To: Department of Climate Change and Energy Efficiency

Made: January 2011

Design of the Carbon Farming Initiative

The following comments on the Consultation Paper have been provided to the Department within the template (and under the headings) provided by them

Scheme design principles
We agree that clear and simple rules are needed to keep costs down. 

“Ensuring environmental integrity – credits that represent genuine and additional emissions abatement will have a higher market value and help address climate change.” This statement implies that activities that are not genuine will be funded at a lower rate! Suggest this is reworded, e.g. Ensuring environmental integrity – the market value of credits will rise in proportion to the effectiveness of an activity in emissions abatement.

EFN doubts that you can accurately measure how much carbon is emitted by some agricultural activity and hence the value, in terms of carbon abatement, of not carrying out the activity. For example, it is easy to quantify how much stubble is not burnt in one cropping season but impossible to quantify with certainty how much will be permanently incorporated into the soil. We assume that many of the activities mooted in the scheme will not be in this “genuine and additional” emissions abatement category?

The carbon crediting mechanism has to be elegant. It will not work otherwise. The design principles need to be few, simple and easy to understand. Simplicity can only be realised by having a very clear idea of what is to be achieved. We are not sure that the required achievement as documented for the CFI is simple and sharp enough.

The “additionality’ definition is not simple or easy to understand and makes no sense if you are trying to establish a scheme to reward landholders for reducing greenhouse gas emissions whilst providing other ecosystem services.  You could argue that landholders planting biodiverse plantations are losing an opportunity to fix more carbon in order to provide biodiversity services that are not paid for by the Community. That is, they are already being penalised financially by sacrificing carbon fixing opportunities to enhance biodiversity.

Other subordinate design principles are to do with equity, improvability, transparency, pertinent to the goal and goal focused.

Agree with aim of broad participation.

Suggest where possible that remote sensing be used to achieve low cost auditing of projects.

Scheme coverage
Abatement activities include several where much research is needed before including the activity eg soil carbon emission avoidance and sequestration activities. Other activities are straight forward and easy to monitor eg revegetation, avoided deforestation. The concept of avoided deforestation is strongly supported to recognise those farmers who have preserved carbon stocks over-and-above the short term economic gain of mobilising them.

We value the approach of enabling “beyond Kyoto” CFI credits.

The logical approach to deciding which activities to allow as eligible is to forget the concept of additionality and pay for the service delivered…if an action abates greenhouse gas emission then it is eligible regardless of any other commercial effect the action has. For equity reasons all avoidance activities should be eligible, irrespective of intent. Is that not an economic principle?

Sale of units
We suggest that Australian Government be included as a buyer of credits to offset their activities running the Country (State Governments mentioned as potential buyers but not Australian Govt). This would give the scheme more credibility.

Regional communities, water and biodiversity
We suggest that the Australian Government continues support for regional catchment Authorities and their associated strategies and plans and that these strategies and plans guide location of activities (using whole farm planning) in catchments to avoid negative consequences such as stream flow reduction due to large scale and poor placement of plantations. Essential that biodiversity plantings be considered as they provide multiple benefits for farming communities, the environment and Government.

Smaller plantations scattered over many farms will minimise negative environmental and commercial effects. Suggest no planning approval needed if plantations are part of an approved Whole Farm Plan with diverse production and therefore income streams. Downside to smaller plantations is higher transaction costs but remote sensing could overcome this disadvantage.

The cross benefits of more “environmentally aware” management of land are worth considering. The key “services” (ie ecosystem services) of greenhouse gas production control, clean water production, biodiversity maintenance and oxygen production are all inter-related. Focussing on just the one service will cause changes in the others and these changes may sometimes be adverse ones.

Risk management can only be dealt with by considering these interactions. Further, to minimise risk and maximise sustainability, appropriate planning for each region must include equitable treatment of people, evaluation of the environmental resources available, and the capacity of ecosystem services.

Integrity and standards
Systems for accreditation, annual reporting, maintenance of obligations and the use of agents are all high risk areas of governance needing careful consideration. Risk can be reduced by utilising the knowledge and the operational systems (infrastructure) set-up by established entities. Catchment Management Authorities and Commodity Organisations are in a good position to help in this regard.

Perhaps integrity would be improved if there were additional penalties for non compliance other than those inherent in carbon trading.

The additionality test excludes many potential activities outlined in section 4 Coverage. This seems at odds with the main purpose of the CFI; that is, reducing carbon and other greenhouse gas emissions to the atmosphere. (See point made under Coverage). Payment for ecosystem services, such as greenhouse gas abatement, should be separate and identifiable so that the value of each service paid for is evident to all those in the market (buyers and sellers).

Therefore EFN disagrees with the additionality definition. For example plantations that provide multiple benefits, especially salinity abatement, farm shelter and biodiversity benefits should be an eligible activity even if the plantations were initially established for multiple reasons other than fixing carbon. Each ecosystem service provided has its own value.

All activities that provide greenhouse gas abatement should be eligible, irrespective of intent.

We agree with the 100 year rule but not sure how you effectively monitor farming practices for 100 years to ensure they are still being practiced (or not practiced as the case may be) when best practice could actually change.

Leakage/measurable and verifiable
Leakage potential comes back to the concept of elegance. If we have an unequivocal vision, clear goals, and good regional planning systems, then we can have pertinent and responsive development and minimise leakage.

Third party auditing needs to be made simple enough to reduce costs, be backed by relevant research results and not necessarily annual so that the cost is not prohibitive.

Scheme processes
All these seem reasonable. They are simply about “governance”. The key part from our point of view is whether or not the included “abatements”, the veracity and accuracy of the measures, the pertinence of our understanding, and the ability to incorporate improved science, technology and systems are good enough to support the governance provisions

Taxation treatments of credits
We agree that existing taxation rules cover CFI.

Additional comments
The stated goal of the CFI is “to unlock (greenhouse gas) abatement opportunities”. The implied reason is to properly recognise, and financially acknowledge, the value of terrestrial organic carbon in planetary productivity and stability.

The level of certainty needed for abatement activities to be eligible for carbon credits needs further examination. Because of the complexity of ecological systems, many activities will not have certain results and some will have unforeseen side effects, in fact the only ‘certainty’ may be our commitment to moving to a low carbon emissions economy. This should be enough for enterprise planning. If demand for high levels of certainty reduces learning, appropriate flexibility, and overall improvement - then it is undesirable.

Much research will be needed if all potential activities listed are permissible under the scheme. We have a lot of learning to do as we move to this new land management paradigm. The CFI needs to unequivocally embrace this. For example a staged approach to permissible activities would be sensible so that straightforward easy to verify activities such as revegetation can proceed immediately.

There is a conflict in the document between suggested potential activities and the concept of additionality that has not been properly addressed. Many suggested activities are effectively excluded by the definition of additionality.

Peter Forster

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