What if demand for ACCUs triples?

June 19, 2014 Louisa Kiely

Update of Carbon Farming & Trading Assocation

We have a scheduled meeting with the Carbon Market Institute (CMI) to explore the opportunities for forming an industry body as part of the CMI – to provide the Institute with Carbon Farming knowledge and expertise and to take advantage of the Institute’s secretariat resources. As a foundation member of the CMI, Carbon Farmers of Australia has long represented our sector in the CMI’s consultation and policy formulation activities. The concern we would have is that, as a chapter of the CMI, we would compete for resources and attention with the industrial and energy sectors which dominate the industry. The objective of the workshop – to find a means of generating funds to resource the existing lobbying and policy activities – would not be met by the CMI solution. There is also the possibility that the amounts that could be generated by fees paid for membership would be insufficient to fund a full service association. We are consulting with a specialist in ethical investment and association management to resolve these issues.

The single sector that stands to gain the most or lose the most, depending on the outcome of the Emissions Reduction Fund’s Carbon Farming Initiative, is the soil nutrition and soil health amendment industries. The Soil Carbon Grazing Management Methodology allows farmers to select their choice of activity that will increase soil carbon levels and deliver genuine additionality (i.e.wouldn’t have happened without the CFI). This offers some opportunity for soil amendments. However the main opportunity lies in cropping, and this is where the possibility for gain or loss is greatest. Our assumption that a CFI methodology for croppers would follow the grazing methodology automatically is not as secure as we thought. The Minister and the Department have been repeating the message that government resources for developing methodologies will be assigned based on competition between activities. The criteria for success include the amount of abatement that can be delivered in the shortest period. This puts us at a disadvantage, given that the CSIRO told the Senate Committee that soil could make only a small or modest contribution to abatement – despite the fact that there is no evidence of the potential performance of a contemporary soil amendment activity in the hands of a highly experienced and skilled land manager. Should soil carbon cropping become a methodology – and the cost is not a barrier, given that it would be an extension of the grazing methodology – the number of potential new customers for natural fertilisers will be multiplied by an order of magnitude. If cropping can’t compete for government methodology resources,you are faced with hiring highly expensive scientists to build your own, in collaboration with your competitors. Do you have the time to lobby government or build unlikely alliances with competitors and see it through to the end? This is where full-time lobbyists come in handy.

Why the 1st One Million Tonnes??

There is a demand for numbers in the carbon market – What we need here is strength in numbers: because while many rural enterprises are small, many “industrial” suppliers of offsets have massive capacity. With the ERF, God is on the side of the big battalions: Individual enterprises that can supply 200,000 tonnes can step outside the reverse auction system and negotiate their own contracts. We can do that by aggregating aggregates. You maintain control of your carbon. We set our prices to avoid cutting each other’s throats, and bid as as block. It also works to bring costs down. Especially measurement. If we buy as a block, we can presumably take advantage of bulk discounts. Costs down. Prices up. Further, suppliers of services to the rural offsets sector should register an Expression of Interest so we can map our capacity as a sector and where the gaps are.

What if demand for ACCUs triples?

What happens to the demand for carbon credits under the Emissions Reduction Fund if our target is tripled to 15% in 2016 (two years away)? It could happen. Read on…

While Australia’s leadership is confused about the direction the rest of the world is taking on Global Warming, the rest of the world is getting serious about it. ”There is no sign – no sign – that trading schemes are increasingly being adopted. If anything trading schemes are being discarded, not adopted,” said PM Tony Abbott while in Canada recently. In fact, the World Bank reports that eight new carbon markets opened in 2013: California Cap-and-Trade Program, Quebec Cap-and-Trade System, Kazakhstan Emissions Trading Scheme, and five Chinese pilot emissions trading schemes (Shenzhen, Shanghai, Beijing, Guangdong, and Tianjin). And new carbon taxes were introduced in Mexico and France this past year. But the big news is that the three biggest emitters of greenhouse gases last week made game-changing moves on climate. China – Emitter No. 1 – announced it will set an absolute cap on its emissions from 2016. Setting an absolute cap instead of pegging them to the level of economic growth means they will be more tightly regulated, reports Reuters. China is now the second largest carbon market in the world. In America – Emitter No. 2 – the EPA announced a national standard to cut carbon emissions from coal fired power plants. US states can join cap-and-trade programs, building on the 10 states with market-based mechanisms, or start their own. In India – Emitter No. 3 – the people just elected as Prime Minister Narendra Modi, who pioneered incentives for large-scale solar power. He wants to use solar technology to supply electricity to 400 million people in India who do not have power.

These events make a new global climate treaty in Paris in December 2015 more likely. This will set dominoes falling in Australia which has set itself higher targets should the rest of the world fall into line, which now seems likely. We have already promised to reduce emissions by 5% of 2000 levels by 2020. The target increases to 15% if there is an international agreement where developing economies commit to reduce emissions and advanced economies take on commitments like Australia’s. China and India are classified as ‘developing economies’. The target increases to 25% if there is comprehensive global action capable of stabilizing CO2 levels at 450ppm or lower.

At the same time, public opinion is swinging behind action on Climate Change as people are noticing Nature acting scarily like the scientific predictions that the denialists had rubbished. The Bureau of Meteorology reports that Australia’s climate has warmed by 0.9°C since 1910, and the frequency of extreme weather has changed, with more extreme heat and fewer cool extremes. Extreme fire weather has increased, and the fire season has lengthened, across large parts of Australia since the 1970s. Sydney broke its previous records for warmth in May, with maximums almost 4 degrees above average. Sydney Observatory Hill had its warmest May on record. The city experienced 19 consecutive days above 22C, and four consecutive days above 25C. Only one May day had a top temperature below 20C. Sydney Airport recorded it’s warmest autumn since 1958 with 21 consecutive days above 20C and seven days in a row reached at least 25C.

Public attitudes re shifting rapidly; the 2014 Lowy Institute Report revealed that 45% of Australians see global warming as a ‘serious and pressing problem’, up five points and the second consecutive increase since 2012. A significant majority (63%) say that the government ‘should be taking a leadership role on reducing emissions’. Only 28% believe ‘it should wait for an international consensus before acting’.

In ancient times, King Canute had his throne placed on a beach in England in front of the advancing tide and commanded the sea to retreat – to demonstrate to his followers that even he could not defy Nature. There’s a lesson in that somewhere.

What can you do?

Go to the website and register an Expression of Interest in the 1st One Hundred Million Tonnes campaign.


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