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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 [email protected] www.australiancarbontraders.com