Special report: Carbon farming and the ERF

The failure of the Emissions Reduction Fund continues with reports this week of pre-existing projects reaping generous government hand-outs achieving little additional carbon abatement and nowhere near the government’s stated figures.

This includes gas landfill projects already operating. Even proponents of useful projects with co-benefits – such as those that involve avoided clearing, regenerating bushland, avoided logging, composting and savannah burning – have reservations about the ERF’s effectiveness.

But amidst the criticism there have been good land management projects under way for several years. In this special report we talk to Climate Friendly, Green Collar, Forests Alive, Carbon Farmers of Australia and Green Fleet to see what they say is going on.

A dive into land management projects

Not all of the land management projects were set up specifically for the ERF first round auction. Some got up under the Carbon Farming Initiative, funded by carbon trading in either the voluntary market or via the former labour government’s Emissions Trading Scheme. Others built on groundwork laid under the ETS and CFI.

An interview with Climate Friendly manager for Australian projects Josh Harris reveals what’s involved in 15 of the successful ERF projects.

The company provided consulting, project management and methodology services to projects including nine regeneration projects with Australian Carbon Traders, two savannah burning projects with Indigenous organisations, one waste sector project comprising a composting facility at Coffs Harbour and three avoided clearing projects.

Harris says the regeneration projects total about 175,000 hectares of grazing and agricultural land that had generally become degraded due to overstocking. The projects involve removing stock, fencing the land off, undertaking feral animal control, and allowing natural reseeding of the endemic species to grow up into forest.

Each of the projects has a permanence condition – generally a 100-year commitment to not clear, graze or cultivate the area and to maintain fences and feral animal control measures.

Co-benefits galore – and sequestration too

Harris says these projects have a number of co-benefits, including increased habitat for wildlife and active carbon sequestration as the vegetation regrows amounting to roughly three tonnes of CO2 per hectare every year..

“Regeneration is a really charismatic type of project, and it is actually sucking up CO2,” he says.

“Landfill gas [projects] have less co-benefits, but the government was looking for the lowest cost abatement, not co-benefits.

“Often the highest cost projects have the most co-benefits.”

Another important co-benefit of carbon farming-type projects is they increase the resilience of both the land and the people to drought. Harris says it is an answer to questions around government drought support for farmers, because it provides an income stream. That income means they can keep spending money on food, fencing and other necessities within their local community, which in turn supports those local businesses and communities through dry times.

“Carbon farming is not a conflict between agriculture and the environment,” he says.

There’s also a benefit in attracting young people back to the land because carbon farming can provide certainty in the form of a contract for a decade or more and revenue to deal with drought or undertake farm improvements such as water management, fencing, or restocking after drought.

“The opinions of farmers are changing [about carbon farming], but people have to see it working.”

Helping Indigenous communities build livelihoods

The savannah burning projects also have a high level of co-benefits, including tackling an important social justice issue around self-determination and economic opportunities for Indigenous communities on their traditional country.

Harris says former burning practices on some of these areas had been discontinued when traditional owners were displaced. Now some have regained rights to their country, burning in patterns that reduce the bushfire fuel load and promote germination of certain native tree and shrub species and fresh growth of native grasses can be started up again.

Carbon credit units from either the voluntary market or under the two ERF projects are an income stream for the communities that enable them to pay Indigenous rangers, while also improving biodiversity and assisting with getting young people in the community back on country.

It is an answer to questions around government drought support for farmers, because it provides an income streams…That income means they can keep spending money on food, fencing and other necessities within their local community, which in turn supports those local businesses and communities through dry times.

“The co-benefits in savannah projects get accounted for in the voluntary market, but not under the ERF,” Harris says. The co-benefits are actually part of the attraction for the voluntary market, with their overtones around reconciliation and endangered species habitat protection value.

Missed opportunities and neglected potential

The lack of accounting for co-benefits in assessment of ERF projects has been “a 10 year debate”, Harris says. The bottom line is the ERF is simply focused on the numbers.

“The number one thing [with the ERF] is we are trying to avoid climate change, and the number one principle of that is to reduce carbon emissions,” he says.

There was a lot of potential for carbon abatement that had not been realised in this current round of projects.

This includes transformations in the energy sector, such as shifts from coal to renewable energy, and greater energy-efficiency across the economy. Harris expects we will see more projects under the commercial buildings energy-efficiency methodology in the next round.

Farmers changing perspectives and clearing plans

Green Collar Group, under the trading name of Terra Carbon, was the first round’s most successful proponent, with 41 projects receiving contracts. Chief executive James Schultz said all of these are bushland protection projects under an integrated forest management agricultural regime on private land.

These projects also came in for some criticism in the media, with reports that some areas were never going to be cleared in any case.

Schultz told The Fifth Estate that in fact 95 per cent of the areas being protected as part of ERF projects were marked for clearing under a deforestation plan for the properties. These plans outline which specific areas of a property can or cannot be cleared, and once they are approved by the relevant authorities they are binding – except where the ERF is giving the landowner an alternative.

The areas being protected are only those that could otherwise be cleared for productive agriculture, and so exclude areas such as steep slopes, protected vegetation or riparian zones where clearing is not permitted.

Schultz says the reason his firm was so successful is the years of prior work with landholders that has given them a clear understanding of the costs of operating these kinds of projects. Those costs include a “rent cost”, as there is an opportunity cost for the landowner.

“It is productive land, the proponents could have chosen to expand grazing instead [of an ERF project],” Schultz says. This cost becomes prime element in the business case against carbon farming.

The ERF areas are to be protected for 100 years, with a 20 year active management phase and an 80 year period of simply maintaining the stored carbon.

Ecosystem services also have a value

Schultz formerly worked for the World Bank, and said that during his tenure there was increasing emphasis on valuing ecosystem services and broader definitions of natural resources that go beyond the traditional extractive resources lens to include water, soil, biodiversity and other ecosystem services.

He wants to see a broader approach beyond the ERF in terms of the current Australian economic picture that would also see landowners receive payments for the ecosystem services rural lands provide for the entire Australian community.

“Then we would get good land management as a default,” he says.

“The profound impact the CFI really had was in creating an income stream and creating resilience – and also better land management. Farmers are starting to see this kind of legislation as positive; they initially engaged with it as sceptics, now these conservative land owners are big advocates for [mitigating] climate change, and see how it has benefits for the community.”

With the kinds of co-benefits carbon farming provides, including protection of fauna and biodiversity, improved water catchments, and “beautiful landscapes for people to look at on Sunday drives”, Schultz says that “to only pay for one thing – carbon – is a complete market failure.”

Forests don’t actually count – but they should

Forests Alive had one project succeed in the first round ERF auction, a Tasmanian project involving four landholders who have agreed to forego private logging operations that were being carried out on their properties. Each landholder was formerly a project in the voluntary market that has made the transition across to the ERF under the avoided deforestation methodology.

Managing director Virginia Young says there is as yet no methodology specifically for either private or public forest management.

It would make a lot of sense for there to be one, she says, given how much carbon is stored in native forest, and also that since developing countries are being expected to protect their forests, such as the rainforests of the Amazon and South East Asia, Australia should also look to do the same.

Young says that under international carbon accounting frameworks, the “standing value of keeping carbon” in the form of forests is not counted, as the international accounting looks at carbon flows.

“The framework doesn’t encourage forest protection,” she says.

This is despite the value of maintaining healthy forests from a climate change mitigation perspective. Permanent forests, where minimal disturbance means greater resilience equate to a secure carbon stockpile.

Young said this is not only because of sequestered carbon in the trees themselves, but also carbon in the layer of coarse woody debris on the forest floor, and soil carbon in the form of humus. A carbon audit of Tasmania’s Styx Valley forests showed they contained around several hundred tonnes per hectare of stored carbon.

“Australia has some of the most carbon dense forests in the world,” Young says. She said there was a very selective understanding of carbon in the forests. What is most urgent is to prevent its release through conserving forests.

Political football versus opportunities to show leadership

Young says the politicisation of climate change policy is her biggest frustration.

“[The climate crisis] is a solvable problem but we’re running out of time. We have no excuse for not engaging with this seriously in Australia.”

The other frustration is the way lack of certainty and ongoing rule changes around carbon mitigation is impacting on businesses in her sector.

“I think the polluter pays principle has been around for a long time and is accepted by most people,” Young says.

“I support Direct Action but it’s not enough, we also need a price on carbon and a regulatory framework. We need every tool in the book, and we need to have long-term multi-party support.

“A truly innovative and creative economy would put Australia ahead of the game. Where the money’s going is out of these [fossil fuels] sectors – all the big financial advisors are saying to limit exposure these sectors.

“It’s very frustrating to watch the pace [of change]. It is too slow. We’ve somehow got to lift our ambitions and ramp up the rate of change.”

Locking up the carbon, not the land

Director of Carbon Farmers of Australia Louisa Kiely said carbon farming in the form of sequestration in soil and vegetation should be seen as crucial to winning the climate change battle. However, carbon farmers are up against projects like landfill gas in the ERF and as soil-based projects are cost-intensive, it is difficult for them to succeed in a lowest cost abatement auction process.

In the first round, one CFA project was successful, Sunset Ranch. The project, which involves a number of farmers working together, has contracted to achieve 460,000 tonnes of abatement under the avoided deforestation methodology.

Kiely says there could also be opportunities for farmers in the energy-efficiency space in future ERF rounds, such as reduced emissions through decreasing the amount of diesel being used, reduced reliance on grid power, more efficient pumps and altered herd management practices.

CFA is an alliance of farmers that also engages in the voluntary market space. Kiely says that in many quarters there is a perception that farmers should be undertaking soil carbon farming simply for more or less altruistic reasons, rather than receiving an income stream for their efforts.

However, given the potential carbon farming holds for both reducing emissions and actively sequestering carbon already in the atmosphere, there are big picture benefits for urban populations if carbon farming is appropriately valued and encouraged.

“We have the largest carbon sink world-wide [in Australia] in our landscape,” Kiely says.

“And carbon farming is the only technology that is safe and known for putting carbon back [into the ground] in the form of soil and trees.

“Soil carbon also assists with the land’s resilience to drought [as high carbon soils retain water], if the government wants to incentivise drought-proofing, this is a way to do it.

“The [climate change] titanic has already hit the iceberg. This needs to be on a war footing.”

Where’s the long-term capacity building?

Greenfleet was not a successful bidder in the first ERF round. Outside of the auction, some of Greenfleet’s CFI projects were transitioned to the ERF, which means they are still generating Australian Carbon Credit Units, which still have a market value.

Chief executive of Greenfleet Wayne Wescott said his biggest criticism of the ERF is it is so focused on meeting emissions reductions goals by 2020, comparing it to middle managers who are so focused on meeting the goals of the next quarter they are not thinking about stakeholder and shareholder value.

“My key problem is this: for the country to respond to climate change long term, we need to develop capacity over the long term,” he says.

This means supporting the development of expertise in land management, including the skills of farmers.

“From my sector’s perspective, the ERF offers nothing, we are priced out of it. There is no sense of partnership. And that’s a lost opportunity.

“Avoided land clearing is cheap [compared to replanting and ecosystem restoration]. It is a good thing, and should be applauded, but in terms of a hierarchy [of carbon mitigation], it should be lower down than protecting native forest remnants and reafforestation.”

Wescott says there needs to be attention paid to “enabling a framework to look at agricultural productivity in a new way incorporating how to farm carbon”. There also needs to be a focus on urban carbon farming, and he said Greenfleet is working on bringing forests into the city.

“The question is, where are we investing in terms of IP and skills for the future? We need to be investing in regional Australia.”

Wescott says carbon funding is ideally a mechanism that can deliver triple bottom-line impacts.

“We will make it work for us as best we can. The ERF is a good example [of the potential of carbon funding], but it has been let down by the execution and the ideological battles.”

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