Annette Cowie NSW Department of Primary Industries Soil carbon trading: Lessons learned from forestry

After Carlson et al 2001; data from Lal, 2008 Units are Pg C (10 15 g or Gt) Global carbon pools Assimilation Death Soil 2500 SOC 1550 SIC 950 Vegetation 560 Fossil fuel 4130 Atmosphere 760 Ocean 38400

Soil 2500

SOC 1550

SIC 950

Biosequestration - reforestation

Biosequestration – soil OM

Sequestration potential: Guesstimates *Relative to conventional practice 18Mt = 11% total NSW (2006) = 100% NSW agriculture emissions Potential increase* tCO2e/ha/year Range; Average NSW total MtCO2-e/year Cropping 0 - 2 0.7 2 Pasture management –Higher rainfall 0 -1.8 0.9 8 Rangeland management 0 - 1 0.4 8

Sequestration potential: reforestation Sequestration rate tCO 2 -e/ha/year 1.5 -2Mha reforestation required for 18Mt/yr sequestration Montagu et al Carbon Sequestration Predictor Across Australia: 657 mt CO2e from 2.25m ha, over 40 years cf annual emissions 560 mt CO2e Hatfield-Dodds et al, 2007 Annual rainfall mm 400-600 600-800 >800 4-10 6-12 10-25

Biosequestration in soil is significant How do we encourage it?

How do we encourage it?

Can soil carbon trading work? Should landholders be paid for soil carbon? Can a workable scheme be designed? Will it be an effective incentive? What can we learn from forestry?

Should landholders be paid for soil carbon?

Can a workable scheme be designed?

Will it be an effective incentive?

What can we learn from forestry?

Forest C trading Allow forest offsets: NSW GGAS Greenhouse Friendly Kyoto, incl Clean Development Mechanism California Chicago CCX CPRS No forest offsets: European ETS

Allow forest offsets:

NSW GGAS

Greenhouse Friendly

Kyoto, incl Clean Development Mechanism

California

Chicago CCX

CPRS

No forest offsets:

European ETS

Participation alternatives Optional offset mechanism Full coverage of sector

Optional offset mechanism

Full coverage of sector

New South Wales, ACT GGAS NSW Carbon Rights Legislation Amendment Act 1998 legal recognition of carbon right as a forestry right NSW Greenhouse Gas Abatement Scheme 2003 Targets per capita emissions from electricity generation -5% by 2007 Electricity retailers and large electricity users are liable ACT joined scheme 2005 Carbon price ~$15/tCO 2 e

NSW Carbon Rights Legislation Amendment Act 1998

legal recognition of carbon right as a forestry right

NSW Greenhouse Gas Abatement Scheme 2003

Targets per capita emissions from electricity generation -5% by 2007

Electricity retailers and large electricity users are liable

ACT joined scheme 2005

Carbon price ~$15/tCO 2 e

Can soil carbon trading work? Should landholders be paid for soil carbon? Can a workable scheme be designed? Will it be an effective incentive? What can we learn from forestry?

Should landholders be paid for soil carbon?

Can a workable scheme be designed?

Will it be an effective incentive?

What can we learn from forestry?

Benefits of soil carbon Biological Energy for biological activity Nutrient cycling Physical Structural stability Erosion resistance Water infiltration Water holding capacity Chemical Nutrient holding capacity Buffer against pH change ↑ Soil carbon = ↑ Soil health ↑ Resilience

Biological

Energy for biological activity

Nutrient cycling

Physical

Structural stability

Erosion resistance

Water infiltration

Water holding capacity

Chemical

Nutrient holding capacity

Buffer against pH change

Should landholders get credit? Yes: Climate change mitigation is a public good

Yes: Climate change mitigation is a public good

Can a workable scheme be designed? Project level emissions trading requires: Standard product Efficient estimation of emissions and removals System for verification Market structure, buyers

Project level emissions trading requires:

Standard product

Efficient estimation of emissions and removals

System for verification

Market structure, buyers

Can a workable scheme be designed? Hurdles for offset projects: Offsets must be Credible (real net abatement) Permanent (or deal with non-permanence) Measurable Additional Verifiable

Hurdles for offset projects:

Offsets must be

Credible (real net abatement)

Permanent (or deal with non-permanence)

Measurable

Additional

Verifiable

Hurdles for offsets: credibility Is it real? Is carbon sequestered? Is there a net benefit? Are there negative offsite impacts? (Leakage) Increased emissions offsite, attributable to the project, should be considered Are ‘life cycle’ emissions considered? Emissions due to fossil fuel use, indirect (fertiliser, herbicide), and non-CO 2 greenhouse gases should be considered

Is it real?

Is carbon sequestered?

Is there a net benefit?

Are there negative offsite impacts? (Leakage)

Increased emissions offsite, attributable to the project, should be considered

Are ‘life cycle’ emissions considered?

Emissions due to fossil fuel use, indirect (fertiliser, herbicide), and non-CO 2 greenhouse gases should be considered

Nitrous oxide Increased soil N, by fertiliser, legumes or some organic amendments, will increase N 2 O Emissions of N 2 O could partially negate the mitigation benefit of increased soil C sequestration (GWP of N 2 O is 298 x CO 2 ) C credit for offset activities should be discounted for increase in N 2 O (but uncertainty in estimation is high)

Increased soil N, by fertiliser, legumes or some organic amendments, will increase N 2 O

Emissions of N 2 O could partially negate the mitigation benefit of increased soil C sequestration (GWP of N 2 O is 298 x CO 2 )

C credit for offset activities should be discounted for increase in N 2 O (but uncertainty in estimation is high)

Hurdles for offsets: permanence “ abatement should represent a permanent reduction in CO 2 equivalents in the atmosphere” Biosequestration is vulnerable NSW GGAS forestry offset: “ 100 year rule” Can only trade carbon that will remain sequestered for 100 years Registration on title: forest carbon rights, restriction on use Kyoto CDM: temporary credits

“ abatement should represent a permanent reduction in CO 2 equivalents in the atmosphere”

Biosequestration is vulnerable

NSW GGAS forestry offset:

“ 100 year rule” Can only trade carbon that will remain sequestered for 100 years

Registration on title: forest carbon rights, restriction on use

Kyoto CDM: temporary credits

Hurdles for soil C offsets Handling (im)permanence restriction on land use? restoration provision? alternative approach to permanence?

Handling (im)permanence

restriction on land use?

restoration provision?

alternative approach to permanence?

Hurdles for offsets: measurement Can it be measured / estimated? Easy for forests

Can it be measured / estimated?

Easy for forests

Counting Carbon in plantations - easy! Carbon makes up 50% of tree biomass Predict carbon from growth models, inventory Focus on stock change, not absolutes

Carbon makes up 50% of tree biomass

Predict carbon from growth models, inventory

Focus on stock change, not absolutes

Allometric approach for estimating carbon in trees from inventory data

Allometric approach for estimating carbon in trees

from inventory data

Hurdles for offsets: measurement Dealing with uncertainty GGAS: discount for uncertainty “70% rule” Can only trade quantity for which 70% probability that actual sequestration exceeds traded C

Dealing with uncertainty

GGAS: discount for uncertainty “70% rule” Can only trade quantity for which 70% probability that actual sequestration exceeds traded C

Hurdles for offsets: measurement Soil C Monitoring is not feasible Cost-effective accounting Based on calibrated models informed by baseline measurement Credit based on modelled rather than measured impact of land use

Soil C

Monitoring is not feasible

Cost-effective accounting

Based on calibrated models informed by baseline measurement

Credit based on modelled rather than measured impact of land use

Hurdles for offsets: additionality Is it new abatement? (“Abatement should be “additional” to “business-as-usual” if it used to offset emissions”) Additionality test determined by scheme GGAS: environmental GF, CDM: financial

Is it new abatement? (“Abatement should be “additional” to “business-as-usual” if it used to offset emissions”)

Additionality test determined by scheme

GGAS: environmental

GF, CDM: financial

Hurdles for C offsets - verification Is it verifiable? GGAS: audit Spot checks? Remote sensing? Soil C Compliance based on land management practice rather than measured soil C stock change (CCX approach)?

Is it verifiable?

GGAS: audit

Spot checks?

Remote sensing?

Soil C

Compliance based on land management practice rather than measured soil C stock change (CCX approach)?

Will it be an effective incentive? Sufficiently attractive to encourage participation? Costs vs returns Legal : ownership Record keeping, GIS Monitoring Reporting Audit Risks

Sufficiently attractive to encourage participation?

Costs vs returns

Legal : ownership

Record keeping, GIS

Monitoring

Reporting

Audit

Risks

New South Wales GGAS Conservative calculation methods Strict rules for accreditation, accounting, record keeping, reporting, audit “ Restriction on Use” = Confidence in the market-place But = High transaction costs, low net return = Barrier to participation

Conservative calculation methods

Strict rules for accreditation, accounting, record keeping, reporting, audit

“ Restriction on Use”

= Confidence in the market-place

But

= High transaction costs, low net return

= Barrier to participation

NSW Greenhouse Gas Abatement Scheme

What about risk? Terrestrial carbon is vulnerable: risk of loss Australia elected to exclude “Article 3.4 activities” due to perceived risk of losses

Terrestrial carbon is vulnerable: risk of loss

Australia elected to exclude “Article 3.4 activities” due to perceived risk of losses

‘ Factoring-Out’ COP 7 Marrakesh Accord: … .accounting excludes removals resulting from (i) elevated carbon dioxide concentrations above their pre-industrial level; (ii) indirect nitrogen deposition; and (iii) the dynamic effects of age structure resulting from activities and practices before the reference year IPCC invited to develop methods for “factoring-out” direct human-induced changes from changes due to indirect human-induced and natural effects, and effects due to past practices in forests

COP 7 Marrakesh Accord:

… .accounting excludes removals resulting from (i) elevated carbon dioxide concentrations above their pre-industrial level; (ii) indirect nitrogen deposition; and (iii) the dynamic effects of age structure resulting from activities and practices before the reference year

IPCC invited to develop methods for “factoring-out” direct human-induced changes from changes due to indirect human-induced and natural effects, and effects due to past practices in forests

Requirements for Soil carbon trading – lessons from forestry (1) Credibility of concept Document the potential Handle non-permanence Satisfy additionality, report leakage Adjust for impact on whole farm GHG balance Marketable product Standard offset unit – fungible credit Compatible with international markets Compliance approach Based on practice, not measured stock changes

Credibility of concept

Document the potential

Handle non-permanence

Satisfy additionality, report leakage

Adjust for impact on whole farm GHG balance

Marketable product

Standard offset unit – fungible credit

Compatible with international markets

Compliance approach

Based on practice, not measured stock changes

Requirements for Soil carbon trading – lessons from forestry (2) Minimise barriers Eligibility requirements: practices, legal -ownership Accreditation costs Participation costs Cost-effective GHG accounting: models Record-keeping, monitoring and verification Marketing costs Pooling mechanism Risk Factoring out effects that aren’t directly human-induced

Minimise barriers

Eligibility requirements:

practices, legal -ownership

Accreditation costs

Participation costs

Cost-effective GHG accounting: models

Record-keeping, monitoring and verification

Marketing costs

Pooling mechanism

Risk

Factoring out effects that aren’t directly human-induced

Can’t wait for 2015 Mitigation needed now!