Tuesday, June 10, 2008


ATTENTION: This paper does not necessarily represent the views of the Australian Government or any Government Minister. It is a working paper prepared by the Emissions Trading Division of the Department of Climate Change. The views contained in this paper are preliminary only and are subject to change. The aim is to promote discussion and submissions at not sought at this time.



1. Introduction

There has been ongoing and active debate about the international greenhouse gas accounting framework for emissions from land-use. The Kyoto accounting rules are relevant to the design of the emissions trading scheme because they determine what emissions sources and sinks count towards our internationally agreed emissions target.

2. Current international accounting

The international accounting framework specifies which emissions sources and sinks count towards our Kyoto target and provides guidance on approaches and methodologies for calculating Parties’ national emissions inventories. These are used to measure progress towards Kyoto emissions targets. The current Kyoto accounting rules require emissions from forestry and deforestation to be reported on a land basis and non-CO2 gases (primarily nitrous oxide and methane) to be reported for specific activities. Kyoto Protocol accounting rules for land-based emissions are not comprehensive. They cover a limited set of emissions sources and sinks:
• Agriculture emissions (Article 3.1) includes enteric fermentation (feed digestion) in livestock, manure management, methane from decay of organic matter, agricultural soils (e.g. fertiliser use), prescribed burning of savannas and field burning of agricultural residues; and
• Emissions from land use change and forestry (Article 3.3) include net emissions from forests established since 1990 on land that was clear of forest on 31 December 1989 and deforestation (deliberate removal of forest and replacement with non-forest land use).

Article 3.4 of the Protocol provides for additional activities that countries may elect to count towards their emissions target during the first commitment period. These elective activities are:
• Forest Management (plantation forests established prior to 1990 and all native forests under some form of management);
• Revegetation (establishment of woody vegetation that does not meet forest criteria);
• Grazing Land Management (carbon stored in soil and vegetation on grazing land), and
• Cropland Management (carbon stored in soil and crops).

If a country chooses to include any of the additional activities, then it must also include, and report on, all emissions from all land on which these activities are undertaken. Australia has elected not to include these activities because of the risk that drought or bushfire could result in significant emissions from these sources during the Kyoto commitment period. This means that Australia does not account for soil carbon in
agriculture, although soil carbon is counted where it is associated with forestry (Article 3.3) activities.
Kyoto accounting rules do not recognise storage of carbon in harvested wood products; harvesting is treated as a source of emissions at the time of harvest. Australia has long advocated an alternative accounting approach which involves deferring allocation of the emissions liability until it actually occurs, either through product usage or in landfill.
The Australian Government will continue to work actively in international fora to pursue climate change frameworks that reflect Australia's particular circumstances and which are based on good science and provide maximum incentives for actions to achieve real emissions reductions.

3. Possible evolution of international accounting rules

There is international movement towards more comprehensive, land-based accounting of emissions. For example, the 2006 Intergovernmental Panel on Climate Change Guidelines for Agriculture, Forestry and Other Land Use recognise all direct human-induced effects on greenhouse gas emissions and removals that occur on six categories of managed lands – forest land, cropland, grassland, wetlands, settlements and other land defined to incorporate all managed land areas within a country.

Emissions estimates calculated using a comprehensive land-based approach would, for example, account for activities currently covered by Article 3.4. Future decisions will need to be made regarding Australia’s position on the international accounting rules that apply to setting international obligations. These decisions will need to balance the risk arising from the variability of these emissions in a commitment period against the potential for reductions of these emissions - in other words, whether additional activities encompassed by the broader approach are more likely to be sinks or sources of emissions. Further analysis of these issues will need to be undertaken once more is known about commitment periods and other rules. International negotiations are at a very early stage so the likelihood of these changes can not yet be predicted and Australia has not determined its negotiating position on these points. However, future international obligations for developed countries will almost certainly continue to cover the key, human-induced sources of emissions currently counted under the Kyoto Protocol – agricultural emissions listed under Article 3.1 and emissions from forestry and land-use change (Article 3.3). It should be noted that not all emissions sources that count towards our Kyoto target have to be included in the scheme. Judgment will be needed as to the merits of including emissions activities in the scheme, based on Australia’s particular circumstances and the practicalities of including different emissions sources and sinks in the scheme.

4. Accounting framework for the emissions trading scheme

Australia could decide to include emissions sources that cannot be counted in its national inventory. For example, carbon in harvested wood could be included for strategic reasons, in order to demonstrate the workability of an approach that Australia advocates internationally. Including activities that do not count towards Australia’s international commitments could increase the costs of the scheme relative to what they might otherwise have been because Australia would still need to meet its commitments but would not be able to count abatement from ineligible sources. It could also limit the tradability of Australia’s permits, as other countries are unlikely to want to buy abatement that cannot be counted towards their international commitments.

Questions for stakeholders:

- Stakeholders are invited to comment on the benefits and limitations of the current Kyoto accounting rules on emissions from land-use.

- Stakeholders are also invited to comment on the benefits and risks of including emissions sources and sinks in the emissions trading scheme that do not count towards our international commitments.




The Carbon Coalition welcomes the opportunity to contribute to the Department of Climate Change’s thinking on the shape of Australia’s Emissions Trading Scheme and acknowledges the Commonwealth Government’s proactive position on soil carbon.

1. KYOTO CONTRADICTION: There is an abiding contradiction in the Kyoto Principles that is possibly strangling the innovation likely to help the world meet the threat of climate change. For those who point to the need for ‘practicalities’ to be resolved before the soil carbon solution can be attempted, “as soon as practicable” means “never” to the Soil Carbon Pessimist because soil cannot fit the current prescriptive Kyoto rules. Yet Kyoto has a rule called The Precautionary Principle: ‘The “precautionary principle” responds to the dilemma that, although many uncertainties still surround climate change, waiting for full scientific certainty before taking action will almost certainly be too late to avert its worst impacts. The Convention, following many environmental treaties before it, thus calls for “precautionary measures” to combat climate change, stating that, “where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures”.’ Which Kyoto Principle takes precedence? When will the ‘threats of serious or irreversible damage’ be recognized? How many of Stern’s 10 years be consumed pursuing ‘full scientific certainty’?

2. A SENSE OF URGENCY: The emphasis on scientific exactitude and strict observance of inflexible accounting principles suggests that there is a belief that observing the rules will be sufficient. But all IPCC Reports indicate that Warming is happening faster than expectations. The question remains: how bad must the crisis become before an appropriate sense of urgency emerges and all potential solutions that fall outside the ‘rules’ are tried?

3. PESSIMISM INFECTS POLICY: There is evidence Australia’s response to the Kyoto Principles has been distorted by a deep pessimism about Australian Agriculture’s ability to respond to Climate Change. This pessimism expresses itself in assumptions that become received wisdom, even though they have no scientific basis. (Eg., “Typically Australia’s soils have a poor capacity to store large quanties of carbon.”) This pessimism is generated by a tendency to focus on the worst case scenario, without factoring in mitigating elements. For instance, the atmosphere of dread generated by discussions of Methane emissions from livestock is rarely counterbalanced by the fact that the science is not in yet, that there are many simple, low-cost solutions that are known already and, as usual with these threats, the solution is often near at hand. (Eg. mulesing and bare-breached genetics.) The future is ‘unknown and unknowable’ (in the words of former CEO of ABARE Brian Fisher.) But often the response to the unknown is FEAR. The following are examples of erroneous assumptions (EA) that have guided Australia’s response to Kyoto: • EA#1: Bushfires are likely to cause emissions on such a scale that they would negate any sink-value in soil carbon sequestration. FACT: Bushfires do more damage to carbon sequestered in forests than to soil carbon under pastures and crops. In fact, native pastures respond rapidly to burning. Soil carbon can withstand all but the most intensive fire in vegetation. EA#2: Drought will cause emissions that would negate any sink-value in soil carbon. FACT: Emissions from “carbon farmed” soil in drought are relatively small compared to emissions from livestock. Land managed for 100% ground cover (ie. farmed for soil carbon) goes into drought later and comes out sooner than conventionally-managed land and is less likely to emit CO2. Pool management practices in carbon trading (withholding 30% of carbon submitted for sale as a form of insurance) protect the individual farmer.

4. CERTAINTIES: There are several certainties that the Kyoto Accounting Rules ignore: 1. There are already enough GHGs in the atmosphere to drive the mean temperature through the 2°C limit. (Government speakers at farmers gatherings are prone to say that we are ‘locked in to a 2°C rise’.) 2. Photosynthesis is the only process known to man that can extract that GHG from the atmosphere. Neither solar, nor wind, nor clean coal, nor nuclear power, nor thermal energy solutions can do it. 3. Forests cannot provide the extraction capacity within the time allowed (Stern’s 10 years). The task would require more forest land than the world can provide, and forests take more than 10 years to reach their full sequestration capabilities. 4. The largest carbon sink over which mankind has control is soil. It normally holds more CO2e than the atmosphere and the vegetation of the entire planet combined. 5. Farmers could change their land management practices overnight and create a significant global sink capacity, even at low levels of sequestration per hectare over 5.5billion hectares.

5. WHY 100 YEARS? There can be no long term without a short term. The world needs immediate triage to stabilise its condition and allow the other emissions-reduction solutions time to reach critical mass. Neither solar, nor wind, nor clean coal, nor nuclear power, nor thermal energy solutions can be deployed within 10 years or even 20 years. The “Permanence” principle is irrelevant to soil carbon. This does not mean soil will leak all the carbon it sequesters within a short time. It means two things: 1. Soil can play its key role in the next 30 years – acting as a bridge to the future. Soil has a tendency to achieve equilibrium or steady state or saturation after a period of ‘dynamic disequilibrium’ caused by a change in conditions or management. A new disequilibrium can be created by a further change in land management. So the process of sequestration need not cease at the first plateau. 2. Soil carbon doesn’t leak, it “cycles”. It is by nature mobile. This doesn’t mean it is uncontrollable. A carbon-rich landscape is a precious asset for any farmer. The motivations to preserve the higher total carbon content (no matter which fraction or type of carbon – labile or non-labile) could range from greater productivity to government incentive programs. The Voluntary Carbon Standard recognises a 30-year horizon. This comment on Permanence is not an attempt, in the words of Brian Fisher, “to seek to change the rules to suit ourselves.” It is an attempt to change the rules to save our society.

6. ADDITIONALITY? The tests for Additionality were designed for CDM projects, usually clean energy projects in ’developing’ countries, not soil sequestration at home. But like so many Kyoto Principles invented for one purpose, they are likely to be applied inappropriately to other categories of climate change solution. The UNFCCC “Tool for the demonstration and assessment of additionality” (Version 05) is a 4-step process that analyses the project to ensure that it would not have happened without the revenue from the carbon credits. STEP 1. Identification of alternatives to the project activity. STEP 2. Investment analysis: Of the options, is the proposed project activity unlikely to be the most financially attractive or unlikely to be financially attractive? STEP 3. Barrier analysis: (1) Is there at least one barrier preventing the implementation of the proposed project activity without the promise of credits; and (2) Is at least one alternative scenario, other than proposed project activity, not prevented by any of the identified barriers? STEP 4. Common practice analysis: (1) No similar activities can be observed? (2) If there are, are there essential distinctions between the proposed activity and similar activities? ADDITIONAL: A Project is additional if, compared to other investment options, it is either financially unattractive or faces insurmountable barriers without the ingredient of carbon credits plus it is not common practice in the location or has unique features which make it a risky option. The Investment Analysis would knock carbon farmers out because their low input regimes can turn a profit when high input farmers are struggling. The Common Practice test would rule no till cultivation out in SA and WA, where more than 50% and 85% respectively of farmers practice it. It’s not hard to see a whole raft of farmers who have already moved to carbon farming techniques being locked out of the carbon credit market because the Kyoto accountants say they made the change without the promise of carbon revenues; or they are unable to prove that their intention was to sequester CO2 and their motive was money. If the Government sets a date before which changes to carbon farming are not eligible and that date doesn’t go back far enough, then the pioneers who did the hard yards – like Col Seis who invented pasture cropping and has socked away hundreds of tonnes of carbon per hectare – will miss out. There are several reasons why Additionality could be a blockage to maximizing our response to climate change: 1. It relies upon the fiction that a person’s intention can be known and that documents can prove it. 2. It ignores human nature and the impact on a carbon farmer who made the move early and missed out seeing their destructive neighbour being rewarded. 3. It is an absolute failure in its everyday application in the Clean Development Mechanism (CDM) market. Billions of dollars are being paid to Chinese energy companies for projects that clearly are not within the bounds of Additionality. Stanford University researchers examined more than 3,000 Chinese projects applying for or already granted up to $10bn of credits from the UN's CDM funds. They concluded that the majority should not qualify. "They would be built anyway.” All new hydro, wind, and natural gas fired projects in China claim credit for emissions reductions under the CDM, each makes the argument that it would not have been constructed but for the carbon offsets. But the Chinese Government has policies to support clean generation. Even more revealing, nearly three quarters of all registered CDM projects were complete at the time of approval, suggesting that CDM money was not needed to finance them. International Rivers’ Patrick McCully, who makes the allegation, says: “ Judging additionality has turned out to be unknowable and unworkable. It can never be proved definitively that if a developer or factory owner did not get offset income they would not build their project."

7. COUNTING SHEEP: If harvested timber can be considered a sink and recognised as such, though not officially recognised, we would contend that wool and leather be also considered.

8. ABOUT THE CARBON COALITION: The Carbon Coalition Against Global Warming was formed in February 2006 to ensure Australian farmers and graziers gain maximum benefit from trading in soil carbon credits. The Convenors of the Coalition have been regular speakers at gatherings of farmers and graziers across Australia. They led a fact-finding delegation to the USA on behalf of Australian farmers in 2006. While there they negotiated the first order for soil carbon credits from the Chicago Climate Exchange. They attended workshops, briefing sessions and meetings with members of 3 of President George W. Bush’s 7 ‘regional partnerships’ of states. They carried the flame to New Zealand and saw the Government call a tender for the design of a voluntary market in soil carbon. They discovered the gaps in the data sets used for the National Carbon Accounting System, upon which the belief that Australian soils cannot sequester carbon was based. They initiated a series of ‘soil science summits’ between scientists and farmers, that culminated in the world’s first Carbon Farming Expo & Conference in 2007. They have appeared as expert witnesses before the NSW Premier’s Greenhouse Advisory Panel, the NSW Parliamentary Standing Committee on Natural Resources & Climate Change, and the NSW Dept of Primary Industries Climate Risk Management Project. They succeeded in getting soil carbon on the Election Platform of the ALP for the 2007 Federal Election. When PM Rudd declared an inquiry into soil carbon after the election, Matthew Cawood, Science & Environment Editor with The Land wrote: The soil carbon issue ‘would be still largely invisible if it wasn’t for your efforts. You and Louisa have barnstormed this issue into national politics. That's as good as it gets.”

Michael & Louisa Kiely, Convenors, Carbon Coalition Against Global Warming: RMB 384 Uamby Road, Goolma NSW 2852 (02) 6374 0329 www.carboncoalition.com.au