CARBON TRADING – now more relevant to you all!

posted by Kirrily Blomfield

16 June 2015 / 0 comments

Carbon! I usually talk about how it helps our production and how to get more of it in the soil. There is however another aspect to carbon that I haven’t touched on yet. This is the opportunity for farmers to earn money from trading carbon – either storing carbon or reducing the emissions of carbon (and other greenhouse gases). For some, this may be adding extra income to their farm business, while for others the income might be an added bonus to putting carbon in the soil, which they know will benefit their production in many ways.

I don’t know about you, but in the evolution of the Carbon Farming Initiative in Australia (what the last Government called the agriculture component of carbon trading), I felt a bit like switching off from the politics involved with it. As a farmer, I felt – “Just give me something that’s easy to work with on-ground!” This is why I am grateful for people like Louisa Kiely of Carbon Farmers of Australia. Louisa has contributed to the hard work for us, to help get our industry to a point where there are now some usable aspects of the Australian Governments’ carbon reduction scheme. This is why I’ve chosen to speak with Louisa about where things are up to with carbon trading and the now called Emissions Reduction Fund.

What is The Emissions Reduction Fund

The Emissions Reduction Fund provides “incentives for emissions reduction activities across the Australian economy.”¹ Its objective is to help reduce Australian carbon emissions to 5% below 2000 levels by 2020.

Can I make money from the Emissions Reduction Fund?

The great thing is that the options for farmers to be involved in making money from carbon are now more likely relevant to all of you – croppers and graziers.

In my opinion, whatever your views on climate change and its link with human induced carbon emissions, can be put aside. Simply ask yourself – Is there an opportunity for me to make money from trading carbon and can it fit with the other goals of my farming business and its operation?

The Emissions Reduction Fund allows farmers and land managers to earn tradable carbon credits – Australian Carbon Credit Units (ACCUs) by:

1. storing carbon (in soil and trees)

2. reducing greenhouse gas emissions (from tractors, trucks, stationary pumps, fertiliser and livestock).

These credits or ACCUs can then be sold to people and businesses wishing to offset their greenhouse gas emissions.

Australian Carbon Credit Units (ACCUs)

ACCUs can be earned by a farmer for storing carbon or for preventing greenhouse gas emissions via approved methodologies. One ACCU is earned for each tonne of carbon dioxide stored or avoided (or carbon dioxide equivalents for other greenhouse gases – methane and nitrous oxide). An ACCU is a tradeable unit that allows the right to emit one tonne of carbon dioxide (or other greenhouse gas equivalent). Farmers can then trade (sell) this for financial gain – to those wanting to offset their emissions. This may either be sold at auction (where the Australian Government is the primary buyer) or into the direct market. The Government has allocated $2.55Billion Australian dollars for purchasing ACCUs – to reduce emissions and store carbon – so there’s lots of funds on offer.

Methodologies

Louisa explained that the process a farmer goes through to make money may seem more complex than necessary, but there needs to be accountability and assurance for the buyer that the atmospheric carbon tonnes really are being reduced. This assurance comes through the thoroughly determined methodologies.

A methodology is the rules and instructions one must follow in order to be eligible to claim the carbon credits. Louisa describes it as like a recipe – that needs to be followed to a ‘T’.

I would like to share with you some of the currently approved methodologies that might be relevant to your farming operations, as suggested by Louisa.

1. Reducing greenhouse gas emissions in beef cattle through feeding nitrate containing supplements

This methodology requires farmers to replace urea lick blocks with nitrate lick blocks for pasture fed beef cattle, which has the effect of reducing methane (greenhouse gas) emissions from enteric fermentation. It is widely accepted that methane has a 25 fold greater impact on climate change than carbon dioxide.

2. Sequestering Carbon in Soils in Grazing Systems.

Because the outcomes of carbon sequestered into soils can be so varied with management – this method requires proofing through soil testing. The (fairly exhaustive) soil testing requirements in the current methodology is something that is a challenge to people adopting this methodology. It is hoped (and being worked on) that more time efficient and less costly methods of soil testing become available in the future. On the positive side however, there used to be the need to assure the carbon was sequestered for 100 years – something most farmers were apprehensive to become involved in. There are now modifications to the methodology that allow for 25 year ‘permanency’.

3. Land and Sea Transport – Mobile Farm Machinery and/or trucks

This methodology aims at reducing emissions from vehicles (carbon dioxide, methane, nitrous oxide). This can be done by:

‘Replacing machinery (for more efficient ones)

Modifying existing vehicles

Changing energy sources

Changing operational practices in relation to vehicles’²

Louisa suggests farmers could band with some other farmers to replace older, energy inefficient machinery. There is then buying power for purchasing the equipment, as well as the potential financial benefits from the carbon credits.

This could apply to tractors and farm machinery, but also trucks; you may run them for commodity hauling. Louisa told me of a trucking company that trained their drivers to drive in a manner that was more economical on fuel. This created significant savings across the fleet.

4. Industrial Electricity and Fuel Efficiency.

“This method could benefit owners or operators of (usually large-scale) energy intensive equipment. Projects may involve a broad range of activities that reduce direct fuel combustion emissions and emissions from electricity use. These include upgrades to boilers, compressed air systems and heating, ventilation and cooling systems, or the installation of variable speed drives.”³

I know a common complaint of irrigation farmers is the money spent on energy for irrigation pumps. It is possible that carbon credits (ACCUs) can be generated from savings by moving to more efficient pumps. I also wonder what savings could be made with improving efficiencies of grain dryers?

5. Improving efficiencies of Fertiliser use in Irrigated Cotton

“This method provides for crediting emissions reductions achieved by improving the efficiency of synthetic fertiliser use in irrigated cotton. The method provides proponents with flexibility to select a broad range of management actions that will achieve these emissions reductions.”⁴ According to the NSW DPI, nitrous oxide (the greenhouse gas emitted from inefficient use of synthetic nitrogen fertiliser) has around a 310⁵ fold increased influence on climate change that carbon dioxide.

6. Afforestation and Reforestation – Plant Trees

We can’t forget the planting of trees, which store much carbon. Louisa suggests checking out the Government’s Green Army project to lower the cost of planting the trees.

As you can see some of the methodologies are really becoming viable options for farmers. I look forward to a more useable and cost effective method of soil testing being approved within a methodology for soil storing carbon – but that is also rigorous for its purpose. We already know that sequestering carbon into soils is a fantastic thing to do for our soil and production systems, so I look forward to farmers being rewarded by having cost effective methodologies of the ERF available for soil carbon.

7. Finishing Beef Earlier

This methodology is not finalised yet- but is likely to be soon, according to Louisa. As mentioned above, cattle are a methane emitter and so this methodology requires the turning off of cattle earlier in order to reduce methane emissions.

Competition in the Market

Finally, Louisa points out that we can’t be complacent about this topic. There is now a methodology to encourage airlines to reduce their emissions. This essentially leaves us competing with the likes of Qantas for the emission reduction funds available from the Government. Louisa suggests that companies like Qantas would have whole teams working on such a project. While there are a lot of funds on offer – we may have to get moving if we want our share among the big players like Qantas.

If you would like to know more I would suggest that many of your questions about carbon trading can be answered at the National Carbon Farming Conference at Albury, NSW on the 7^th to the 10^th July 2015 – run by Carbon Farmers of Australia. If you are interested – you can see details here.

I may follow up with another post with some details about the ACCU selling options – auction and direct – and what prices have been received for carbon in the past.

References

Do you think any of these methodologies might be appropriate for your farm business?

Any comments from the overseas readers on what’s happening in the US?

And do you know what the opportunities currently are for farmers to make money from storing or abating carbon in the US?