Production

Big promises but no easy credits under carbon scheme

James Nason, 19/07/2011

While much has been made about the potential for landholders to earn credits under the carbon tax scheme, much of the detail surrounding how credits will be earned has yet to be finalised.

KEY POINTS

  • Landholders will be able to earn credits for carbon-saving activities that reduce emissions or store carbon on-farm.
  • Eligibility criteria includes requirements that the activity must involve a 100 year commitment and must be over and above usual practice.
  • Potential for soil carbon to reverse, and challenges demonstrating measurable changes in carbon levels in rangeland environments,  complicate the credit-for-sequestration process.
  • Govt relying on tree plantations to deliver carbon goals, but projections appear to underestimate how many trees it will need.

 

RURAL landholders have heard a lot of talk about the opportunities to earn additional income under the Federal Government’s carbon pricing scheme, but how likely are they to benefit in reality?

Much of the detail surrounding how the scheme will work in practice, and the types of carbon-saving activity that will earn credits, remains shrouded in ambiguity and uncertainty. In some cases the necessary supporting science has not yet been completed.

Carbon Farming Initiative

The Carbon Farming Initiative (CFI) identifies a range of activities through which farmers can earn credits for either removing carbon from the atmosphere or reducing emissions. The credits will be tradeable, and farmers will be able to sell them back to the Government or to big emitters to offset their own carbon tax bills.

Depending on whether the activity is recognised as a carbon-saving measure under Australia’s obligations to the Kyoto protocol, the credits will be able to be sold into the mandatory market – worth $23/t from year one – or into the voluntary market where carbon is currently worth about $2-$5/t. In the voluntary market, emitters such as airlines offer to plant trees to offset the emissions from their activities.

The Government says the ways in which farmers can earn carbon credits include establishing forests or plantations, reducing methane emissions from animals, reducing nitrous oxide emissions from fertilisers, reducing emissions from savannah burning, managing native forests, revegetating high conservation areas and culling feral animals.

However, it is not simply a matter of doing one, some or all of those things and then claiming a credit.

Earning credits

Under CFI legislation passed by the House of Representatives in March (the legislation is yet to be passed by the Senate), there are a number of key parameters that an activity must satisfy before it can be deemed eligible to earn carbon credits.

One of the parameters is “permanence”. In the case of landholders looking to store carbon in soil or trees, they have to make a commitment to lock that carbon up for 100 years. It is not an “I’ll do it a year or two and see if it makes money” arrangement.

To qualify as a carbon sink forest, the planted area must have been free of trees as at January  1, 1990, and must be at least 0.2ha in area. The trees must grow more than 2m in height, and 20pc of the groundcover must be covered by the crown.

The trees will be assessed for carbon volumes at fixed intervals – every five years for example – and credits issued accordingly. Once the trees reach maturity there are no more permits to earn, however the trees must be maintained for up to 100 years.

Mature trees cannot be removed to plant new ones to generate carbon credits, and where plantations are destroyed by drought or fire or cyclones or other means, the lost trees must be replaced. New credits cannot be earned in such cases until the volume of carbon exceeds the previous maximum.

Another parameter is “additionality”, which stipulates that the project has to be something the landholder has initiated for the carbon pricing scheme, and cannot be something they were already doing, or were going to do anyway.

Further parameters include the requirement for the work to be scientifically valid (in that it has to involve an activity that is backed by a thorough scientific methodology based on published research results), it has to be conservative so people can not over-estimate the amount of carbon they are saving, and the outcomes have to be third-party verified before credits can be realised.

Carbon sequestration

The permanence parameter requires that a sequestration activity must involve a permanent change in land use, and that the sequestration outcome cannot be reversed.

Founder of the Carbon Grazing principle, Alan Lauder, says this requirement may see landholders leaning more towards management changes that focus on reducing emissions, such as through planting shrubs or fodder trees to improve digestibility of the diet available to animals through increasing nitrogen intake/availability, rather than changes that focus on sequestration.

“Biosequestration is removing carbon dioxide from the atmosphere and storing it in trees or the soil. Emissions reductions are final and can’t be reversed, while biosequestration is part of the carbon cycle and can reverse.”

Australian Farm Institute executive director Mick Keogh said the sequestration process is hampered by the difficulty involved in proving that changes in soil carbon have occurred, particularly in highly variable rangeland environments.

“There have been trials in the rangelands with cell grazing and a range of different technologies and to my knowledge there has not been one that has demonstrated measurable change in soil carbon,” he said.

One example  which did demonstrate a measurable change involved a 25 year long trial in the high rainfall zone at Wagga, where conversion of degraded cropping land to permanent improved pasture resulted in sequestrations of about 0.4t of carbon /ha/annum. This translated to about 2t of carbon dioxide equivalent emissions of credits per hectare per annum – worth $46 per hectare to the landholder under the $23/t carbon price in year one of the carbon scheme.

However achieving this level of credit would require an initial investment of around $200/ha to establish permanent pasture, which a farmer may be doing anyway which would void the ‘additionality’ requirement, followed by superphosphate applications worth around $40/ha every second year.

“So it is not as if you just convert to a pasture and away you go, you’ve got to maintain that pasture at a reasonably productive level to get the consistent sequestration occurring,” Mr Keogh said.

Tree plantations

The detail available so far also suggests the Federal Government expects plantation forestry to drive a significant percentage of its desired carbon outcomes.

Given that trees do not grow quickly on less productive land, the implication is that increasingly large tracts of Australia’s best farming land could soon be tied up growing trees to produce carbon instead of growing crops and livestock to produce food. On a dry matter basis, the wood in trees is about 50pc carbon.

How this fits against a backdrop of looming global food shortages and the emergence of legislation in some states designed to protect prime agricultural land from activities that do not support future food security is another consequence to be debated.

However the likelihood that landholders will be enticed into replacing income-producing farming activities with high-establishment-cost tree plantations to earn carbon credits may be remote, based on the existing credit-eligibility requirements outlined above.

In a further sign of the confusion that surrounds existing levels of detail, Mr Keogh said the Federal Government appears to be significantly underestimating the area of new tree plantations it will need to meet its future emissions targets.

The peak sequestration rate recorded in Australia is about 25 tonnes of carbon dioxide equivalent emissions per hectare per annum, but the average is closer to 15 tonnes per hectare per annum.

Australia’s 500 biggest carbon emitters will be able to buy credits to offset the amount of carbon tax they pay, but the volume of credit offsets they can buy must not exceed 5pc of their total emissions liability each year.

By Mr Keogh’s calculations, the initial $23/t carbon price will mean the largest 500 emitters can buy up to 16 million tonnes of carbon offsets in year one of the scheme.

At an average sequestration rate of 15t/ha/annum, it would take an enormous area of tree plantations – about 1,066,666 million hectares – to generate 16 million tonnes of carbon offsets.  (As a point of comparison Australia currently has 1,800,000 million hectares of plantation forests in total, according to the National Forestry Education and Awareness Network.)

Treasury modelling projects that there will be an extra 80,000 hectares of land planted to trees per year when the carbon pricing scheme kicks off.

“If they are going to get that many tonnes of offsets (16 million tonnes) they will need more than 80,000 hectares, because they are already recognising that they are not going to get them through soil carbon or another mechanism, so it virtually has to be forestry.”

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