Carbon Farming Update Graeme Anderson - Climate Specialist DEPI Vic Cam Nicholson – Nicon Rural Services Vic

Carbon (the restless years…….) 2003 - Emission Trading Scheme was first proposed (Costello, McFarlane etc) but not actioned 2007 John Howard took ETS proposal to election 2009 Rudd Govt CPRS 2011 Gillard & minority govt “Carbon Tax” Clean Energy Future - 4 key planks - Carbon Price, Renewable Energy, Energy efficiency, Land use (CFI) 2014 “Direct Action” & Carbon Reduction Fund?………

Carbon Farming Initiative.…. Initial CFI legislation passed in August 2011, operational Voluntary for farmers – “don’t have to do anything if they don’t want to…” Coalition said they won’t throw this out (Direct Action) Carbon Reduction Fund (Green Paper-White Paper) process now underway in new govt….. Process underway to remove “Carbon Tax” If proceeds, govt becomes buyer of CFI credits, not polluters Remember – CFI credits is just one policy instrument towards achieving reduced emissions & practice change

Federal Funding – Carbon Farming Futures $1 Federal Funding – Carbon Farming Futures $1.7B to complement CFI (background) Biodiversity Fund - $946 million. Carbon Farming Futures - $429 million over 6 years Filling the research gap $201 million (DAFF) Action on the ground $ 99 million (DAFF) Extension and outreach $ 64 million (DAFF) Conservation Tillage Equipment Tax Offset Developing methodologies $ 20 million (DCCEE) NRM planning for climate change $44 million 5 yrs. Indigenous Carbon Farming Fund $22 million 5 yrs Carbon Farming Skills - $4 million 5 yrs

Filling the research gap ($200M 6 yrs) competitive grant funding supporting research into technologies, strategies and innovative management practices that improve soil carbon, reduce greenhouse gas emissions and enhance sustainable agricultural practice. Also…..Developing estimation methodologies ($20 million): To convert outputs from Filling the research gap into practical methodologies which are recognised under the CFI.

Action on the ground ($99M 6 yrs) Grant funding to implement innovative management practices, reduce emissions and boost soil carbon stores - for landholders to take action on the ground includes a 15 per cent refundable tax offset for eligible conservation tillage equipment Outcomes from Filling the Research Gap will be applied, ensuring that laboratory results can be replicated on the ground.

Extension and Outreach ($64 M 6 yrs) to provide information and support to landholders about integrating carbon management into farm planning Coordinated communication across an expanded national network of extension providers to provide information and support for landholders to participate in the CFI. Funding for a range activities including workshops, field days and the engagement of additional extension officers.

What practices ? What are the main management practices worth considering?

Fertiliser management (nitrogen on crops) Objective is to reduce nitrous oxide emissions associated with fertiliser application. It includes consideration of actions such as: using legumes to build soil nitrogen instead of N fertiliser application of N fertiliser to avoid losses using more 'efficient' N fertilisers using urease or nitrification inhibitors OTHERS??????

Reduced emissions from animals Objective is currently to reduce methane emissions from livestock (rather than nitrous oxide). Possible reductions may occur from adopting: feed additives using different types of feed adjusting rumen biology grazing management OTHERS??????

Use of waste products? No clear objective at the moment and the use is very small, however the sourcing of alternative nutrient streams eg pig, poultry, dairy effluent, biosolids, green waste, food waste may be worth understanding further (not withstanding cost and supply issues).

Reforestation Objective is to capture carbon from the atmosphere through a range of possible end uses including: Revegetation (biodiversity) Forest products (where carbon is stored eg timber) OTHERS??????

Soil carbon Objective is to capture carbon from the atmosphere and store it in the soil. Possible improvements may occur from adopting: Increases in total DM production (species selection, rotations) Adding material with organic matter (Biochar, claying, organic material) Reduce fallow periods Land use OTHERS??????

Conservation tillage tax offset Objective is to provide an incentive (via a 15% tax offset) for purchase of new conservation tillage equipment (even if the farmer already has conservation tillage equipment). Runs out on 30 June 2014. Eligible for: Seeder bar and cart Seeder bar (keep existing cart)

Sequestration / Avoidance Sequestration: is the process of capture and long-term storage of atmospheric carbon dioxide. Actions that claim to sequester carbon and wish to be considered as a carbon offset are subject to the permanence test.

Sequestration / Avoidance Avoidance: To stop greenhouse gas emissions entering the atmosphere in the first place. Only actions that reduce the total greenhouse gas emissions will be eligible. This excludes actions that may reduce greenhouse gas emissions per unit of production but result in an overall increase in total greenhouse gas emissions.

Avoidance 100 units of CO2e are emitted in producing 1t of grain. This would be deemed eligible for avoidance action if: Only 80 units of CO2e are emitted in producing 1t of grain (20 units eligible) Only 80 units of CO2e are emitted in producing 1.6t of grain (20 units eligible) Only 80 units of CO2e are emitted in producing 0.8t of grain (20 units eligible) Only 80 units of CO2e are emitted in producing 0.4t of grain (20 units eligible)   - X

Avoidance 100 units of CO2e are emitted in producing 1t of grain The following would NOT be deemed eligible for avoidance action: 100 units of CO2e are emitted in producing 1.6t of grain (0 units eligible) 120 units of CO2e are emitted in producing 1.6t of grain (0 units eligible)  

Regional NRM plan? You must include a statement of consistency with the relevant regional NRM plan…… “When you submit your application, you will need to declare whether your project is consistent with the regional NRM plan for the project area. A copy of the relevant NRM plan can be obtained from the relevant catchment management authority or NRM body.”

CFI Flowchart Eligibility Do you have the legal right to undertake the project? If your project is a sequestration project, you will also need to hold the applicable carbon sequestration right and have the consent of eligible interest holders. If Yes, proceed……… Is there an approved methodology? If Yes, proceed……… Are you legally required to do the activity? If so, your project will not pass the additionality test. If No, proceed………… Is the activity on the Positive List? The Positive List and Guidelines for adding activites to the list are available at www.climatechange.gov.au/cfi If Yes, proceed …………. Is the activity on the Negative List? If No…… The activity is an eligible CFI activity!

Approved Methodologies…. Project applications using these methodology determinations can be made to the Clean Energy Regulator……. Agriculture (livestock, soil carbon, fertilisers, feral animals) Destruction of methane generated from dairy manure in covered anaerobic ponds Destruction of methane from piggeries using engineered biodigesters Destruction of methane generated from manure in piggeries Reducing greenhouse gas emissions in milking cows through feeding dietary additives

Approved Methodologies (cont). Project applications using these methodology determinations can be made to the Clean Energy Regulator……. Vegetation (regrowth, reforestation, avoided clearing and avoided harvest) Environmental Plantings Human-Induced regeneration of a permanent even-aged native forest Native forest protection (avoided deforestation) Quantifying carbon sequestration by permanent plantings of native mallee eucalypt species Reforestation and Afforestation Savanna burning Landfill and waste treatment

Methodologies proposed (but not approved) Still seeking approval for……….. Sequestration of soil carbon Carbon sequestration through afforestation and/or reforestation of degraded mangrove habitats Measuring carbon sequestration by permanent plantings of native species using in-field sampling Rangeland restoration projects Native forest from managed regrowth Will they make it?....More proposals coming…

CFI Positive List examples……. Establishment of Permanent (Tree) Plantings Human Induced Regeneration of Native Vegetation Combustion of Manure from Livestock Reduced Emissions from rumen manipulation Urease or Nitrogen Inhibitors Biochar for soil Savanna burning

CFI Negative List Examples………… A Project mandated under law Planting a known weed species MIS Forestry Projects Avoidance of the harvest of a plantation Illegal clearing or draining of a wetland Planting trees in an area that receives more than 600 mm long-term average annual rainfall (some restrictions eg water, biodiversity etc)

Permanence & Sequestration…….. Require long term obligations (100 years or 25?) Stays with the land (title), legal agreements Implications for future re land sale, mortgage, consents Insurance & tax implications Terminations & cost Carbon loss events How does carbon income versus carbon liability change over time? eg decades later Flexibility to adjust to future market/land use drivers How might carbon storage change under future climate?

To watch…….. The market will drive R&D to get methodologies “approved” to access the flow of $$$ Makes a call on research that can be applied and proven (peer review). Most only early stages….. Methodologies built by proponents & approved by DOIC Must past key tests of being additional, permanent, no leakage, audits etc – beware rules of eligibility……. Which practices will be worth it (ie the business case)? On farm production/efficiency benefits $$ often of more value than potential carbon revenue More than one way to skin a cat…….

State of play for emission trading: Over time an ETS aims to create a wedge between GDP, energy use and CO2 emissions……. This graph shows response to oil price rises in 1970’s and how the economy responded……… How will we grow the new “winners”? From CSIRO Greenhouse2007 presentation – Warrick McCubbin economist and member of Reserve Bank of Australia. Shows 1970’s oil shock story for USA – initially oil shock reduced GDP. This caused a major shift/transition where alternatives were found and those who could grow their businesses with reduced reliance on expensive oil lead the recovery and eventually GDP growth returned but with a new trend which was now not tied directly to energy use/consumption. An emissions trading scheme basically aims to create this process and provide a price signal for products which have high emissions associated with their production. This aim to drive a wedge between GDP growth (the key intention is the economy must still grow!), energy use (we get more efficient with energy as it gets more expensive) and CO2 emissions (higher emissions energy gets more expensive, low emissions energy gets more competitive/attractive). Emissions Trading “Theory” for a “Cap & trade” carbon pricing scheme Designed by economists – based on the belief that changes to the price of a product affects the way consumers behave Govt sets a limit or cap on total allowable carbon dioxide emissions for each year, and gradually reduces this over time (ie 60% reduction by 2050) Effectively restricts supply of those goods/services that are emissions intensive - thus raising their prices Increasing prices encourages consumers to be more economical in their use of that product/service & makes lower emissions alternatives more competitive (easier said than done – as always, the devil will be in the detail!) Our challenge is to identify and bring forward the successful emissions management strategies and responses that will benefit our farms and agriculture supply chains.

Meeting global food/fibre demand Energy & water efficiency New energy generation options Improved soil health & production Farm trees and landcare Improved fertiliser efficiency Better livestock performance Healthy people & businesses Most farmers I know are keen to: Improve nitrogen fertiliser efficiency and save $$ Improve energy efficiency and save $$ Improve soil health Improve the health of the farm landscape and landcare/trees Improve feed conversion efficiency in livestock