Wednesday, August 29, 2012

Five Fatal Flaws of the 100 Years Clause

 The 100 Years Rule is a dangerous delusion, easily believed, but only by those who focus on carbon stocks when the natural world operates by carbon flows.

1. Universally rejected by farmers: 100 years requirement not supported by a single farmer or farmers representative in private or public statements since the principle has been announced.

2. Not based on science: 100 Years chosen as a convenient period for comparing various greenhouse gases. Not based on decay rate of CO2 in the atmosphere.

3. Not equivalent to avoided emissions: A tonne of coal not burned today can be burned tomorrow.

4. Preventing delivery of many essential co-benefits: Increased soil carbon levels are associated with increased soil health, landscape resilience, water efficiency, and enhanced food security.

5. Blocking biosequestration’s unique ability to buy us time: Soil and vegetation can draw down the equivalent of 50ppm for 50 years, while renewable energy sources reach critical mass.

WHo is saying "No!" to 100 Years?

Will farmers join the CFI? You don’t have to look far to find people giving the 100 Years Rule the thumbs down:

 “Even a generous interpretation of the treatment of permanence in this document [the CFI consultation paper][1] seems very likely to exclude all sequestration practices."
- Dr Richard Conant, Smart Futures Fellow at Queensland University of Technology and Ecosystem ecologist at the Natural Resource Ecology Laboratory at Colorado State University.

“A feature of the CFI is the requirement for participating farmers to maintain any credited sequestration for 100 years beyond the last date for which they receive payments under the scheme. This creates considerable costs and uncertainties for farmers.”
- Dr David J Pannell, School of Agricultural and Resource Economics, University of Western Australia,

Organic Farmers
 “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 guaranty activities for longer than most people’s lives is unrealistic.”
- Andre Leu, Chairman, Organic Federation of Australia

NRM Networks
 “From experience, and from comprehensive research including global best-practice approaches, we believe that, as currently proposed, the Carbon Farming Initiative will result in little uptake by
- Degree Celsius (Joint Venture model based on the 56 Regional NRM networks of Australia, enabling NRM activities of Australia to be aggregated for both regional and larger scale delivery of climate mitigation and abatement.)

NRM Networks
“The 100-year permanence rule is not grounded in any biological reality, and simly sets a barrier too high for most… We believe that the current framework could potentially result in little uptake.”
- Natural Resource Management Regional Leaders Group (WA)

Indigenous Landholders
 “We are particularly concerned by the treatment of permanence as a 100-year commitment. Indigenous landholders will be reluctant to take decisions that determine the economic futures of several generations of descendants, as well as their ongoing relationships with ancestral lands. This provision alone will deter many Indigenous and non-Indigenous land owners from considering participation.”
- North Australian Indigenous Land and Sea Management Alliance (Carpentaria Land Council Aboriginal Corporation, Northern Land Council and Balkanu Cape York Development Corporation.)

The Wool Industry
 “It is impossible in practice to guarantee permanence of land sector bio-sequestration offsets.”
- Australian Wool Innovation

Farmers Groups
 “No farmer would be silly enough to agree to 100 years for soil carbon or 100 years for anything. A finance lender would want to know seriously the impact on the value of the property of agreeing to such a thing.”
- Carbon Farming & Trading Association’

[1] DCCEE, Design of the Carbon Farming Initiative, Consultation Paper, 2010

This is the Government’s Year to Make the CFI Work

In a year’s time Australians will be going to the polls to choose between the Government who brought us the Carbon Farming Initiative and the Opposition who promised to keep it but change it. What will the CFI look like by Polling Day? It will be considered a success if there are large numbers of farmers getting involved. There are only two things that can be done to achieve this: remove barriers and increase incentives. What are the barriers?  Many farmers have been convinced that there is nothing in the CFI for them after a long period in which people have been talking the CFI down under the guise of giving sage advice by highlighting the risks, many of them fictional, most of them overstated. But the marquee risk that gives credence to the others is undoubtedly the 100 Years Rule. No farmer would take the risk. No other industry or market asks people to make such a commitment. It’s na├»ve to expect any involvement while the 100 Years Rule reigns. The other barrier of significance is price. In the commodity markets farmers usually sell into they are price takers. But in the carbon market they can be price makers because only farmers can activate the world’s biggest photosynthesis installation for shifting large amounts of CO2 from the atmosphere to  vegetation and soil sinks. Think of the lack of involvement by farmers as a negotiating tactic. They’re trying to tell you something: the risk is too high and the price is too low.

The 100 Year Rule will feature at this year's Carbon Farming Conference.

Friday, August 03, 2012

Is that a Featherbeded Silvertail?

What is outrageous about the following sentence:? "The Government has allocated $250 million to the Non-Kyoto Carbon Farming Initiative Fund to purchase non-Kyoto credits from soil carbon and revegetation projects such as Henbury."* Right. The $250 million was meant for corporates like RM Williams? So they have got a market for the carbon credits they earn by locking up 500,000 hectares of rangeland on Henbury Station. Why not? The Government helped RMW buy the place with a $9 million contribution towards the $13 million price tag, taken out of the Caring For Our Country funds. And you can have this treatment, too. Because both the Department and the company believe they are developing a template for others to follow.
The Project expects to sequester 1.5m tonnes CO2-e per year in total, for 10 to 20 years. It can't come out of soil alone. The project has avoided methane emissions from the 17,000 cattle plus eradication of camels (ruminants) and the regrowth of native vegetation. A leaked document reveals that the Company expects to make $78 million out of carbon alone. We have a lot of questions.

*From a Departmental PR release.

Thursday, August 02, 2012

Mother Nature joins the argument

 A recent survey conducted by Yale and George Mason universities indicates that the vast majority of Americans agreed that climate change is making natural disasters and extreme weather events worse. More than a third of respondents reported that they personally experienced "harm" to their property, finances or physical or mental health from a natural disaster or extreme weather event in the past year alone, reports While the "ostrich strategy" - ignore it and it will go away - has been adopted as the easy way out by many, the rapid growth in the incidence of extreme weather events will test those convinced to do nothing about it. 35% of Americans report they have been physically hurt by a weather event. While the 30% of Australians who went ostrich in 2006 grew to 60% this year, Mother Nature has a convincing debating style.

Watch what you say about Carbon Credits

People making comments about CFI carbon credits in the media or in presentations or just in conversation may have to watch what they say if they do not have an Australian Financial Services Licence (AFS). When the Government decided that CFI Credit would be classified as a financial instrument, it brought a lot of people under one of the strictest regulatory regimes in the world.
If your words are likely to influence your audience's decision about a CFI investment, you are considered to be a provider of financial services, and you must be licensed by ASIC under the Corporations Act 2001.
“[A]dvice relating to an offset project in the context of the Carbon Farming Initiative” is a specific example given. It may be considered to apply to comments that regularly appear in the media.
    To discover whether you fall under the regime, the questions that must be answered are these:
1.  What is financial advice?
2.  What is technical advice?
3.  When can technical advice become financial advice?
It is important to distinguish between advice of a technical nature about projects and advice that is intended to “influence a person’s decision on the financial products emanating from the project... which is likely to be financial product advice.” 
Examples of technical advice that are not likely to represent financial product advice are the following:
(a) advice about options for technology that may be used or the feasibility of implementing the physical aspects of a project; 
(b) advice about the implementation, construction and costs of a project;
(c) advice about the “potential sequestration, avoidance or abatement of emissions that does not include advice about the income that may be derived from regulated emissions units generated by a project”; and
(d) advice about the ongoing operations of a project.

But it is also important to consider whether this information, when seen beside other material that you provide, may together constitute financial advice.
Factual matter presented in a way that does not contain or imply a recommendation to buy, sell or hold a regulated emissions unit is unlikely to constitute financial product advice. Examples of these types of advice are:
(a) advice about the eligibility of a project as an offsetting project; (b) advice about the process of getting approval of eligiblity; (c) advice about the monitoring of emissions sequestration, avoidance or abatement of the project; or (d) advice about verification or audit of the emissions sequestration, avoidance or abatement of the project.
Advice about the potential commercial benefits of a project through the generation of regulated emissions units relates to a financial product and may influence a decision on that product. This is likely to constitute financial product advice.