The CFI in the BMRG

Bundaberg, Monto, Eidsvold, Kingaroy Booubyjan & Pomona 31st March – 4th April 2014

Ben Keogh

Managing Director Australian Carbon Traders

THE CHALLENGE Anthropogenic Global Warming

Climate Change

• Who believes in Climate Change?

• Who believes it is human induced?

• Who believes we can do anything about it?

Climate Change

• Climate Change is real to us! – Governments are

making policies based on Climate Change being real

– Consumers are making choices based on Climate Change being real

– This makes it real

Climate Change

• Global Problem – Global response

• Domestic Action

Source Mapping Carbon Pricing Initiatives – Carbon Finance at the World Bank - Prepared by Ecofys 2013

Australia's Target

300

350

400

450

500

550

600

650

700

750

2000 2005 2010 2015 2020

Carryover of surplus Kyoto units Abatement challenge

Projected business-as-usual emissions Net emissions, -5% trajectory

MtCO2-e

-5%

+17%

% change on 2000

level

Emissions

reduction task in

2020

(MtCO2-e)

131 431 Mt

Figure 1: Australia's emissions reduction task to 2020

Source: ERF Green Paper - Department of the Environment, Australia’s Abatement Task and 2013 Emissions Projections, 2013.

THE POLICY RESPONSE

Domestic Policy Response • Price Carbon - CEF - domestic cap and trade

– Change behaviour

– Drive consumers to lower carbon intensive goods and service

– Make low carbon intensive goods and services more competitive

• Reward activities that reduce emissions or sequester carbon -CFI

– Land practices

•Direct Action Plan •Reward reductions in emissions economy wide •Purchase emissions reductions

Climate Change

• Climate Change is real to us!

– Governments are making policies based on Climate Change being real

– Consumers are making choices based on Climate Change being real

– This makes it real

Direct Action Plan

• 5% reduction of 2000 levels by 2020 – 431 Million Tonnes CO2e

• Funded through $1.55 billion Emissions Reduction Fund

• approx $3.60 t/CO2e

• CFI to continue – Streamlined, new methodologies – more for non

sequestration activities

– Aggregations encouraged

– Sell to voluntary market and ERF

AMENDMENT: extended to $2.55 billion - http://tinyurl.com/nldk3hh

THE CARBON FARMING CONCEPT The Carbon Farming Initiative

• Voluntary

• Bipartisan approval

• Not Competitive but Complimentary

• Most actions will – Prepare you for predicted

climate change

– Increase property productivity

Carbon Farming Initiative

Carbon Farming Initiative - Key concepts

• What is the change in carbon associated with that parcel of land that can be attributed to a change in management.

• What is the net effect on the atmosphere? • How can I measure and report on that change? Is my

method backed by science and consistent with international rules

• Is it beyond business as usual, is it additional • Is it a permanent change- can it be reversed? • Can every carbon credit issued must be backed by the

same amount of carbon on site?

Some general rules for CFI

• Methodologies spell out how to manage a project Different methodologies for different project types

Monitoring, calculations, reporting etc

Must meet all regional NRM plans and other statutory plans

Sequestration projects Notification of consent of all land parties

Notification of project on land title

Risk of Reversal Buffer – 5% of issued credits

• Credits created after abatement or sequestration

• Credits issued after reporting and verification

• Reporting Periods from 12 months to 5 years

• Crediting periods up to 20 years

• Sequestration has a long term maintenance obligation

– must back every issued certificate with an equivalent tonne of carbon on site

• Certificates have no expiry date –can be banked

CFI –key points

home

THE MECHANICS Carbon Farming Initiative

1. Within the scope of the CFI

Land based activity described in the regulations

2. Be on the Positive list

3. Not on the Negative List

4. Have an approved methodology

Eligibility

Positive and Negative list

• + Dynamic list of project types that automatically qualify for additionality.

– E.g. Permanent environmental plantings

– Common practice test can determine additionality

• - Dynamic list of projects that are automatically disqualified

– E.g. no weed species

– for harvest plantations in areas with rainfall over 600mm • Unless for salinity control, or

• An equivalent water right is held for water interceptions

CFI provides framework for reporting, auditing and

certificate issue

Positive and Negative list establishes approved and

prohibited activities

Methodologies provide rules for undertaking

activities

Methodologies under consideration •Avoided emissions from diverting waste from landfill through a composting alternative waste treatment technology •Diverting waste to an alternative waste treatment facility •Measurement-based methodology for Farm Forestry Projects •Another 20 under consideration

Approved Methodologies •Permanent Environmental Plantings •Avoided emissions from diverting waste from landfill for process engineered fuel manufacture •Destruction of methane from piggeries using engineered biodigesters •Methane Capture and destruction from landfill •Methane Capture and destruction from piggeries and Dairies •Landfill diversions •Savannah Burning •Human-Induced Regeneration of a permanent even-aged native forest •Afforestation and Reafforestation

CFI - Methodologies

• Methodologies spell out how to manage a project Different methodologies for different project types

Monitoring, calculations, reporting etc

Must meet all regional NRM plans and other statutory plans

Soil Sequestration projects Notification of consent of all land parties

Notification of project on land title

Risk of Reversal Buffer – 5% of issued credits

Generating carbon credits

Check project eligibility and

viability

Does a methodology exist

Is it in positive or negative list

Compare land uses / management

practices

Register as a eligible entity

Prepare documentation and

apply to be a registered offset

entity

And ANREU account

Submit documentation to CFI Administrator

Register Project

Maps, models, documentation

plans etc

Obtain notification of consent,

notification on title, conformity with

statuary

Submit project application to

Scheme Administrator

Monitor Report and Verify your

project

Monitor the abatement or

sequestration and emissions from your

project

Prepare report for CFI administrator (e.g. monitoring, models, data etc)

Have your reports verified by a third

party auditor

Create and Trade your

Credits

Apply for credit issuance from CFI

administrator

Receive credits and trade or hold

Maintain your carbon on site

(sequestration only)

Compliance, termination and

transfer

THE OPPORTUNITIES FOR LANDHOLDER

Carbon Farming Initiative

Common Land Based Greenhouse Gasses and Global Warming Potential

GAS Symbol GWP

CO2e

Common Source

Carbon Dioxide

CO2

1 1

Fuel emissions, vegetation

burning

Methane CH4 25 25 Livestock

Nitrous Oxide NO2 300 300 Fertiliser

CFI - Opportunities

Native Planting Agro Forestry Improved forest management Soil carbon sequestration SINKS HAVE A MAINTENANCE OBLIGATION

Fertiliser and manure management Reduction of enteric fermentation Avoided deforestation* Crop residue management Rice emissions management Legacy landfill emissions Waste management Savannah burning management Feral Camel Culling

SOURCES SINKS

Break down of Agricultural emissions

0

10

20

30

40

50

60

Enteric fermentation Manure management Rice cultivation Agricultural soils Prescribed burning ofsavannahs

Field burning ofagricultural residues

Mt CO2-e

Source: CIE (2010), ABARES (2010), DCCEE analysis.

0

1

2

3

4

5

6

7

8

MtC

O2

e

Millions of t/CO2e abated in 2020

High

Low

Low uptake - 6 million tonnes abatement in the year 2020 ($134M@$20) High uptake - 22 million tonnes abatement in the year 2020 ($425M @$20)

Horticultural Opportunities

• Possible opportunities – Nitrous Oxide

abatement • Fertiliser efficiency

• Soil carbon – Mulching strategies

• Waste diversion – Biomass to energy

production

Intensive Ag opportunities

• Enteric Fermentation

– Feed supplements • ( eg cottonseed)

– Early finishing - more meat less methane

– Genetic manipulation

• Methane capture and destruction

– Biomass to energy, manure management

home

Avoided Deforestation

• Clear evidence of the forest at risk of being cleared – converted to another land use

• Proven economic benefit in clearing

• Remove risk and preserve forest for 100 years

• Get 1/20th of the carbon for 20 years

• Cannot convert for harvest to not for harvest

Broad Acre Cropping / Grazing Opportunities

• Fertiliser efficiency – Sub surface – Urea inhibitors – Variable Rate Technology

• Soil Carbon sequestration

• Forestry – Windbreaks – Erosion control – Salinity control – Natural regeneration

Human Induced revegetation of even aged permanent forest

• Clear of forest for 10 years

• Proven change in management

– End of suppression activity ( grazing, clearing etc)

• Less than 2 m tall at project start

• Native and Permanent (100 years)

Fertiliser Efficiency – not approved

• On positive List

– Emissions reduction project

• Methodology not close

– Eligibility criteria - not determined

– Monitoring and verification not determined( hard to cost)

• Cannot have adverse outcomes

– No drop in yield

• 80% clear of vegetation on 31/12/ 1989 or legally cleared after 1990

• clear for at least 7 years prior to planting • revegetated after 1/7/2007 • revegetated by human induced methods • canopy over 2 meters and 20% closure at maturity • area greater than 0.2 Ha

CFI Permanent Environmental Planting Rules

Harvesting is treated as an emission

10 years to recover from fires and

depletion events

Carbon must remain on site for 100 years

Soil Carbon - not approved

• Increase soil carbon through changed management

• Human induced ( not natural ebbs and flows)

• Maintain increase for 25-100 years

Clear Fell Harvest Regime

LOCAL RETURNS Carbon Sequestration – Permanent Environmental Returns

Pomona 100 hectares MSEP

Pomona RMT results

Pomona 100 hectare Landcare planting

Project Returns to 2050 CO2e/t

total tonnes C02e - 2050

29,406

average tCO2e/project/yr

735

Project Returns over 100 yrs CO2e/t

Total tonnes C02e - 100 yrs

38,986

average tCO2e/project/yr

389

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

20

11

20

14

20

17

20

20

20

23

20

26

20

29

20

32

20

35

20

38

20

41

20

44

20

47

20

50

ton

ne

s C

O2e

annual CO2e/project

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

20

11

20

14

20

17

20

20

20

23

20

26

20

29

20

32

20

35

20

38

20

41

20

44

20

47

20

50

ton

ne

s C

O2e

cumulative CO2e (ACCU)

Landholders Entering the Market

• Carbon Pool Manager – Transfer carbon rights, obligations and % of benefit

• Self manager/Agency – DIY - more paperwork/more benefit – Agency - fee for service/%of benefit

• Aggregator – Bundle parcels from suppliers

• Joint Venture Partner – Shared costs and management and benefit

• Seek independent legal advice

Integrated Carbon Farming

Manure management Fertiliser

management

Revegetation

Soil carbon

Crop residue

management

Landholder

PROJECTS Farming Income

Carbon income Cross

production benefits

$

$

$ =$

See carbon as a part of farm business •Ensure carbon is a part of the long term management objectives •Incorporate into whole farm plan •Identify long term risks and obligations/limitations to farm management

Manure management

Paddocks of gold or get rich quick scheme?

Carbon Farming is a policy construct

driven by factors not common to ag

not weather, commodity demands, global trade

Carbon Farming takes time

turning around ecosystem processes

changing embedded farming practices

ERF ToR

Green Paper

White Paper

ERF begins

Emissions Reduction Fund (ERF)

• ERF to begin on 1 July 2014

ERF CREDITING

PURCHASING

SAFEGUARDING Lowest Cost Abatement

Simple

Genuine Abatement

Crediting

• Revisiting Additionality – New voluntary and otherwise unsupported or not business as

usual processes – Activity or Facility level? – CFI positive list?

• Facility level methodologies – Large emitters, uses NGERS – Facility activities such as fuel switching, waste heat recovery and

efficiencies

• Activity level methodologies – Use existing CFI methodologies ( expand)

• Aggregation to be encouraged – to allow councils small business and farmers to participate

Purchasing

• Reverse Auction Process

– Benchmark price

– Fewer larger auctions

– Minimum bid size

– Forward contracts

– Flexible delivery

– Guaranteed price

Volume Purchased

Benchmark Price

Successful Bids Unsuccessful Bids

Pri

ce b

id f

or

abat

emen

t d

eliv

ery

Volume of abatement bid

Safeguarding

• Discourage increase in Scope 1 and 2 emissions

– Rouge facilities, production increase

• Not a revenue raising measure

• Make good options?

• Multi year compliance periods with flexible compliance options

Ben Keogh Managing Director Australian Carbon Traders p (03) 5470 5722 e ben.keogh@australiancarbontraders.com www.australiancarbontraders.com