Soil Carbon Trading: Lessons Learned From Forests


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Dr Annette Cowie of the NSW Department of Primary Industries shares the secret formula for success used by forest offset promoters to get credititation and to convince governments that they were socially positive.

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  • Soil Carbon Trading: Lessons Learned From Forests

    1. 1. Annette Cowie NSW Department of Primary Industries Soil carbon trading: Lessons learned from forestry
    2. 4. After Carlson et al 2001; data from Lal, 2008 Units are Pg C (10 15 g or Gt) Global carbon pools Assimilation Death <ul><li>Soil 2500 </li></ul><ul><li>SOC 1550 </li></ul><ul><li>SIC 950 </li></ul>Vegetation 560 Fossil fuel 4130 Atmosphere 760 Ocean 38400
    3. 5. Biosequestration - reforestation
    4. 6. Biosequestration – soil OM
    5. 7. 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
    6. 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
    7. 9. Biosequestration in soil is significant <ul><li>How do we encourage it? </li></ul>
    8. 10. Can soil carbon trading work? <ul><li>Should landholders be paid for soil carbon? </li></ul><ul><li>Can a workable scheme be designed? </li></ul><ul><li>Will it be an effective incentive? </li></ul><ul><li>What can we learn from forestry? </li></ul>
    9. 11. Forest C trading <ul><li>Allow forest offsets: </li></ul><ul><li>NSW GGAS </li></ul><ul><li>Greenhouse Friendly </li></ul><ul><li>Kyoto, incl Clean Development Mechanism </li></ul><ul><li>California </li></ul><ul><li>Chicago CCX </li></ul><ul><li>CPRS </li></ul><ul><li>No forest offsets: </li></ul><ul><li>European ETS </li></ul>
    10. 12. Participation alternatives <ul><li>Optional offset mechanism </li></ul><ul><li>Full coverage of sector </li></ul>
    11. 13. New South Wales, ACT GGAS <ul><li>NSW Carbon Rights Legislation Amendment Act 1998 </li></ul><ul><ul><li>legal recognition of carbon right as a forestry right </li></ul></ul><ul><li>NSW Greenhouse Gas Abatement Scheme 2003 </li></ul><ul><ul><li>Targets per capita emissions from electricity generation -5% by 2007 </li></ul></ul><ul><ul><li>Electricity retailers and large electricity users are liable </li></ul></ul><ul><ul><li>ACT joined scheme 2005 </li></ul></ul><ul><ul><li>Carbon price ~$15/tCO 2 e </li></ul></ul>
    12. 14. Can soil carbon trading work? <ul><li>Should landholders be paid for soil carbon? </li></ul><ul><li>Can a workable scheme be designed? </li></ul><ul><li>Will it be an effective incentive? </li></ul><ul><li>What can we learn from forestry? </li></ul>
    13. 15. Benefits of soil carbon <ul><li>Biological </li></ul><ul><li>Energy for biological activity </li></ul><ul><li>Nutrient cycling </li></ul><ul><li>Physical </li></ul><ul><li>Structural stability </li></ul><ul><li>Erosion resistance </li></ul><ul><li>Water infiltration </li></ul><ul><li>Water holding capacity </li></ul><ul><li>Chemical </li></ul><ul><li>Nutrient holding capacity </li></ul><ul><li>Buffer against pH change </li></ul>↑ Soil carbon = ↑ Soil health ↑ Resilience
    14. 17. Should landholders get credit? <ul><li>Yes: Climate change mitigation is a public good </li></ul>
    15. 18. Can a workable scheme be designed? <ul><li>Project level emissions trading requires: </li></ul><ul><li>Standard product </li></ul><ul><li>Efficient estimation of emissions and removals </li></ul><ul><li>System for verification </li></ul><ul><li>Market structure, buyers </li></ul>
    16. 19. Can a workable scheme be designed? <ul><li>Hurdles for offset projects: </li></ul><ul><li>Offsets must be </li></ul><ul><li>Credible (real net abatement) </li></ul><ul><li>Permanent (or deal with non-permanence) </li></ul><ul><li>Measurable </li></ul><ul><li>Additional </li></ul><ul><li>Verifiable </li></ul>
    17. 20. Hurdles for offsets: credibility <ul><li>Is it real? </li></ul><ul><li>Is carbon sequestered? </li></ul><ul><li>Is there a net benefit? </li></ul><ul><ul><li>Are there negative offsite impacts? (Leakage) </li></ul></ul><ul><ul><li>Increased emissions offsite, attributable to the project, should be considered </li></ul></ul><ul><ul><li>Are ‘life cycle’ emissions considered? </li></ul></ul><ul><ul><li>Emissions due to fossil fuel use, indirect (fertiliser, herbicide), and non-CO 2 greenhouse gases should be considered </li></ul></ul>
    18. 21. Nitrous oxide <ul><li>Increased soil N, by fertiliser, legumes or some organic amendments, will increase N 2 O </li></ul><ul><li>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 ) </li></ul><ul><li>C credit for offset activities should be discounted for increase in N 2 O (but uncertainty in estimation is high) </li></ul>
    19. 22. Hurdles for offsets: permanence <ul><li>“ abatement should represent a permanent reduction in CO 2 equivalents in the atmosphere” </li></ul><ul><li>Biosequestration is vulnerable </li></ul><ul><li>NSW GGAS forestry offset: </li></ul><ul><li>“ 100 year rule” Can only trade carbon that will remain sequestered for 100 years </li></ul><ul><li>Registration on title: forest carbon rights, restriction on use </li></ul><ul><li>Kyoto CDM: temporary credits </li></ul>
    20. 23. Hurdles for soil C offsets <ul><li>Handling (im)permanence </li></ul><ul><li>restriction on land use? </li></ul><ul><li>restoration provision? </li></ul><ul><li>alternative approach to permanence? </li></ul>
    21. 24. Hurdles for offsets: measurement <ul><li>Can it be measured / estimated? </li></ul><ul><li>Easy for forests </li></ul>
    22. 25. Counting Carbon in plantations - easy! <ul><li>Carbon makes up 50% of tree biomass </li></ul><ul><li>Predict carbon from growth models, inventory </li></ul><ul><li>Focus on stock change, not absolutes </li></ul>
    23. 26. <ul><li>Allometric approach for estimating carbon in trees </li></ul><ul><li>from inventory data </li></ul>
    24. 28. Hurdles for offsets: measurement <ul><li>Dealing with uncertainty </li></ul><ul><li>GGAS: discount for uncertainty “70% rule” Can only trade quantity for which 70% probability that actual sequestration exceeds traded C </li></ul>
    25. 29. Hurdles for offsets: measurement <ul><li>Soil C </li></ul><ul><li>Monitoring is not feasible </li></ul><ul><li>Cost-effective accounting </li></ul><ul><ul><li>Based on calibrated models informed by baseline measurement </li></ul></ul><ul><li>Credit based on modelled rather than measured impact of land use </li></ul>
    26. 30. Hurdles for offsets: additionality <ul><li>Is it new abatement? (“Abatement should be “additional” to “business-as-usual” if it used to offset emissions”) </li></ul><ul><li>Additionality test determined by scheme </li></ul><ul><li>GGAS: environmental </li></ul><ul><li>GF, CDM: financial </li></ul>
    27. 31. Hurdles for C offsets - verification <ul><li>Is it verifiable? </li></ul><ul><li>GGAS: audit </li></ul><ul><li>Spot checks? </li></ul><ul><li>Remote sensing? </li></ul><ul><li>Soil C </li></ul><ul><li>Compliance based on land management practice rather than measured soil C stock change (CCX approach)? </li></ul>
    28. 32. Will it be an effective incentive? <ul><li>Sufficiently attractive to encourage participation? </li></ul><ul><li>Costs vs returns </li></ul><ul><ul><li>Legal : ownership </li></ul></ul><ul><ul><li>Record keeping, GIS </li></ul></ul><ul><ul><li>Monitoring </li></ul></ul><ul><ul><li>Reporting </li></ul></ul><ul><ul><li>Audit </li></ul></ul><ul><li>Risks </li></ul>
    29. 33. New South Wales GGAS <ul><li>Conservative calculation methods </li></ul><ul><li>Strict rules for accreditation, accounting, record keeping, reporting, audit </li></ul><ul><li>“ Restriction on Use” </li></ul><ul><li>= Confidence in the market-place </li></ul><ul><li>But </li></ul><ul><li>= High transaction costs, low net return </li></ul><ul><li>= Barrier to participation </li></ul>
    30. 34. NSW Greenhouse Gas Abatement Scheme
    31. 35. What about risk? <ul><li>Terrestrial carbon is vulnerable: risk of loss </li></ul><ul><li>Australia elected to exclude “Article 3.4 activities” due to perceived risk of losses </li></ul>
    32. 36. ‘ Factoring-Out’ <ul><li>COP 7 Marrakesh Accord: </li></ul><ul><li>… .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 </li></ul><ul><li>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 </li></ul>
    33. 37. Requirements for Soil carbon trading – lessons from forestry (1) <ul><li>Credibility of concept </li></ul><ul><ul><li>Document the potential </li></ul></ul><ul><ul><li>Handle non-permanence </li></ul></ul><ul><ul><li>Satisfy additionality, report leakage </li></ul></ul><ul><ul><li>Adjust for impact on whole farm GHG balance </li></ul></ul><ul><li>Marketable product </li></ul><ul><ul><li>Standard offset unit – fungible credit </li></ul></ul><ul><ul><li>Compatible with international markets </li></ul></ul><ul><li>Compliance approach </li></ul><ul><ul><li>Based on practice, not measured stock changes </li></ul></ul>
    34. 38. Requirements for Soil carbon trading – lessons from forestry (2) <ul><li>Minimise barriers </li></ul><ul><li>Eligibility requirements: </li></ul><ul><ul><li>practices, legal -ownership </li></ul></ul><ul><li>Accreditation costs </li></ul><ul><li>Participation costs </li></ul><ul><ul><li>Cost-effective GHG accounting: models </li></ul></ul><ul><ul><li>Record-keeping, monitoring and verification </li></ul></ul><ul><li>Marketing costs </li></ul><ul><ul><li>Pooling mechanism </li></ul></ul><ul><li>Risk </li></ul><ul><ul><li>Factoring out effects that aren’t directly human-induced </li></ul></ul>
    35. 39. Can’t wait for 2015 Mitigation needed now!