Saturday, October 30, 2010

Our advice on Additionality, 2008 - THEY WERE WARNED


Getting ready to trade? What about “Additionality”

According to the experts, all projects that aim to earn carbon credits must pass the “Additionality” test. This is to prove that the emissions prevented or sequestered were the result of deliberate action designed to qualify for carbon credits and not the result of ‘business as usual’, ie. would not have happened anyway.

We cannot tell you what to do because the Government has got to decide. But here is the system presented by the UNFCCC. It is a 4-step process that analyses the project to ensure that it would not have happened without the revenue from the carbon credits.

STEP 1. Identification of alternatives to the project activity consistent with mandatory laws and regulations. Were there other viable options beside the carbon-related activity?

STEP 2. Investment analysis: Of the options, is the proposed project activity unlikely to be the most financially attractive or unlikely to be financially attractive?

STEP 3. Barrier analysis: (1) Is there at least one barrier preventing the implementation of the proposed project activity without the promise of credits; and (2) Is at least one alternative scenario, other than proposed project activity, not prevented by any of the identified barriers?

STEP 4. Common practice analysis:
(1) No similar activities can be observed?
(2) If similar activities are observed, are there essential distinctions between the proposed project activity and similar activities that can reasonably be explained?

NOT ADDITIONAL: A Project is not additional if it would be a financially-attractive option without the carbon credits and there are no insurmountable barriers preventing implementation that make the carbon credits essential.

ADDITIONAL: A Project is additional if, compared to other investment options, it is either financially unattractive or faces insurmountable barriers without the ingredient of carbon credits plus it is not common practice in the location or has unique features which make it a risky option.

COMMENTARY: These tests for Additionality were designed for CDM projects, usually clean energy projects in ’developing’ countries, not soil sequestration at home. But like so many Kyoto Principles invented for one purpose, they are likely to be applied inappropriately to other categories of climate change solution. The Investment Analysis would knock carbon farmers out because their low input regimes can turn a profit when high input farmers are struggling. The Common Practice test would rule no till cultivation out in WA and SA where more than 50% of farmers practice it.

But there is no escaping it. Additionality is the top rating issue with Voluntary Market offset buyers, according to the annual survey by Ecosystem Marketplace & New Carbon Finance.

Will “Additionality” rob you of soil carbon credits?

A report in Australian Farm Journal (June, 08) featured a farmer getting his first cheque from Landcare CarbonSmart for locking away land for 100 years, planting trees on it. The farmer said the planting would have happened anyway, without the small amount Landcare pays. And here’s where the Kyoto Accounting Principle “Additionality” rears its ugly head.

The Rule is: “Business-As –Usual” doesn’t qualify. It must be a change in land management in direct response to the climate change challenge and it must be dependent on the additional money for it to happen.. The carbon sequestered must be ‘additional’ to what would have been the case anyway.

It’s not hard to see a whole raft of farmers who have already moved to carbon farming techniques being locked out of the carbon credit market because the Kyoto accountants say they made the change without the promise of carbon revenues; or they are unable to prove that their intention was to sequester CO2 and their motive was money.

If the Government sets a date before which changes to carbon farming are not eligible and that date doesn’t go back far enough, then the pioneers who did the hard yards – like Col Seis who invented pasture cropping and has socked away hundreds of tonnes of carbon per hectare – will miss out. With 85% of WA farmers no-till and 50% in SA, you can see the scale of the injustice.

The Carbon Coalition has been told by high-ranking public servants that the Government is keen to avoid “perverse outcomes” such as farmers left out of the scheme returning to the plough and stubble removal and set stocking for a spell so they can qualify for the credits. (The worst outcome.)

Why has no advice been given out to protect the interests of farmers willing to change to do their bit? Because while they would mention additionality in the long list of reasons why soil carbon could not ever be traded, they never thought the day would ever come when farmers would need to know about it.

There are several reasons why Additionality could be a blockage to maximizing our response to climate change:

1. It relies upon the fiction that a person’s intention can be known and that documents can prove it.
2. It ignores human nature and the impact on a carbon farmer who made the move early and missed out seeing their destructive neighbour being rewarded.
3. It is an absolute failure in its everyday application in the Clean Development Mechanism (CDM) market. Billions of dollars are being paid to Chinese energy companies for projects that clearly are not within the bounds of Additionality.

Additionality was introduced for CDM market. It is an international system established by the Kyoto process that allows rich countries to meet emissions targets by funding clean energy projects in developing nations. The market for CDM credits is is worth nearly $20bn a year, but this is expected to grow to over $100bn within four years.

Two senior Stanford University researchers examined more than 3,000 Chinese projects applying for or already granted up to $10bn of credits from the UN's CDM funds. They concluded that the majority should not qualify. "They would be built anyway," says David Victor, law professor at the Californian university. "It looks like between one and two thirds of all the total CDM offsets do not represent actual emission cuts." All new hydro, wind, and natural gas fired projects in China claim credit for emissions reductions under the CDM, each makes the argument that it would not have been constructed but for the carbon offsets. But the Chinese Government has policies to support clean generation. Even more revealing, nearly three quarters of all registered CDM projects were complete at the time of approval, suggesting that CDM money was not needed to finance them. International Rivers’ Patrick McCully, who makes the allegation, says: “ Judging additionality has turned out to be unknowable and unworkable. It can never be proved definitively that if a developer or factory owner did not get offset income they would not build their project."

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