Carbon Farming Initiative case study 13.9 Dairy in south-west Victoria

Edition 01 2012

Case study snapshot

• 550–750 mm average rainfall per annum

• Rich grey–brown basalt soils

• Direct Seeding

Carbon Farming Initiative case study13.9 Dairy in south-west VictoriaEnvironmental plantings of native tree species

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Department of Agriculture 2013, Carbon Farming Initiative case study—environmental plantings of native tree species: 13.9 Dairy in south-west Victoria, Canberra.

ISBN: 978-1-760030-31-5 (printed)

ISBN: 978-1-760030-32-2 (online)

CFI case study: 13.9

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Carbon Farming Initiative case study—environmental plantings of native tree species: 113.9 Dairy in south-west Victoria is available at daff.gov.au/climatechange/resources.

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AcknowledgementsThe Australian Government Department of Agriculture acknowledges the work of URS Australia Pty Ltd in preparing this case study.

This case study was produced with funding from the Australian Government Department of Agriculture as part of the Carbon Farming Futures Extension and Outreach Program.

1Department of AgricultureCarbon Farming Initiative case study: 13.9 Dairy in south-west Victoria

Purpose of this case study 2

The Carbon Farming Initiative 2

Australian carbon credit units 3

1 Introduction 4

Environmental plantings on a small dairy farm 5

2 Land-use implications 8

3 Case study details and key decision points 10

DemoDAIRY CFI project 10

Planning approvals 13

Calculating carbon—what is measured 13

Baseline calculations 14

Data collection 14

Tools 15

Other benefits 15

4 Pre-project needs 16

Site preparation 16

Fencing 16

Pests, weeds and pathogens 17

Environmental asset protection 17

5 Resources and skills required 18

Practical skills 18

More specialised skills 18

6 Australian carbon credit units 20

Rates of carbon storage and ACCU generation 20

7 Potential costs 22

Project setup costs 22

Variable and direct costs 22

8 Risk analysis 23

Scale of plantings 23

Integration into the farm 24

Using the ACCUs to offset farm emissions 24

Pest and disease 24

Fire 24

Climate 24

Summary 25

Abbreviations 26

Contents

2 Department of AgricultureCarbon Farming Initiative case study: 13.9 Dairy in south-west Victoria

Purpose of this case study

This document is a case study of a potential offset project under the Carbon Farming Initiative (CFI). The case study describes a potential project that could, in principle, satisfy the requirements to be an eligible CFI project, but it is not currently an eligible CFI project. The purpose of this case study is to illustrate:• the applicability of the environmental plantings methodology determination• matters considered in determining the choice of technology, site selection, and implementing

and operating the physical characteristics of a CFI project• the project monitoring and record-keeping requirements of the methodology determination

and the establishment of project monitoring and record-keeping systems• the financial and non-financial costs and benefits of a potential CFI project.

You should not take action in relation to a CFI project or Australian carbon credit units (ACCUs) purely on the basis of the scenarios presented in this document. Before you take any action, you should get further information or advice relevant to your individual circumstances.

This case study does not claim to comprehensively cover all the above matters and does not necessarily do so. It may use estimates, forecasts and assumptions, and these may be simplified for the purposes of illustration. This case study also does not cover all the matters you could or should consider in implementing a CFI project of this type.

The information in this case study is not necessarily applicable to any other case. Again, you should obtain any appropriate professional and financial advice relevant to your individual circumstances and not rely solely on the information in this case study.

The Carbon Farming InitiativeThe CFI is an Australian Government scheme that allows farmers and other land managers to earn ACCUs by reducing greenhouse gas emissions or storing carbon (also known as carbon sequestration) in the landscape. These ACCUs can be sold to people and businesses wishing to offset their emissions.

The CFI also helps rural communities and the environment by supporting sustainable farming by creating incentives for landscape rehabilitation.


Purpose of this case study

Participation in the CFI is voluntary; farmers and land managers can choose whether or not to be involved.

For more information about the CFI, visit www.daff.gov.au/climatechange/cfi.

Australian carbon credit unitsSubject to satisfying the monitoring, auditing, reporting and other requirements under the CFI for a particular reporting period, an eligible CFI project can apply for ACCUs. Each ACCU represents one tonne of carbon dioxide equivalent (CO2-e) net abatement (through either emissions reductions or carbon sequestration) achieved by eligible activities.

From 17 May 2013, two types of ACCUs can be generated under the CFI; Kyoto and non-Kyoto (voluntary) ACCUs.1

Kyoto ACCUs:• are created by Kyoto offsets projects with a reporting period that occurs from 17 May 2013

until 30 June 2020• can be sold to companies (liable entities) to meet their obligations under the carbon

pricing mechanism• can be sold on the voluntary market to individuals or businesses who voluntarily want to offset

their emissions.

Non-Kyoto (voluntary) ACCUs:• are created by non-Kyoto offsets projects• can be sold on the voluntary market to individuals or businesses who voluntarily want to offset

their emissions• are unable to be sold to companies (liable entities) to meet their obligations under the carbon

pricing mechanism• are unable to be exchanged for international emissions units.

The table below summarises the characteristics of each type of ACCU.

Table 1 ACCU Characteristics

Characteristic Kyoto ACCUs Non-Kyoto (voluntary) ACCUs

Able to be sold on the voluntary market

Can be surrendered under the carbon

pricing mechanism

Any reference to a value of an ACCU in this case study should be taken as an example of a value, which may or may not occur in the future. The Commonwealth of Australia, nor any of its officers or related bodies, cannot make any representation or provide any guarantee concerning the future values of non-Kyoto (voluntary) ACCUs.

An ACCU is a ‘financial product’ under the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. This means people who provide financial services in relation to ACCUs and related financial products and services in Australia may require an Australian Financial Services (AFS) licence, which authorises them to provide those services.

You should obtain your own professional advice about the trading of ACCUs, having regard to your own situation.

For further information on the characteristics of ACCUs, please refer to the descriptions of the Clean Energy Regulator at www.cleanenergyregulator.gov.au/ANREU/Concise-description-of-units/Pages/default.aspx.

1 There is a third type of ACCUs called non-Kyoto (eligible) ACCUs. This type of ACCUs was only able to be generated by Kyoto eligible projects between 1 July 2012 and 16 May 2013. These credits are the same as Kyoto ACCUs with the exception that they cannot be exchanged for international emissions units.


1 Introduction

This case study explores undertaking a potential CFI project using the environmental plantings methodology determination, Carbon Farming (Quantifying Carbon Sequestration by Permanent Environmental Plantings of Native Species using the CFI Modelling Tool) Methodology Determination 2012.The environmental plantings methodology determination covers the establishment and management of permanent native forests through the planting and/or seeding of native species on cleared or partially cleared land. This achieves greenhouse gas abatement by removing carbon from the atmosphere and storing (sequestering) it in trees by growing a native forest.

This methodology determination can be applied Australia-wide to CFI projects that meet requirements, such as:• The native forests are established through direct planting or seeding; native forest regrowth

through existing natural seed banks is not eligible.• The native forests are established on land that has been clear or partially clear of forest for the

five years before tree planting or seeding.• The native forests consist of Australian species that are native to the local area. They may be

a mix of tree and understorey species, or one single species if the species naturally occurs as a monoculture in the area.

• The trees have the potential to attain a crown cover of at least 20 per cent and a height of at least 2 m.

• The project does not involve harvesting of wood products—you can remove a maximum of 10 per cent of debris per year for personal use (e.g. firewood).

• Grazing by livestock is prevented in the first three years after tree planting or seeding.• The carbon stored in biomass (vegetation) is stored permanently for at least 100 years.

Established permanent environmental plantings may be eligible to participate in the CFI using this methodology if they meet the above requirements and were planted on or after 1 July 2007. Plantings established before 1 July 2007 could still be eligible if there is documentary evidence that they were planted for the purpose of generating carbon credits. ACCUs will only be issued for abatement from 1 July 2010.

The complete methodology is available at www.comlaw.gov.au/Details/F2012L01340.


Introduction

Environmental plantings on a small dairy farmDemoDAIRY is a not-for-profit organisation near Terang in south-west Victoria. It was established in 1996 as a dairy farm cooperative. The organisation has two main operational areas: the dairy farm and the dairy precinct. The demonstration dairy farm is run as a working farm reliant on income from its milk, livestock sales and labour hire.

The purpose of the farm is to trial and demonstrate new and innovative dairy farm technology and management practices, which can be adopted by other dairy farms in the region. The aim is to improve productivity, create economic opportunity and practice sound environmental management.

A range of environmental plantings have been established on the DemoDAIRY farm, and carbon has already been traded from one planting established in partnership with the Victorian Government under the Carbon Tender initiative. The plantings where the environmental plantings methodology determination could be applied, and which form the basis of this case study, have been established throughout the farm as shelter belts.

The permanent environmental plantings established on this farm provide a highly relevant and practical approach for all dairy farms in the region to consider. The careful integration of the trees into the core dairy production system demonstrates how multiple benefits can be gained and, should the environmental plantings methodology determination be applied in the future, the opportunity for an alternative revenue stream realised.

DemoDAIRY is a demonstration farm that incorporates pasture trials (foreground), dairy farming and environmental plantings (background) into its farming system

The farmThe 163 ha farm has several trials running at any one time. The trials, run by universities, state government organisations and industry bodies, include pasture species trials, hay and silage cropping trials, nitrous oxide field trials, revegetation for carbon and conservation trials. Normal farm operations occur around trial sites within paddocks.

The farm currently has a herd of 320 cows that are milked twice daily. Feed is predominantly based on an open grazing system supplemented with grain in the dairy and hay on the feed pads, as needed. All of the farm paddocks have improved pastures and are not irrigated. The herd consists of Holstein Friesian and Jersey cows. Average milk production per cow per day is approximately 24 L, with about 4 per cent milk fat and just over 3 per cent protein. In addition to milk production, hay and silage crops are also grown on the farm, to be used on-farm.

The farm has been operational for 15 years. A farm manager oversees the day-to-day running of the farm with the help of farm hands, some of whom are students with the National Centre for Dairy Education Australia. The key management decisions of the farm are decided by the volunteer board of management, which has at least four local dairy farmers at any one time.


Introduction

The first permanent environmental plantings on the farm were established in 2003 and 2004. They consist of local indigenous tree and shrub species and combined comprise 4.2 ha. The carbon from the 2004 planting has already been sold onto the voluntary carbon market within Victoria. The other planting was established along a drainage line in partnership with the Glenelg Hopkins Catchment Management Authority (GHCMA).

Since establishing these plantings and observing their impacts on the farm, further plantings have been established annually since 2008. It is these later plantings that the environmental plantings methodology determination could be applied and carbon traded.

A long-term aim for DemoDAIRY is to establish a network of shelter belts throughout the farm that will cover 10–15 per cent of the total farm area. These permanent environmental plantings, through the integrated planting design being used, aims to benefit farm production and increase production intensity.

The herd is predominantly Holstein Friesian, with some Jersey cows that are grazed in an open grazing system

Characteristics of the farm

The terrain is generally flat. The soils consist of rich grey–brown basalt soils with some heavy clay areas that are prone to waterlogging. A lot of work has been done to improve the subsoil drainage to try to mitigate the waterlogging impact and increase pasture production and use.

The soils and terrain of the farm are typical of many of the dairy farms in south-west Victoria. The 30-year average annual rainfall is approximately 750 mm. However, over the last 10 years, a prolonged ‘dry’ period persisted with rainfall dropping as low as about 550 mm in some years, which had a profound impact on pasture production.

The environmental planting projects that have been implemented on the DemoDAIRY farm are both repeatable and applicable to other dairy farms using non-irrigated pasture, open grazing systems.

The integration of shelter belt plantings in paddocks may not be applicable in irrigated pasture dairy farms. However, shelter belts on these farms might be integrated along farm laneways, as may small block plantings that either improve farm productivity or efficiency through better land use. This, however, is dependent on individual farm setup and management.


Introduction

An established, 8-year-old direct seeded shelter belt consisting of a mix of local indigenous species


2 Land-use implications

The motivations for establishing permanent environmental plantings on the farm are threefold. The first and core reason for the plantings is to provide weather protection for the cows, including wind and shade shelter. Research on milk yield has shown that a reduction of up to 10 per cent from cows suffering heat stress is possible.The second reason is for the amenity and property values. The trees look good on the farm and they are considered to positively affect property values in the area.

The third reason for establishing the plantings are for the environmental value they proffer, including increased birdlife on the farm and adding value to landscape biodiversity, which is a GHCMA priority.

The careful integration of the plantings achieved through planning means that the design of the plantings fits with the day-to-day operation of the farm, thereby making best use of the available land.

The shelter belt design means that the sites are part of the agricultural system rather than removing land from agriculture for trees. The block planting established in 2004, which is not eligible to apply the environmental plantings methodology determination, uses an area of heavy clay soils, prone to waterlogging, that was difficult to manage under a pasture grazing regime. The planting to be established this year is in the middle of a paddock, emphasising the integration of trees into the dairy system, rather than removing land from agriculture for trees.

Any revenue that would be received from carbon through the application of the environmental plantings methodology determination to the plantings would be a bonus on top of the other benefits already being realised through the establishment of the plantings. As such, the requirement of the methodology determination for no harvesting of the trees does not create a barrier in the immediate term if DemoDAIRY decide to proceed in applying the methodology determination.

There have been no structural adjustments made for the plantings other than the addition of a fence line to permanently exclude stock from the plantings. The farm already has access to all paddocks via a loop track, and every paddock had double gates installed for ease of stock movement. The shelter belts were established along existing fence lines.


Land-use implications

DemoDAIRY farm map—all revegetation projects are shown in green


3 Case study details and key decision points

All CFI projects must be undertaken using an approved set of instructions (called a methodology determination). In this case, it is the ‘Methodology Determination for Quantifying Carbon Sequestration by Permanent Environmental Plantings of Native Species using the CFI Reforestation Modelling Tool’. Some of the requirements of the methodology determination that apply to the revegetation projects established in shelter belts throughout the DemoDAIRY farm are presented in Table 2. These requirements are discussed further through the case study.

Table 2 Selection of requirements of the environmental plantings methodology determination that apply to the DemoDAIRY projects

Methodology requirement for eligible project The project

Plantings have been established on or after 1 July 2007

Trees have the potential to reach a height of 2 m and

attain 20% crown cover

Trees are established through planting

Project does not involve harvesting of wood products

Plantings consist of Australian native species that are

native to the local area

Project will apply the ‘mixed species environmental

planting’ setting in the CFI Reforestation Modelling Tool

Project area is protected for first three years from grazing

Project has been established on land that has been clear

of forest for five years prior to planting

DemoDAIRY CFI projectMilk production and the health and wellbeing of the cows on the DemoDAIRY farm are a priority for farm management. It is also the predominant reason for the establishment of the permanent environmental plantings on the farm. To make the best use of valuable land and to achieve this


Case study details and key decision points

core objective, the plantings have been carefully integrated into the farm as 10 m wide, direct seeded shelter belts.

Only plantings that have been established on or after 1 July 2007 are eligible to apply the environmental plantings methodology determination (earlier plantings must provide evidence that they were planted to generate carbon credits). There are two permanent environmental plantings on the farm that are ineligible. The block planting established in 2004 is ineligible because of the establishment date, as well as the fact that the carbon has already been traded from it.

The waterway planting that was established in 2003 in collaboration with the GHCMA is also ineligible. All of the other sites on the farm that have been established since 1 July 2007, or are planned to be established in the future, are eligible to apply the environmental plantings methodology determination.

DemoDAIRY removed cypress (Cupressus macrocarpa) along a fenceline on the farm in 2006. Cypress trees were commonly planted as windbreaks in the region because they established quickly and provided good shelter. However, more recently, cypress has proven to be toxic to dairy cows and in particular pregnant cows, with evidence linking cypress toxicity to premature termination of the pregnancy. Consequently, many dairy farms in the district are now removing cypress from their farms.

After the cypress trees were removed, the site was direct seeded. The initial seeding failed, reportedly because the cypress created a hostile soil environment for seed germination. Weed colonisation of the site was also a problem, despite an initial spray of the area. The plan now is to rest the site in hope that if the soils are left fallow, it may recover sufficiently to attempt reseeding the area in the future.

The integrated shelter belt plantings started in 2008, with new plantings being established each year until the target of 10–15 per cent of the farm planted to permanent environmental plantings is reached. So far, DemoDAIRY has established approximately 2 ha worth of vegetation in shelter belts that would be eligible to apply the environmental plantings methodology determination, and had plans to establish almost 2.5 ha in 2012. To reach their revegetation target, about an additional 2.5 ha will need to be established in the future.

The way in which the plantings have been integrated means that minimal land is removed from the core purpose of pasture production. The majority of the shelter belts run approximately east–west, to break the southerly winds and provide shade shelter from the hot northerly sun.

The shelter belts run approximately east–west through the farm and permanently remove a 10 m wide strip of land from pasture production



In choosing the species for the plantings, a mix of local indigenous tree and shrub species have been used with. The use of local indigenous species is a prerequisite for applying the environmental plantings methodology determination.

An important consideration in the planting density and mix of tree and shrub species is to ensure that some wind and sun can penetrate the shelter belts. The tracks, particularly those leading directly to the dairy, need to have enough airflow and sunshine to dry out, even in the winter months. The placement of the belts across the farm is also important, to ensure that wind funnelling does not become a problem and also ensures that enough wind and sunshine can penetrate through and between belts to help dry the tracks.

Each of the sites has been direct seeded using a local contractor. The shelter belts are 10 m wide, and seed was broadcast by hand in a sandy medium to help evenly disperse the seed. The tree stocking rate is between 800 and 1000 trees/ha, which has achieved 20 per cent crown cover, as required by the environmental plantings methodology determination.

Direct seeded permanent environmental planting established in 2009 as a 10 m wide shelter belt

The direct seed mix contains shrubs and trees that create effective shelter belts



Planning approvalsThe DemoDAIRY farm is in a local government rural planning zone and therefore no planning permits were required to establish the permanent environmental planting shelter belts. The plantings contribute to the regional catchment landscape connectivity of native vegetation across farms, which is a biodiversity priority of the GHCMA.

An aerial photo taken in 2011 showing early revegetation works, including the carbon tender block planting and drainage line revegetation project, plus newly established shelter belts including the half-completed cypress removal and revegetation project (centre left)

Calculating carbon—what is measuredTo measure carbon, the area of each planting needs to be known. A carbon estimation area (CEA) comprises plantings that have the same biophysical and topographical characteristics, uniform establishment, and ongoing management requirements and objectives. The plantings established on the DemoDAIRY farm all have the same features, establishment and management requirements.

The existing plantings have been established over a period of four years (2008, 2009, 2010 and 2011) and there was another planned planting for 2012. As such, there will be five CEAs. Any environmental plantings done beyond 2012 will be new, separate and additional CEAs.

Determining CEAs and their boundaries is based on several conditions including:• same site characteristics—soil type, aspect and position on slope• defined boundary—field surveys and sampling, remotely sensed imagery, maps• uniform management—established using the same methods, at the same time, planted with

the same species mix, and managed over time in the same manner.

The area of each CEA needs to be determined. This can be done using a global positioning system (GPS) and a geographical information system (GIS), or the CFI Mapping Tool (CMT). This area is then entered into the Reforestation Modelling Tool (RMT), which must be used when applying the environmental plantings methodology determination, to calculate the amount of carbon absorbed and stored in the permanent environmental plantings.



Any permanent environmental plantings that have been established before 1 July 2010 must have their base carbon stock calculated. No ACCUs can be claimed for carbon already sequestered before this date. For DemoDAIRY, this means that the plantings established in 2008 and 2009 will not generate ACCUs for their first year of growth.

ACCUs can be claimed from all subsequent years of growth. ACCU generation is expected to continue until the environmental planting reaches maturity, which is generally accepted to be at about 30 years of age. At this stage the forest ceases to generate any further ACCUs, and the planting must be maintained for another 70 years.

Baseline calculationsIn applying the environmental plantings methodology determination, new plantings on previously unvegetated land are assumed to have a zero carbon baseline. This is the case for all farms establishing new permanent environmental plantings and applying this methodology determination.

DemoDAIRY will be incorporating into their CFI project two plantings that were established before 1 July 2010 and, as such, a carbon stock for each of these, as at 1 July 2010, will need to be calculated using the RMT. Additional abatement since 1 July 2010 has the potential to generate ACCUs for trade in the carbon market applying the environmental plantings methodology determination.

Data collectionA range of data relating to the CEAs within the project area need to be collected to apply the environmental plantings methodology determination. Table 3 provides an overview and the tools used to collect the data.

Table 3 Data collection required for projects applying the environmental plantings methodology determination

Data needed Tool

Project area of each CEA CMT, GPS, GIS

Geographic reference point in each CEA CMT, GPS, GIS

Fuel data directly associated with project RAC, Logbook, spreadsheet

Disturbance data (e.g. fire, flood, pest, disease) RMT, Observation, GPS, GIS

CEA = carbon estimation area; CMT = CFI Mapping Tool; GIS = geographic information system; GPS = global positioning system; RAC = Reforestation Abatement Calculator; RMT = CFI Reforestation Modelling Tool

The area of each CEA and an accurate geographic reference point (latitude and longitude) from within each CEA are needed for the RMT to download location-specific data. These are are then used within the RMT to calculate the likely rate of carbon sequestration for your area.

Fuel-use data associated with the upkeep of the environmental plantings also needs to be recorded, including fuel used during general maintenance of the CEAs. Overall fuel use due to general maintenance would be expected to be negligible after the initial establishment of the environmental plantings.

Disturbance data also needs to be collected and recorded in the RMT. This includes, for example, if there is a fire in one or more of the CEAs. The required data includes when the disturbance occurred, the extent of damage to the trees (alive or dead) and the area burnt within the affected CEA(s). Fire will release the carbon stored in the trees and therefore no further ACCUs can be claimed until the planting(s) have regrown to the same stage they were at before the fire occurred. The landholder also has a responsibility to take reasonable steps to make sure that the carbon stores are re-established, depending on the extent of the damage this may include replanting if the fire killed an area of trees.



ToolsDemoDAIRY used GPS and GIS to accurately map each of the shelter belts that have been established on the farm. In addition to this, the RMT will be used to determine the amount of carbon being absorbed and stored in the trees. The Reforestation Abatement Calculator (RAC) will be used to account for fuel use and calculate final abatement.

Other benefitsThe permanent environmental plantings on the DemoDAIRY farm have been established to improve the core production systems of the farm, which are to grow pasture for forage and hay or silage, and produce milk. By establishing the environmental plantings in shelter belts, wind speeds and flow patterns across the farm are altered. This provides the cows with sheltered areas protecting them from the elements, and increases pasture growing seasons through the creation of microclimates that are likely to be both warmer and have lower rates of evapotranspiration. The shelter belts also provide shade shelter for the cows, which helps to prevent heat stress.

The plantings have also provided environmental value. The south-west regional landscape of Victoria is dominated by dairy farms, and over time has been largely denuded of local indigenous vegetation. To re-establish locally indigenous species through the implementation of permanent environmental plantings adds significant biodiversity value both on farm and on a landscape level. An increase in native birdlife has been observed at DemoDAIRY.

Other benefits of the established environmental plantings on the farm include an increase in land value. Farms with trees are pleasing to the eye and add real value to property prices. Planting out 10 per cent of the farm to permanent environmental plantings will add significant value in terms of monetary and on-farm benefits to the farm without impeding core business. Planting more than 10–15 per cent of the farm is considered likely to provide only marginal additional benefits and potentially will result in lost agricultural production.


4 Pre-project needs

Site preparationThe areas that have been established as permanent environmental plantings were sprayed with a knock-down herbicide, in some instances twice, and then direct seeded with a mix of local indigenous tree and shrub species. No residual herbicide was used because this would impede the germination of the native seeds sown to establish the permanent environmental plantings.

Ripping was not required; however, the sites were scarified after spraying and before they became too wet, to create a receptive seed bed. Once scarified, the sites were broadcast seeded by hand and then driven over with the tractor to push the seed into the soil.

FencingThe permanent environmental plantings are all fenced. Where the stock is to be permanently excluded, the fencing consists of three wires with a single hot wire running along the top of the fence. Two of the newer plantings have been designed to allow the cows to graze under and through the planting. The fencing around these sites is temporary, with two hot wires running the length of the perimeter of the plantings. Under the environmental plantings methodology determination, areas to be grazed must exclude stock for three years.


Pre-project needs

Two hot wires are enough to keep the herd out of the newly established planting sites until the planting is at least three years old

Pests, weeds and pathogensThe only problematic site was where the old cypress trees were removed in 2006. A problem with the site, irrespective of the initial spraying of weeds before the first seeding, is a residual soil seed bank of weed and grass species.

When the cypress was removed, light and moisture could reach the ground, triggering a mass germination of weeds. Before attempting to reseed the site, extensive weed control will be required, potentially with a follow-up spray about 12–18 months after the direct seeding.

Environmental asset protectionThe two early plantings that are not eligible to apply the environmental plantings methodology determination were established to (a) protect a drainage line that runs through the centre of the property, and (b) protect the soil in the corner of one paddock that was prone to waterlogging.

In establishing the shelter belts within the farm, no specific action required was required to protect any other existing environmental assets such as remanent trees, waterlines or wetlands.


Practical skills Understanding of the herd and herd movements are particularly important; particularly in the planning and design phase of environmental planting projects. This knowledge is needed to make sure that the core business is neither impeded nor interrupted by the permanent environmental plantings.

An example is creating an L-shaped shelter planting in the corners of paddocks rather than a block corner planting. The herd will move more easily in an L-shaped belt rather than in a block planting.

Understanding which tracks are prone to being wet, particularly near the dairy—including during the winter months—is an important consideration when designing plantings. Ensuring that planned plantings do not inhibit drying of the track, by ensuring sufficient airflow and sunshine, is important to avoid adverse effects to the foot health of the herd.

The fencing for each of the permanent planting sites was done by farm staff.

More specialised skillsThe weed control for each site was contracted out. The direct seeding was also done by a contractor who also advised on the species to be planted, the quantities of seed to be used and the method for sowing within the shelter belts.

If DemoDAIRY proceeds to apply the environmental plantings methodology determination, it will use the RMT to calculate the amount of carbon in their plantings, and the RAC to account for fuel use and calculate the projects final abatement. DemoDAIRY may use a service provider or consultant until it is familiar with the CFI tools. For many dairy farmers within south-west Victoria, the use of service providers to use the CFI tools and assist with reporting for the life of the project is a likely outcome.

5 Resources and skills required


Resources and skills required

The trees in the shelter belts have the potential to grow at least 2 m high and create a 20 per cent crown cover


Generating ACCUs from an environmental planting has the potential to provide a revenue stream for the holders of the carbon rights until the forest reaches maturity. Existing plantings can only receive ACCUs for additional, new carbon absorbed and stored (sequestered) since 1 July 2010. Forest maturity is assumed to be approximately 30 years. Likewise, for plantings established on or after 1 July 2007 that are eligible to apply the environmental plantings methodology determination, no ACCUs can be claimed for the first three years of growth. ACCUs for carbon sequestered in subsequent years can be claimed.

Creating ACCUs from environmental plantings requires a long-term commitment from the landholder to maintain that planting for 100 years. Creating and trading ACCUs from their environmental plantings will create a legal long-term liability regarding the maintenance and upkeep of the plantings beyond the ACCU-generation period.

The newly planted trees are expected to grow to a height of more than 2 m. This means that the plantings comply with the definition of reforestation under the Kyoto Protocol, and that the credits generated from these environmental plantings through the application of the environmental plantings methodology determination would be Kyoto ACCUs.

Kyoto compliant abatement has the potential to contribute to the National Greenhouse Gas Accounts. Kyoto ACCUs also have the potential to attract a better price per tonne of carbon in the market place than non-Kyoto (voluntary) ACCUs.

Rates of carbon storage and ACCU generationRates of carbon storage vary depending on a range of factors, including site, species selection and the age of the trees (young trees sequester carbon faster than older trees). Table 4 summarises sequestration rates and indicative ACCU generation that could be achieved from the environmental plantings on this farm.

6 Australian carbon credit units


Australian carbon credit units

Table 4 Summary of potential carbon sequestration and ACCU generation

ACCU generation component Indicative value

Potential rate of sequestration on site 6–8 t/ha/year of CO2-e

Indicative annual sequestration potential of plantings 24–32 t/year of CO2-e

Indicative annual number of ACCUs per year 23–30 ACCUs per year

Indicative total sequestration potential over 30 years 180–240 t of CO2-e over 30 years

Potential revenue from ACCUs Determined by carbon credit market price and may

depend on the nature of the ACCU that is generated

(e.g. Kyoto or non-Kyoto (voluntary) ACCUs)

For DemoDAIRY the potential sequestration rate may be between 6–8 t/ha/year of CO2-e. This suggests that based on the 4 ha already planted, DemoDAIRY could generate approximately 24–32 t/year of CO2-e.

Because this is a sequestration project 5 per cent of the potential ACCUs being generated are withheld by the regulator to cover the Risk of Reversal Buffer (a form of insurance to cover short term losses due to disturbance events). Therefore, this project could generate 23–30 ACCUs per year. These ACCUs could then be offered and traded in the carbon market or banked for future sale.

The price that could be received for the ACCUs would reflect the supply and demand conditions associated with the market for ACCUs at the time of sale. Like any other commodity, the price is expected to fluctuate over time and will depend on a range of factors, including the type of ACCU being traded. The potential price a CFI project could receive is a factor that needs to be considered when deciding whether to undertake a project.


Project setup costsPotential costs associated with establishing permanent environmental plantings on a dairy farm include planning time, mapping costs, contractor costs for weed spraying and direct seeding, fencing materials and the time to erect the fences.

Planning is pivotal to establishing a successful permanent environmental planting, and ensures that it will not interfere with the core production system. This is of particular relevance on a dairy farm where the cows are moved twice daily, to and from the dairy. DemoDAIRY has a whole-farm plan, which helped the planning and the positioning of the plantings.

The use of GPS and other mapping tools and services to establish environmental plantings is an optional cost. The alternative would be to use the CMT, which will cost the amount of time it takes either DemoDAIRY or a service provider to use it.

Weed spraying is an important part of site preparation, particularly if converting improved pasture areas to permanent environmental plantings, because weed competition can significantly inhibit the growth of young trees. The costs associated with weed control are labour and herbicide costs. Direct seeding is a cheaper establishment option than using seedling stock grown in a nursery. Broadcasting seed by hand potentially further reduces costs than if a direct seeding machine was used.

An important point to consider before applying the environmental plantings methodology determination is the scale of plantings that are being established to store carbon. There are potential costs associated with the project setup costs such as tying the projects to the land title they are established on. Legal advice may be required to understand the contract being entered into. Each of the sites that have been established on the DemoDAIRY farm is small. When all of the labour and project setup costs are taken into account, this may impact the overall viability of the project.

Variable and direct costsVariable and direct costs associated with the permanent environmental plantings that have been established on the DemoDAIRY farm include the reporting and auditing required by the environmental plantings methodology determination.

7 Potential costs


The DemoDAIRY farm has established permanent environmental plantings to improve animal health and wellbeing. The plantings have also added to the aesthetic and amenity values of the farm. The option to incorporate another revenue stream through the creation of ACCUs by applying the environmental plantings methodology determination is being considered but, like all business propositions, there are potentially risks associated in doing so, including:• scale of the permanent environmental planting sites• integration of the plantings into the farm• using credits ACCUs to offset farm emissions• pest and disease• bushfire risk• climate change.

Scale of plantingsThe scale of the plantings impacts the direct costs of applying the environmental plantings methodology determination to a permanent environmental planting to create and trade ACCUs. The risk is that these costs outweigh the expected revenue generated from carbon.

So far, each of the plantings on DemoDAIRY has been established as 10 m wide belts containing direct seeded trees. This planting design integrates well with the farm production system and provides the benefits of wind and shade shelter with minimal land removed from the core production system. The average size of the plantings is approximately 0.5 ha (10 m × 500 m).

The total area of permanent environmental plantings on the DemoDAIRY farm that are eligible to apply the environmental plantings methodology determination is approximately 4.5 ha. Because this area of trees has been established over a period of five years, each will have its own CEA. This will increase project costs because each CEA needs to be registered separately, data has to be collected for each CEA and the amount of carbon stored has to be calculated for each CEA. If using a service provider to help with each of these components, external costs are further increased.

To help mitigate some of the costs associated with creating ACCUs from small project areas, economies of scale could be realised if, for example, all 4.5 ha had been established in the same year. This would have meant that DemoDAIRY could be considered under the environmental plantings methodology determination as one CEA.

8 Risk analysis


Risk analysis

Integration into the farmA key consideration in establishing permanent environmental plantings in a dairy farm context is to ensure that they fully integrate with the core business of the dairy. Land value is high and placement of the plantings is critical to ensure that herd movement is not hindered in any way. Establishing shelter belts throughout the farm adds significant environmental and production benefits, but there are also some risks associated with the design and placement of the belts.

If access tracks become too shaded, they may not dry out, which can become particularly problematic during the winter months by causing foot issues for the cows. As such, any future planning and establishment of trees within the farm needs to provide the shade and shelter desired, but with enough ‘gaps’ within the shelter belts to allow airflow and sunshine to dry out winter-wet tracks.

Using the ACCUs to offset farm emissionsIn a number of different grazing and dairy systems, up to 10–15 per cent of a farm’s land planted to trees adds significant value to the core agricultural business. Because the generation of ACCUs from trees is a finite resource, a farm with 10 per cent planted to trees will not be enough to completely offset the dairy herd.

To incorporate a higher proportion of trees into a dairy farm system would likely result in encroachment and displacement of the core dairy business.

Pest and diseaseTrees, whether planted or direct seeded, can be susceptible to pests and diseases. The impact of pests and diseases can range from negligible to catastrophic, depending on the season, the stage of tree growth and pest or disease voracity. Examples include caterpillars causing defoliation, leaf spots causing some leaf drop, and insect and fungal infection.

One way to help mitigate this risk is to monitor the plantings on a regular basis, looking for the first signs of pests or diseases. Determining the risk to the trees, including whether the infected area is increasing, decreasing or staying the same, is also important. Many tree pests and diseases have minimal impact on the trees and are gone within a few weeks. However, if the risk to the trees is serious, control methods may be needed. These methods may include mechanical removal (e.g. picking the caterpillars off the trees), chemical or, in the worst case scenario, removing the infected trees.

If the infestation of pests or disease is widespread, causes mortality or severely impacts further tree growth, this disturbance must be recorded within the RMT. Revenue from ACCU generation can be lost. If the area has to be replanted, ACCU generation will only resume once the planting attains its former growth stage.

FireFire is an ongoing risk to permanent environmental plantings and should be taken into consideration in the planning phase, particularly the location for the plantings. If a fire was to result in high or total mortality of one or more of the planted areas, re-establishment of the sites will be required, and the costs will be similar to the initial establishment costs.

The biggest threat during the fire season in south–west Victoria is grass fires. The shelter belt design, although integrating well with the core farm production system, forms potential fire ‘wicks’ that can carry the fire rapidly across the farm from area to area. To mitigate this risk, enough of the fuel load needs to be removed around the shelter belts by grazing or slashing of pasture grasses.

ClimateClimate change is a real risk for environmental plantings in terms of maintaining the planting effectively for perpetuity once ACCUs have been created and traded through the application of the environmental plantings methodology determination.

The impact of prolonged dry periods or prolonged wet periods, as sometimes experienced in south-west Victoria, can cause tree mortality. The risk is that the trees are part way through


Risk analysis

generating ACCUs (e.g. 15 years old), and die. The site then needs to be re-established and no further ACCUs are generated for another 15 years. This creates a long-term liability and potential interruption to the farm’s revenue stream.

The risks associated with climate change may impact the overall project viability and require consideration in terms of planting design, establishment methods, etc.

SummaryACCUs are a commodity and, like other core farm business activities, such as milk production, there are both intrinsic and extrinsic risks associated with producing and trading that commodity. The application of the environmental plantings methodology determination provides dairy farmers who have either existing plantings (established on or after 1 July 2007) or new plantings, with an alternative revenue stream.

DemoDAIRY’s motivation for establishing the environmental plantings was to improve weather protection for the herd; and increase the environmental value, amenity, and property value of the farm.

DemoDAIRY’s experience to date suggests that the plantings have added value to the core farm business of milk production and may, in the longer term, help mitigate some of the future climate risks that the farm will face.


ACCU Australian carbon credit units

AFS Australian Financial Services

CEA carbon estimation area

CFI Carbon Farming Initiative

CMT CFI Mapping Tool

CO2-e carbon dioxide equivalent

GHCMA Glenelg Hopkins Catchment Management Authority

GIS geographic information system

GPS global positioning system

RAC Reforestation Abatement Calculator

RMT CFI Reforestation Modelling Tool

Units

ha hectare

km kilometre

L litre

m metre

mm millimetre

t tonne

Abbreviations

Edition 01 2012

The ‘Biosphere’ Graphic ElementThe biosphere is a key part of the department’s visual identity. Individual biospheres are used to visually describe the diverse nature of the work we do as a department, in Australia and internationally.

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Documents

Carbon Farming Initiative case study 13.9 Dairy in south-west Victoria