical solution is to move the “Point of Performance Proof” from the Laboratory to the Paddock where proof is provided by continued substitution (which is also the target behaviour change). Let the farmer decide if the substitute is effective. The aim of one proposed methodology was to reduce the application of conventional nitrogenous fertilizer and the emissions arising from it. The relevant behaviour is non-application of conventional fertilizer. The decision as to whether the substitute nutrient source is “unable to have an effect on plant growth” can be safely left to the farmer who is applying it and relying on it to meet their yield objectives. There is no need for “scientific evidence about the circumstances in which the activity will lead to the abatement of greenhouse gas emissions”. If the product doesn't perform, the farmer won't use it; if they don't use it, there is no abatement; they can't earn ACCUs. If the substitution works, the project is a success. Either way, the offset buyer suffers no loss. The process has integrity.

3. A 25-year soil methodology

Problem: 100 Years is too long for most landholders, even with insurance/buffers. Even with a functioning Soil Carbon Bank underwriting tonnes of soil carbon 1:1, many will need convincing. Practical solution: 25 years, made up of 5 year rolling (renewable) contracts. Farmer commits for 5 years, and can decide to renew or not at each 5 year milestone. If they do not renew, they forfeit the tonnage held in trust and do not have to pay any of the principal back. 25 years is the average for soil undergoing a positive disequilibrium to reach a new steady state or saturation point. The objective of the exercise is to achieve the new steady state (carbon-charged landscape) by means of a change in behaviour by the landholder. The 5 year rolling contracts are the means on drawing the landholder into a journey: 1. New behaviour. 2. New experiences. 3. New knowledge. 4. New values. 5. New beliefs. 6. New culture. In 150+ gatherings with landholders across Australia this was the most favoured arrangement.

2. Gold plating the CFI

Problem: the DOIC has made it a prerequisite for inclusion on the Positive List and for a Methodology Determination that levels of abatement achievable by means of the nominated activity must be demonstrated. Ie., that the sequestration of sol carbon occurs. Why do we need duplication of proof? Why do we have to spend 3 years proving what we have to prove all over again in another 3 years? Practical solution: The practical solution is to move the “Point of Performance Proof” from the Laboratory to the Paddock where proof is measured in carbon sequestered. Securing peer-reviewed science for a new practice can take more than 3 years. There is no logical need for this requirement. All that is required to ensure that any offsets claimed are genuine is a scientifically-sound method of measuring Greenhouse Gases (emissions avoided or sequestered) so that a baseline can be determined and the volume of abatement can be totalled. The purpose of the Integrity Standards is to protect the buyer and support the value of ACCUs. But the demand for peer-reviewed science before the event is gold-plating the function when simple measurement before and after the abatement event is sufficient. This question affects 1. soil carbon practices, such as grazing management, 2. soil carbon practices such as applying compost or biochar. (See Appendix D)

APPENDIX D: Gold Plating the CFI

"Why should we have to prove that we can sequester carbon in trials before we go out and prove that we can sequester carbon in the field?" We put this question to the DOIC at the stakeholder meeting in Melbourne. A slide listed "insufficient evidence linking the activity to the abatement" as a common flaw of methodologies submitted to the DOIC. But we believe "providing proof before providing proof" is redundant. The Government could cut years of delay and hundreds of thousands of dollars out of the Methodology Development process by removing the prerequisite for Positive Listing that peer-reviewed data be submitted to prove that the activity is effective in providing abatement.  The answer we were given was that it is important for integrity of the abatement.

What is Integrity in the context of carbon trading? We have been told countless times that It is to make buyers of CFI ACCUs confident that they get what they pay for: real, genuine abatement.  The question is this: how much integrity is enough, how much science is necessary to satisfy the buyer, and is more better? If the science is needed to establish the amount of carbon sequestered, a sound measurement methodology is required. That should be sufficient to meet the needs of buyers. No buyer is in danger of being short-changed while the measurement methodology is sound. An activity that fails to perform in the field will generate no ACCUs for buyers to buy. "Learning by doing" is a principle endorsed by the IPCC. Growers who have confidence in their activity should be free to assume the risk of investing in implementing an activity. Demanding that they engage in expensive scientific trials that - in the case of soil carbon - must be conducted over 3 years, appears to be redundant. There are many growers who are highly skilled in techniques of sequestration, but who do not have peer-reviewed data.

1. "We have abolished the 100 Year Rule"

Problem: Uptake of a Soil Carbon methodology will be stymied by the relinquishment provisions of the Permanence Integrity Standard. Farmers will not sign a 100 year contract. (See Appendix A below.) Practical solution: The 100 Years Permanence Standard can be ‘neutered’ as a problem by the extending the ‘5% risk of reversal’ buffer into a ‘100% conservativeness buffer’. This concept sees the Permanence of each tonne of carbon sold by a farmer underwritten by another tonne deposited in a Soil Carbon Bank. The tonne held in trust is returned to the farmer or their descendants in increments as the years pass and the risk reduces. This provides an ongoing income and an incentive to continue carbon farming practices.  Its implementation would allow the Prime Minister to announce: “We have abolished the 100 Year Rule that has robbed farmers of the right to be rewarded for capturing carbon in the landscape. And we have done it without reducing the integrity of the permanence of the carbon credits.”


APPENDIX A:  100 Year Rule

The rejection among farmers of the idea of signing a contract binding at least 3 generations to a land management regime that they have yet to experience is almost absolute. Only one farmer organization – the Environmental Farmers’ Network – has expressed support for it. Even those interested in the CFI are against this provision.  The following is a selection of opinion and evidence that supports this contention;

• In more than 150 meetings and workshops with Australian farmers on the subject of carbon farming and offsets trading, conducted by Carbon Farmers of Australia since 2006, not one farmer has been willing to commit to a 100 year contract.

• A survey of 100 rural landholders in the wet tropics natural resource management (NRM) region found that very few would consider 100 years, particularly when the crediting period is 15 years with no guarantee of returns after the initial return period. (Degree Celsius Submission on Carbon Credits (Carbon Farming Initiative) Bill 2011, Senate Standing Committees on Environment and Communications)

• A study for the Fitzroy Basin Association in 2009 focusing on landholders of central Queensland’s brigalow forest, found few likely to participate with long contract lengths. (Gowen, R., 2009. Productivity tradeoffs and synergies for grazing lands in central Queensland to generate carbon offsets; Project report Commissioned by the Fitzroy Basin Association. In. Department of Employment, Economic Development and Innovation, Brisbane, Queensland, Hamilton K., Unna Chokkalingam and Maria Bendana (2010). State of the Forest Carbon Markets 2009. Ecosystem Marketplace.)

• Less than 2% of American farmers are prepared to enter into conservation easements of 100 years to protect carbon sequestration forests (Charnley, S., Diaz, D., Gosnell, H., 2010. Mitigating Climate Change Through Small‐Scale Forestry in the USA: Opportunities and Challenges. Small‐scale Forestry 9, 445‐462).

• Modeling of contract length of carbon sequestration and environmental outcomes shows that while long contracts may increase the environmental benefits from one landowner, the overall result is poor because few landholders are prepared to participate (Ando, A.W., Chen, X. Optimal contract lengths for voluntary ecosystem service provision with varied dynamic benefit functions. Conservation Letters. 2011.)

• Executive Officer of the Conservation Agriculture and No-till Farming Association (CANFA) Neville Gould believes “most farmers would accept… a 15 year contract” at less payment per tonne “just so they can start to trade”. (“Another successful Carbon Farming Conference in Dubbo” CANFA Comment, Neville Gould - Friday, October 26, 2012 )

• Andre Leu, Chairman, Organics Federation of Australia: “The current CDM permanence requirement of 100 years is too long for most people to enter into a realistic contract. The idea of contracts to guarantee activities for longer than most people’s lives is unrealistic.” (Submissions on Carbon Credits (Carbon Farming Initiative) Bill 2011, Senate Standing Committees on Environment and Communications, Andre Leu, Chairman, OFA. P.O Box 800, Mossman, Qld 4873 Ph:07 40987610 Mob:0428 459870 Email: chair@ofa.org.au)

• Professor David Pannell, School of Agricultural and Resource Economics, UWA: “The CFI’s requirement for participating farmers to maintain any credited sequestration for 100 years … creates considerable costs and uncertainties for farmers.” (Submissions on Carbon Credits (Carbon Farming Initiative) Bill 2011, Senate Standing Committees on Environment and Communications)

• Degree Celsius, Network NRM bodies: “Very few landowners or leaseholders will take up such a commitment when the returns are not guaranteed or reasonably expected, and 100 years is a very long time to expect such returns and if returns are not guaranteed, the value of the land will be decreased proportional to the area of land under the carbon maintenance obligation.” (Submissions on Carbon Credits (Carbon Farming Initiative) Bill 2011, Senate Standing Committees on Environment  and Communications)

• Mick Keogh, Executive Director, Australian Farm Institute: “It is hard to imagine farmers signing up to a 100 year commitment in the face of such uncertainty.” (Ie., linking to EU market and abandonment of floor price.) “Carbon uncertainty confirmed ?”, Ag Forum, Thursday, August 30, 2012

• Australian Wool Innovation: “It is impossible in practice to guarantee permanence of land sector bio-sequestration offsets …. there would be little incentive for farmers to enter into offset project agreements.”, (Design of the Carbon Farming Initiative Consultation Paper, January 2011)
• “Even a generous interpretation of the treatment of permanence in this document [the CFI consultation paper]  seems very likely to exclude all sequestration practices." Dr Richard Conant is currently a Smart Futures Fellow at Queensland University of Technology in Brisbane Australia and an ecosystem ecologist at the Natural Resource Ecology Laboratory at Colorado State University.

Getting back down to ERF

Carbon Farmers of Australia
Response to the Proposed Emissions Reduction Fund
18 November, 2013

Introduction

With the best of intentions, the Carbon Farming Initiative has been over-engineered in the name of integrity and robustness, with every change adding more complexity. The continual stream of regulatory “improvements” creates uncertainty, expense and delay.

Carbon Farmers of Australia embraces the concept of Direct Action and its emphasis on practicality and common sense. The need for a sense of urgency is also welcomed.

Carbon Farmers of Australia has identified many opportunities to harvest low hanging fruit by making minor changes to the operating principles of the CFI without any loss of rigor. At the same time, we have solutions to some of the intractable blockages that have caused the CFI to underperform thus far.   The pursuit of the perfect became the enemy of the good.

It is in this spirit that we seek to clear a path to meeting the Government’s targets for Direct Action in ways that can regenerate and restore the landscape to ready it for the challenges ahead.

Rebalancing the CFI

The architects of the Carbon Farming Initiative were given two design principles to guide them: 1. Environmental integrity (avoiding rorting and fraud), and 2. Broad farmer involvement (maximising the amount of abatement achieved and land restored to health).  Failure to deliver on either would cause the Initiative to fail to achieve its economic, environmental and policy potential.

Design Principle No. 1. “Environmental Integrity” – is about the buyer, their confidence and the amount they would pay.  “The environmental integrity of the scheme will directly affect consumer confidence and the amount that buyers are willing to pay for Carbon Farming Initiative credits.” The architects of the CFI ensured the buyer was protected by a complex structure of regulations and Acts of Parliament. But in doing so, they ignored Design Principle No. 2. Broad farmer involvement is not possible while the cost of compliance (in time, money and risk) outweighs the returns needed to get the farmer to change the way they manage their land to generate the offsets the consumer wants to buy.

To deliver on both Design Principles is not impossible. It requires rebalancing them by removing unnecessary red and green tape.

Who is the “Direct Action Consumer?” There is a dramatic difference between the buyer of CFI units (ACCUs) before the Election and after the Election: the new buyer is a Government which has committed to removing unnecessary red and green tape. Our submission identifies several cases of over-engineering and gold-plating of the mechanism.

On the beach at Normandy, D-Day

Every day brings us closer to a methodology for a soil carbon offset credit - an Australian Carbon Credit Unit (ACCU). Tomorrow the Soil Carbon Stakeholders Reference Group meets in Dubbo, NSW to review the work done to date on the Measurement Methodology, including the design of the soil sampling method and the guidelines for sampling and analysis. There is also an "activity" seeking the join the Positive List (deemed to be not common practice and therefore Additional). The briefing documents are not cleared for pubic release. Today the Technical Working Group is meeting to review the work. We have not been informed who is on this panel. We would protest if their number included those who have expressed negative views about the possibility of a soil carbon meth seeing the light of day... and there are many. The place for cynicism and suspicion of markets and righteous distain for the spirit of enterprise is somewhere else. And nor should our Group contain doubters. We need only believers who want the outcome. This process is goal-oriented and we are shamelessly devoted to making a market for farmers to receive incentives for changed land management. The methodology we are working towards is not perfect. Soil Carbon Meth 1G will soon be overhauled by 2G, 3G, etc. But there's no 2G without 1G, etc. We're on the beach at Normandy and this is D-Day.

Michael Kiely
Carbon Farmers of Australia

New Government's priorities: actions vs words

"When I use a word," Humpty Dumpty said…"it means just what I choose it to mean… "The question is," said Alice, "whether you can make words mean so many different things." "The question is," said Humpty Dumpty, "which is to be master—that's all." 

Agriculture Minister Barnaby Joyce has taken funds originally destined for sustainable agriculture projects under the Caring for our Country and Landcare programs and moved them to drought relief and water resources. “The Coalition had promised there would be no cuts to Landcare if it was elected,” reports ABC Rural. “Mr Joyce denies that the redirection of funds constitutes a cut.” He said: "I think a reasonable person looking at this would say it definitely assists sustainable agriculture programs."
"If you think of the countervailing view, if I had all my cattle at one watering point in a corner of a paddock, that is not assisting the land. That is actually causing a problem in the care of the land. The more I can get those cattle to evenly pasture across my property, the better I can look after the property. "That is certainly a Landcare attribute."
To claim disaster relief as part of sustainability is stretching the English language.  Sustainable means proceeding without need of intervention. Drought in northern NSW and Queensland and unseasonal frosts in southern NSW and northern Victoria are only the latest in a kaleidoscope of localised weather events or ”variable weather patterns” that appear to be accelerating as time passes. Steering resources out of Caring For Our Country and Landcare, long-term programs promoting resilience, and into emergency relief could be ominous. Even a significant element of water infrastructure funding cannot replace the role that climate smart farming can play in transitioning to new farming practices that suit the times.
Even the National Farmers Federation - in welcoming the $380m to be divided between the States - expressed concern at the cuts to sustainable farming budgets.
We hope this is only a temporary diversion due to circumstances and not a policy position that sees sustainable farming as socialism in the guise of agricultural management reform.

Government invites your ideas on what replaces the Price On Carbon/Carbon Tax

NB. THIS IS AN INVITATION FROM GREG HUNT, MINISTER FOR THE ENVIRONMENT

The Government invites public comment on the Terms of Reference on the design of the Emissions Reduction Fund.

The Emissions Reduction Fund (the Fund) is a central element of the Australian Government’s Direct Action Plan, providing incentives for emissions reduction activities across the Australian economy. Through the Fund, the Government will purchase low-cost abatement through reverse auctions - an 'abatement buy-back'.

The Terms of Reference have been released by the Government to assist interested parties in making submissions on the design of the Fund. Submissions in response to the Terms of Reference will inform the development of a Green Paper setting out the Government’s preferred options for design of the Fund in December 2013 and a White Paper in early 2014 outlining the final design of the Fund.

The Government welcomes comments on any aspect of the design of the Fund, including views on potential sources of low cost abatement, and on key design features such as auctions, baselines and contract arrangements.

Submissions close 5pm (AEDT) Monday 18 November 2013. The Terms of Reference, submission cover sheet and template are available on the Department’s website at http//www.environment.gov.au/emissions-reduction-fund.

The Emissions Reduction Fund (the Fund) is the centrepiece of the Australian Government’s Direct Action Plan. The Fund will work together with other incentives under the Direct Action Plan and the Renewable Energy Target to help meet Australia’s target of reducing emissions by 5 per cent below 2000 levels by 2020.

Through the Fund, the Government will purchase low-cost abatement through reverse auctions - an 'abatement buy-back'. The Fund will provide incentives for abatement activities across the Australian economy and work in conjunction with the Carbon Farming Initiative. The Fund will have an initial allocation of $300 million, $500 million and $750 million over the forward estimates period.

Community input will be invited on potential sources of low-cost abatement and on key design features such as auctions, baselines and contract arrangements.

Emissions Reduction Fund - Terms of Reference October 2013

INFORMATION FOR RESPONDENTS

The Australian Government seeks the views of the community on the design of the Emissions Reduction Fund. These views will be considered in the development of an Emissions Reduction Fund Green Paper to be published in December 2013 and an Emissions Reduction Fund White Paper to be published in early 2014. Following publication of the White Paper, further submissions will be sought in the process of finalising legislation to support the operation of the Emissions Reduction Fund. The Emissions Reduction Fund will begin operation on 1 July 2014.

Key dates

Release of Emissions Reduction Fund Terms of Reference 16 October 2013

Submissions due in response to Terms of Reference 18 November 2013 

Release of Green Paper December 2013 

Release of White Paper and Exposure Draft legislation Early 2014 

Commencement of Emissions Reduction Fund 1 July 2014

Submission guidelines

Where possible, submissions in response to the Emissions Reduction Fund Terms of Reference should be lodged electronically, preferably in Microsoft Word or other text based formats via the email address below. Submissions may alternatively be sent to the postal address below to arrive by the due date of COB AEDT Monday 18 November 2013.

To provide a submission, please download and complete the cover sheet and submission template.

Important: All submissions must include the cover sheet and be written within the submission template.

Email: emissions-reduction-submissions@environment.gov.au (the preferred option)

Post: Emissions Reduction Fund Submissions

Department of the Environment

GPO Box 787

CANBERRA, ACT 2601

For further information, or to request a hard copy of the document, please call 1800 057 590.

EMISSIONS REDUCTION FUND WHITE PAPER – TERMS OF REFERENCE

The Government acknowledges the science of climate change and recognises that climate change is a global problem whereby all countries need to work together. Australia must act in a way that protects Australia’s international competitiveness, while playing our part in any global effort to address this issue.

The Government is committed to reducing Australia’s emissions by 5 per cent from 2000 levels by the year 2020.

Legislation to repeal the carbon tax will be the first Bill brought before the new parliament. In place of the carbon tax, the Government will institute incentives for businesses, farmers, households and other entities to invest in technologies that will reduce our emissions at lowest cost. The Government’s Direct Action Plan will efficiently and effectively source low cost emissions reductions that will contribute towards our 2020 target.

The Government is calling for submissions on the design of the Emissions Reduction Fund, the centrepiece of the Direct Action Plan.

The Government has committed to review Australia’s Renewable Energy Target in a separate consultative process in 2014.

The Government will release a Green Paper on the development of the Emissions Reduction Fund for public comment in late 2013, with a White Paper containing final policy design to be released in early 2014.

Emissions Reduction Fund

The Emissions Reduction Fund will commence operations on 1 July 2014, after the repeal of the carbon tax, and will be designed to purchase low cost abatement.

The Government is seeking business and community views on the design of the Emissions Reduction Fund including:

• the likely sources of low cost, large scale abatement to come forward under the Emissions Reduction Fund;

• how the Emissions Reduction Fund can facilitate the development of abatement projects, including through expanding the Carbon Farming Initiative and drawing on the National Greenhouse and Energy Reporting Scheme;

• the details of auction arrangements to deliver cost effective outcomes;

• the governance arrangements that will support the Emissions Reduction Fund, including the role of key institutions such as the Clean Energy Regulator;

• the details of the monitoring, verification, compliance and payments arrangements for successful bidders at auction;

• transitional issues relating to the existing Carbon Farming Initiative; and

• the design and operation of a mechanism applying to emissions above the business as usual baseline.

Privacy statement

Your views are being sought by the Department of the Environment for the purpose of providing input on the design of the Emissions Reduction Fund. Personal information that you provide will only be used for these purposes. Personal information may be disclosed to employees of other Australian Government agencies assisting the Department for the purposes outlined above. Contents of your submission may be included in subsequent publications.

Confidentiality Statement

All submissions will be treated as public documents, unless the author of the submission clearly requests otherwise. Public submissions may be published in full on the website, including any personal information of authors and/or other third parties contained in the submission.

If your submission contains personal information about any person who is not an author of the submission, please indicate on the cover sheet if the person or persons have not consented to the publication of their information.

Any request under the Freedom of Information Act 1982 for access to a submission marked 'confidential' will be determined in accordance with that Act.

“A once in a ­generation opportunity to replenish the land."

What the Minister said in October 2011:

"THE opposition has clarified its warning to business not to buy future carbon permits, saying yesterday its advice did not apply to those generated through changes to agricultural and land management practices," reports Rural Press outlets such as The Land and STock & Land. Shadow environment spokesman Greg Hunt said the Coalition's promise to repeal the carbon price scheme would not affect carbon offsets generated through the recently established Carbon Farming Initiative. "I said on the floor of the House at the time that the Coalition will continue the carbon farming initiative," Mr Hunt said. "The Direct Action Plan supports abatement through putting carbon back into soil in what could be a once in a ­generation opportunity to replenish the land."

UN says farmers must be paid for enviro-services

"Governments must find ways to factor in and reward farmers for currently unpaid public goods they provide – such as clean water, soil and landscape preservation, protection of biodiversity, and recreation," says the United Nations Conference on Trade and Development (UNCTAD).

In its latest report UNCTAD Trade and Environment Report 2013 it recommends a rapid and significant shift away from “conventional, monoculture-based… industrial production” of food that depends heavily on external inputs such as fertilizer, agro-chemicals, and concentrate feed. Instead, it says that the goal should be “mosaics of sustainable regenerative production systems that also considerably improve the productivity of small-scale farmers and foster rural development”. 
Monoculture and industrial farming methods are not providing sufficient affordable food where it is needed, the report says, while the environmental damage caused by this approach is mounting and is unsustainable. Global fertiliser use increased eight times in the past 40 years. Global cereal production has only doubled in the same period. Growth rates in agricultural productivity recently fell from 2% to below 1% annually. Food prices from 2011 to mid-2013 were almost 80% higher than for the period 2003–2008. The report says that a shift is necessary towards diverse production patterns that reflect the “multi-functionality” of agriculture and enhance closed nutrient cycles. Moreover, as the environmental costs of industrial agriculture are not accounted for, governments should act to ensure that more food is grown where it is needed. It recommends adjusting trade rules to encourage “as much regionalized/localized food production as possible; as much traded food as necessary.”  
\\