Farming Carbon in Australia: implications for agribusiness under the CPRS March 2009 Adelaide

Overview History of Climate Change Policy Regulated schemes: 1.NSW Greenhouse Gas Reduction Scheme 2.DCC (AGO) GHF 3.Australian Government CPRS The policy effects Issues for business Emerging trends

Conference of Parties Earth Summit Rio 1992 established UNFCCC COP 1 – the Berlin Mandate COP 3 – Kyoto Protocol COP 6 – Bonn – sinks, flexibility, finance COP 7 – Marrakech – the ‘rules’ COP 13 – Bali and Kevin 747 COP 15 – Copenhagen – post 2012

45% chance of wheat crop value below current level 128% increase in tick related losses in net cattle production weight 55% of core habitat lost for eucalyptus 16-48% decrease in flow in the Murray Darling Basin Source: CSIRO Marine and Atmospheric Research “The business case for early action report” (April 2006) indicates potential impacts that a 3-4 degree increase in the average global surface temperature could have on landscape and agriculture:

Total Net Emissions By Gas

Total Emissions - Agriculture 1990 (Mt CO2 e) 2000 (Mt CO2 e) 2006 (Mt CO2 e) Source:

Billion of Tons of Carbon Emitted per Year Currently projected path Flat path Historical emissions 1.9  2105 Seven “wedges” Wedge Theory

Energy Efficiency Decarbonized Electricity Fuel Displacement by Low-Carbon Electricity Forests & Soils Decarbonized Fuels Stabilization Triangle GtC/y 14 GtC/y Seven Wedges Methane Management

NSW Greenhouse Gas Reduction Scheme Mandatory scheme for benchmark participants Large energy producers and users must meet set emissions targets If they miss their target, they pay a fine or offset excess emissions This creates a market

Greenhouse Friendly Voluntary scheme Run by DCC National government endorsed scheme Additionality test

Carbon Pollution Reduction Scheme Only forestry can be counted as an offset Tax incentives to establish sinks More favourable model to permanent plantings Less favourable for harvesting 130 year permanence No accreditations NCAS is the only approved estimation/methodology

Arnie Sells the Hummer SUV California – the first US state to impose a cap on expulsion of carbon dioxide and other gases

PAY AS YOU GROW Existing projects Landholder plants trees Carbon rights transferred and periodic change in carbon stocks credited No carbon liability Offset matches emission event Regular payments over time on actual market values each year Creating carbon credits from forests PAY AS YOU SOW Additional/new projects Landholders paid for trees to be planted in exchange for carbon rights Carbon offset based on sequestered carbon Emissions event does not match sequestration event Price-stable Paid money up front

What it involves for landholders Submit an Expression of Interest Agreements registered on title: –Carbon Sequestration Rights –Restriction on Use Allow access for initial site assessment, and later for ongoing monitoring Report depletion events Submit an annual performance statement Two step landholder process

Basic agreement framework Accreditation Purchasers Permits Credits Scheme Admin Restriction on Use Registered on title Last resort option to maintain carbon on site Landholder and CarbonSMART responsible Does not exclude grazing or other uses CarbonSMART Landholder Carbon Sequestration Rights Deed Carbon Sequestration Rights Agreement Registered on title Transfers interest of carbon rights to CarbonSMART CarbonSMART can then create credits or permits Not an interest in land

Lower Value $Higher Value $Highest Value $ Voluntary scheme or project offsetting Retail Scheme with Govt or third party endorsement Domestic Compliance Regime EU/Kyoto Compliance Regime Voluntary Purchaser Compliance Purchaser Contractual Carbon Sequestration commodity Statutory Sequestration Carbon commodity International Carbon Sequestration commodity Carbon Property Right (legal basis for carbon commodities) No Underlying Property Right

Our Partners

Partners in PwC and URS pro bono partners for compliance, auditing and verification. Rural Solutions SA Assessment Team and Advisory

Emerging trends Large capacity for soil carbon sequestration High variability – soils aint soils High volatility and strict management CSIRO reports more input requirements of P, K and S to a greater value ($200) than the carbon value through sequestration ($44) Methane controls through grazing, vaccines and feed Nitrous inhibitor application, stand off pads and herd homes Biochar/agrichar – all carbon, no credit Algae production Measurement tools such as

Contact Details Matthew Reddy Landcare CarbonSMART Landcare Australia Limited Level 9, 24 Collins Street Melbourne 3000 Website: Sydney Office Melbourne Office Rural Solutions 08