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The Carbon Farming Initiative

The Carbon Farming Initiative and the cattle industry

The Department of Climate Change and Energy Efficiency has released a Consultation Paper on the Design of the Carbon Farming Initiative (CFI), followed by a draft Bill (the Carbon Credits (Carbon Farming Initiative) Bill 2011) [1], designed to give legal force to the CFI .  The planned commencement date is 1 July 2011.

The purpose of the CFI is to give farmers, forest growers and landholders access to domestic voluntary and international carbon markets through the generation of carbon offset credits by undertaking certain emissions abatement activities.  These credits are referred to as CFI credits.

[1] Paper and Bill are available at: http://www.climatechange.gov.au/government/initiatives/carbon-farming-initative/recent-developments.aspx

Eligible activities

Possible eligible abatement activities are listed as:

  • Reforestation and revegetation;
  • Reduced methane emissions from livestock;
  • Reduced fertiliser emissions;
  • Manure management;
  • Reduced emissions or increased sequestration in agricultural soils (soil carbon);
  • Savanna fire management;
  • Avoided deforestation;
  • Burning of stubble/crop residue;
  • Reduced emissions from rice cultivation; and
  • Reduced emissions from landfill waste deposited before 1 July 2011

Much of the Consultation Paper concerns reforestation and avoided deforestation, picking up on work that was undertaken in the development of the now abandoned Carbon Pollution Reduction Scheme.

This brief focuses rather on the cattle industry including manure management and methane emissions from livestock.

Kyoto and non-Kyoto CFI credits

CFI credits would fall into two categories depending on the type of abatement activities that led to their generation and how these are recognised under the Kyoto Protocol.

Kyoto CFI credits – these would be issued for activities that are recognised by the Kyoto Protocol as counting in the calculation of whether Australia is meeting its Kyoto emissions target.  They could be traded with other governments that have Kyoto obligations, and to companies that have obligations under the European Union Emissions Trading Scheme and other national or regional emissions trading schemes.  They could also be traded in domestic and international voluntary carbon markets.  The Australian Government would facilitate international trades through the National Registry of Emission Units.

Non-Kyoto CFI credits - these would be issued for activities that are not recognised under Australia’s Kyoto commitment.  They could be traded in domestic and international voluntary carbon markets to companies and other organisations that seek to offset their emissions voluntarily.  For example, many organisations buy credits to become carbon neutral even though there is no mandatory requirement for them to do so.

The Australian Government has yet to decide whether or not non-Kyoto CFI credits would be accepted in any statutory emissions trading scheme or other carbon pricing mechanism that might be introduced in Australia.

The differentiation between activities generating Kyoto and non-Kyoto credits is not obvious in some cases.  It is proposed that this would be determined by the CFI scheme administrator.

Manure management and enteric fermentation are included as emission sources under the Kyoto Protocol [2] and are listed in the Bill as Kyoto offsets projects.

Afforestation, reforestation or avoided deforestation since 1990 are included under the Kyoto Protocol as sinks, provided certain criteria are met.  Presumably these would also generate Kyoto CFI credits.

Other activities including cropland and rangeland management are not included.  These would appear to be associated with non-Kyoto CFI credits.

The differentiation between Kyoto and non-Kyoto CFI credits is important.  Demand for non-Kyoto CFI credits is likely to be much lower and this would be reflected in the price.  Inclusion of non-Kyoto credits as offsets in any future Australian emissions trading scheme could improve this situation somewhat.

The Bill provides for the post-Kyoto period stating that it will apply to international agreements that are put in place to succeed the Kyoto Protocol.

[2] Refer   http://unfccc.int/essential_background/kyoto_protocol/items/1678.php

Approval of projects for CFI credits

In order to generate CFI credits a project would need prior approval by the CFI scheme administrator.  They would ensure that the credits meet international standards, comply with important principles, notably additionality, and follow rigorous standards of carbon accounting.

The additionality test requires that the project would not have been undertaken without the financial benefits provided by CFI credits.

The administrator would be assisted by the Domestic Offsets Integrity Committee (DOIC) which was recently established as an interim panel in Canberra. The DOIC would assess methodologies for use under the scheme, seeking public comment as part of the assessment process.  Methodologies would be approved by the Minister for Climate Change and Energy Efficiency.

Methodologies will be developed by the Department of Climate Change and Energy Efficiency (DCCEE), and the Department of Agriculture, Fisheries and Forestry in collaboration with industry, as well as by private project developers.  The government has provided funding for this.

The process of methodology approval should be easier where established methodologies already exist, for example, under the United Nations Framework Convention on Climate Change, the Clean Development Mechanism or recognised carbon trading schemes.

The Consultation Paper proposes that streamlined approval processes be adopted where possible to reduce the cost of participation in the CFI.  For example, some activities would be automatically deemed “additional” where there is clearly greenhouse gas abatement but no material increase in business profitability or agricultural productivity.  Flaring methane from livestock manure management is provided as an example of this.

Once methodologies are approved they would be made into determinations under the proposed CFI legislation and would be published on the DCCEE website.

Reporting

It is proposed that project proponents report to the scheme administrator annually and that all reports be audited by approved auditors.

Provision is made for abatement that is achieved between 1 July 2010 and the proposed commencement of the scheme (1 July 2011).  This abatement could be counted provided the methodology has been approved.

Opportunities for the cattle industry

Carbon management including measuring and reducing greenhouse gas emissions is an accepted part of responsible environmental management and is increasingly recognised as contributing to brand competiveness, corporate reputation and good governance.

The proposed Carbon Farming Initiative offers some potential opportunities for cattle industry.  It offers a financial incentive to undertake new on-farm greenhouse gas abatement activities where they would not otherwise be undertaken.

Two possible areas for greenhouse gas abatement are manure management and enteric methane emissions from livestock.  These areas are recognised in the Kyoto Protocol.  Carbon accounting methodologies are available from the IPCC Guidelines for National Greenhouse Gas Inventories and the Australian National Greenhouse Accounts.  Protocols for this area have been developed for other carbon schemes including California and Alberta and by the American Carbon Registry.

The Middle Way’s services include assisting farmers and land holders to:

  • Build a better understanding of sources of carbon emissions associated with individual operations, taking a life cycle approach.
  • Assess carbon abatement options including or manure management and livestock emissions.
  • Develop relevant methodologies for measuring, monitoring and reporting on greenhouse gas abatement from CFI projects.  These would be assessed by DOIC and endorsed by the Minister.
  • Liaise with government on the Consultation Paper and related issues.