Tuesday, September 24, 2013

Carbon farmers more powerful than politicians

Author and wool producer Charles Massy believes that farmers could do more than any other group in society to address the crisis of Climate Change. In a speech at Bombala, NSW, he declared that "climate change and population growth around the globe is the biggest crisis that has ever confronted humanity up until now. And I don't believe the solutions are going to come from (politicians.) I really feel it's farmers who can probably do more than any other segment of society to address the crisis."

There are many examples of farmers reversing damage on the landscape and putting carbon back into the system. "The good news is are a lot of solutions out there, I think a more ecological approach to carbon farming is the key. We can do this by putting more carbon into the soil, whether we are going to be paid for it or not. We are going to need to strive for 100 per cent of ground cover to stop this, deeper-rooted vegetation, different forages." (Weekly Times)

Sunday, September 08, 2013

What’s next for the New CFI?

 Greg Hunt, new Minister for Climate Action, laid out his immediate plans for the CFI in a  Speech to the Sydney Institute, 30 May, 2013

“We will hold a White Paper process after the election. It will provide an opportunity for industry to make submissions on issues such as the timing of the auction process and the setting of baselines. We will call for submissions within 30 days of being elected, consult between days 60 and 100, release the White Paper and draft legislation by day 100, receive further feedback and release final legislation by day 150. Our goal is to commence the system on 1 July 2014.

We have already held extensive discussions with all sectors to encourage potential participants to consider how they can engage with Direct Action and create opportunities for generating abatement, so they are fully prepared for its implementation. We are also keen for any suggestions or feedback at this stage, to ensure all potential issues are addressed. 

The New CFI: Coming Soon

The Federal Election here in Australia is likely to hand power to the conservative parties for the next six years, such is the maths of our democracy. The new Prime Minister, who has been reported as saying the argument behind Climate Change is “absolute crap”, campaigned on a “Scrap The Carbon Tax” platform. In the ranks of his party are many who deny man-made Climate Change.  Australia has been the great laboratory of land sector solutions to Climate Change .The Carbon Farming Initiative (CFI) is a ground-breaking innovation. The new government has promised to dismantle much of what had been built around the “Carbon Tax”. Does this spell the end of the CFI? No. There will be a new CFI. Let’s look at comments made by the new Minister for Climate Action, Greg Hunt:

Direct Action Webpage
“Under the Direct Action plan, soil carbons will be the major plank of our strategy,…

Speech to Sydney Institute, 30 May, 2013
1.     “The Carbon Farming Initiative will be expanded to include a wider range of emissions reduction methodologies.
2.      “We will support the application of methodologies that have been approved internationally, modifying for local conditions where required.” This is in response to complaints about the slow progress of methodologies, in particular the soil carbon meth.
3.     “The current system of methodology approvals has restricted people from engaging in potential projects, both in terms of time and scope,” he says.
4.     “The Clean Energy Regulator, will be responsible for approving the methodologies. It will ensure that the emissions reduction being claimed is genuine and verifiable”.
5.     “At present, the Clean Energy Regulator approves the viability of projects and issues recognition of abatement once it occurs. This method will continue”.
6.     “Methodologies that have been approved to date will be maintained. “
7.     “Registered projects will also be continued. “
8.      “We will unblock the approvals process, create a 25-year option for land-based sequestration and broaden the range of methodologies to include all forms of abatement such as cleaning up power stations and energy efficiency.”

ABC Online 5 September, 2013

“The Coalition intends to place Landcare back at the centre of our land management programs. The grants application process will be simplified and funding will be made triennially, to allow continuity of funding for projects. It is a recognition of the valuable work local Landcare groups undertake. We must ensure that they are part of the decision-making process with funding allocated at a local level, rather than in distant Canberra.”

House of Representatives Speech, 25 May, 2011

“The coalition supports the science and agrees to and supports on a bipartisan basis the targets that Australia has set but disagrees clearly, strongly and absolutely with the primary mechanism brought forward by the government to deal with this issue

“Let us give a fair reading to this legislation. Its objective is to help Australians reduce greenhouse emissions by contributing to the bipartisan five per cent reduction on 2000 emissions by 2020. It seeks to create incentives for farmers and landholders to undertake voluntary land sector abatement projects. These are principles that we in the coalition have set out, so the principles in this legislation are in agreement with those that we have put on the table. It seeks to give farmers some sort of incentive.

“We also want the inclusion of soil carbon in a constructive way from the outset… we want the construction of an acceptable set of rules around permanence… we want the construction of an acceptable set of rules around additionality…"

Tuesday, September 03, 2013

Blood on the Boardroom Floor: Will Directors face the firing squad?

Business might feel they have been liberated by all the talk about abolishing the carbon tax. But extreme weather events can’t be abolished. They are tipped to get worse and worse and worse. And with them the danger for company directors and officers grows higher, because they have statutory duties to act in the best interests of their company and with reasonable care and due diligence. A failure to do so is an offence under the Corporations Act for which directors and officers may be personally liable, according to a paper on Climate Change in Australia's board room by Liberty Insurance.
One of the major duties of a director is to protect the assets of the company (the assets of shareholders) and to address the risks underlying the company’s business operations effectively.
In the event that a legal action is brought against directors or officers for failing to discharge their statutory duty to act in the best interest of the company, the directors or officers may be able to invoke the operation of the “business judgment rule”. Under this rule, directors can defend their action by saying that they have discharged their duties to the company by having made an objective judgment, in good faith, that they rationally believed was in the best interest of the company.
If directors and officers of a company do not obtain adequate information about climate change and fail to take appropriate steps to mitigate the risks or maximise the opportunities available to the company, they might potentially be in breach of their duty of care and diligence owed to the company. In failing to make informed decisions in good faith, the “business judgment rule” may not excuse their actions or inaction in an allegation of a breach of duty. In our political and litigious climate, clear and effective communication is crucial between the company and its stakeholders. Directors and officers need to ensure that they communicate clearly with their shareholders, investors, employees, etc., so that there is a good understanding of the company’s strategic policies in relation to climate change and the reasons for those policies.

A company may decide to do nothing at this stage. The decision must be based on sound business judgments. All available facts and reasons for such a decision must be carefully considered. Ignorant inaction may lead to a breach of, amongst other things, directors’ duties to act in the best interest of the company. Directors and officers may be exposed to litigation from shareholders and investors unless they can show that they have acted with due care and skill and in the best interests of the company. The board has a duty to create sustainable business growth and return for the company over time. 

Monday, September 02, 2013

Soil Carbon Bank gets the nod

We think we have got the 100 Year issue almost licked. Our concept of a Soil Carbon Trust that enables farmers to self insure against the downsides of sequestration has been given an approving nod from highly placed public officials and actuarial experts.

Late last year, the Department of Industry, Innovation, Climate Change, Science, Research, and Tertiary Education (DIICCSRTE) recruited us as members of the CFI Soil Carbon Reference Group to help develop an Offsets Methodology for Trade. With a group of high performance carbon farmers we have been responsible for advising the Department on farmer uptake issues, the most intransigent of which is the Permanence Integrity Standard. It requires that carbon sequestered in vegetation and soils be held for 100 years. This is not acceptable to farmers because:

1.     The contract runs beyond the lifespan of the farmer.
2.     The CFI Act requires that all land enrolled in offsets programs be secured by a lien on land title.
3.     Banks do not understand the CFI and write down the value of the land affected to zero (in our experience.)
4.      Some people have talked down the potential of sequestration and talked up the risks, based on very limited science and much speculation.

There is little chance that the IPCC will shift on the 100 year period, at least in the short term. The only solution we can see is to reduce the perceived risk of the 100 years.

To do this we are exploring the potential of extending the CFI’s proposed 5% Risk of Reversal Buffer to 100% risk of reversal coverage which we believe could remove the major barrier to engagement.

The 100% buffer proposed would take the form of a 1:1 apportionment: for every tonne of CO2~e a farmer claims, an additional tonne is ‘banked’ in a ‘mutual society’-like account. The banked tonne underwrites the primary tonne against loss for any reason, removing the farmer’s liability to make good any losses.

At Year 25 soil carbon sequestration would be reaching ‘steady state’ or saturation. There can be no further ACCU’s earned and the operation enters maintenance mode. Under the CFI, there is no incentive apart from replacing the carbon or the Units should carbon be lost. However, as the risk reduces with the passing of the years, a percentage of the value of the banked tonne could be paid in 5-year increments until the 100th year.

With this ‘mutual society’ arrangement we are able to spread the risk across multiple farm businesses, multiple industries and multiple climate zones.
An alternative to the 100% Buffer presents itself in the form of carbon measurement technology that can measure to 100cm and more in a cost-effective way. As the CFI requires measurement to 30cm, this would leave the possibility of increases in soil carbon below 30cms to contribute to the grower’s banked tonne.

The Department are in favour of our solution, but believe it should operate as a private market offering. We believe the need for numbers of farmers and the encouragement it being run as a Government program, like a Pink Slip, would give would be most advantageous.

We need to validate the concept to gain approval from the Regulator. More important, we need to gain a tick from the market, that mythical beast that inspires many with dread. It can also inspire many farmers to do great things.