Farming Carbon in Australia:

implications for agribusiness under the CPRS

March 2009 Adelaide

Overview

• History of Climate Change Policy

• Regulated schemes:

1. NSW Greenhouse Gas Reduction Scheme

2. DCC (AGO) GHF

3. Australian Government CPRS

• The policy effects

• Issues for business

• Emerging trends

Conference of Parties

• Earth Summit Rio 1992 established UNFCCC• COP 1 – the Berlin Mandate• COP 3 – Kyoto Protocol• COP 6 – Bonn – sinks, flexibility, finance• COP 7 – Marrakech – the ‘rules’• COP 13 – Bali and Kevin 747• COP 15 – Copenhagen – post 2012

• 45% chance of wheat crop value below current level

• 128% increase in tick related losses in net cattle production weight

• 55% of core habitat lost for eucalyptus• 16-48% decrease in flow in the Murray Darling

Basin

Source: CSIRO Marine and Atmospheric Research 2006.

“The business case for early action report” (April 2006) indicates potential impacts that a 3-4 degree increase in the average global surface temperature could have on landscape and agriculture:

Total Net Emissions By Gas

Total Emissions - Agriculture

1990

(Mt CO2 e)

2000

(Mt CO2 e)

2006

(Mt CO2 e)

87.7 95.5 90.1

Source: http://www.climatechange.gov.au/inventory/2006/index.html

20552005

14

7

Billion of Tons of Carbon Emitted per Year

1955

0

Currently

projected path

Flat path

Historical emissions

1.9

2105

Seven “wedges”

Wedge Theory

Energy Efficiency

Decarbonized Electricity

Fuel Displacement by Low-Carbon Electricity

Forests & Soils

Decarbonized Fuels

Stabilization Triangle

2004 2054

7 GtC/y

14 GtC/y

Seven Wedges

Methane Management

NSW Greenhouse Gas Reduction Scheme

• Mandatory scheme for benchmark participants

• Large energy producers and users must meet set emissions targets

• If they miss their target, they pay a fine or offset excess emissions

• This creates a market

Greenhouse Friendly

• Voluntary scheme• Run by DCC• National government

endorsed scheme• Additionality test

Carbon Pollution Reduction Scheme

• Only forestry can be counted as an offset• Tax incentives to establish sinks• More favourable model to permanent plantings• Less favourable for harvesting• 130 year permanence• No accreditations• NCAS is the only approved

estimation/methodology

Arnie Sells the Hummer SUV

California – the first US state to impose a cap on expulsion of carbon dioxide and other gases

PAY AS YOU GROW

• Existing projects

• Landholder plants trees

• Carbon rights transferred and periodic change in carbon stocks credited

• No carbon liability

• Offset matches emission event

• Regular payments over time on actual market values each year

Creating carbon credits from forests

PAY AS YOU SOW

• Additional/new projects

• Landholders paid for trees to be planted in exchange for carbon rights

• Carbon offset based on sequestered carbon

• Emissions event does not match sequestration event

• Price-stable

• Paid money up front

Expression of Interest

EligibilityTest

PreliminaryOffer

Request formore information

Ineligibleletter

Ineligible

Eligible

TitleSearch

Carbon modellingplot file

Fileclosed

Declined Accepted

SiteAssessment

Eligible

Ineligible

Project Plan

Site historyMaps, size and location, risk assessment,

GPS, species, habitat hectares, title search

CalculationMethod

Signing and verificationby landholder

Eligible

Ineligible

Signed

FileClosed

Declined

Steps to Apply for Landholders

Access and Landholder input

Landholder actions

CarbonSMART actions

Legend

Clarification needed

Registered in Landcare CarbonSMART NSW Pool

Landholder receives payment for carbon in June

each year

Draft CSR/ROU)

RegisterCSR/ROU

What it involves for landholders

• Submit an Expression of Interest

• Agreements registered on title:

– Carbon Sequestration Rights

– Restriction on Use

• Allow access for initial site assessment, and later for ongoing monitoring

• Report depletion events

• Submit an annual performance statement

• Two step landholder process

Basic agreement framework

Accreditation

Purchasers

Permits

Credits

Scheme Admin

Restriction on Use

Restriction on UseRegistered on title

Last resort option to maintain carbon on site

Landholder and CarbonSMART responsible

Does not exclude grazing or other uses

CarbonSMART

LandholderCarbon Sequestration Rights Deed

Carbon Sequestration Rights AgreementRegistered on title

Transfers interest of carbon rights to CarbonSMART

CarbonSMART can then create credits or permits

Not an interest in land

Lower Value $ Higher Value $ Highest Value $

Voluntary scheme or

project offsetting

Retail Scheme with Govt or third party

endorsement

Domestic Compliance

Regime

EU/Kyoto Compliance

Regime

Voluntary Purchaser

Compliance Purchaser

Compliance Purchaser

Contractual Carbon

Sequestration commodity

Statutory Sequestration

Carbon commodity

International Carbon

Sequestration commodity

Carbon Property Right(legal basis for carbon commodities)

No Underlying Property Right

Our Partners

Partners in

PwC and URS pro bono partners for compliance, auditing and verification.

Rural Solutions SA Assessment Team and Advisory

Foresty Carbon Sequestration Potential

0

50

100

150

200

250

300

0 25 50 75 100

Years from planting (Tube stock planted at 1,000 stems per hectare)

Cu

mu

lativ

e to

nn

es C

O2e

per

hec

tare

Wagga Wagga (river flats)Tumut (slopes)Tumut (flats)TemoraNarranderaWagga Wagga (away from river plain)Henty

0

1

2

3

4

5

6

7

8

9

10

0 10 20 30 40 50 60 70 80 90 100

Y ear from P lanting (1,000 s tems /ha tube s toc k planted)

An

nu

al

CO

2e

Se

qe

ste

red

(to

nn

es

/ha

)

Wagga Wagga (river flats ) Tumut (flats )Tumut (s lopes ) NarranderaTemora HentyWagga Wagga (away from river plain)

Emerging trends

• Large capacity for soil carbon sequestration• High variability – soils aint soils• High volatility and strict management• CSIRO reports more input requirements of P, K and S

to a greater value ($200) than the carbon value through sequestration ($44)

• Methane controls through grazing, vaccines and feed• Nitrous inhibitor application, stand off pads and herd

homes• Biochar/agrichar – all carbon, no credit• Algae production• Measurement tools such as

Contact Details

Matthew Reddy

Landcare CarbonSMART

Landcare Australia Limited

Level 9, 24 Collins Street

Melbourne 3000

Website: www.carbonsmart.com.au

Email: matthew@landcareaustralia.com.au

Sydney Office 02 9412 1040

Melbourne Office 03 9650 3555

Rural Solutions 08