Carbon Forestry Opportunities in the CFI

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Cameron Jackson
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1 Carbon Forestry Opportunities in the CFI Carbon Farming Conference, Dubbo Tuesday 23 rd October 2012 Freddy Sharpe CEO, Climate Friendly

2 Overview Problem Why is action necessary? Solution Mitigation (eg manure management) Sequestration (eg planting trees) Opportunity How do you do it? Is it worth it?

3 The climate is a dynamic system.

4 So what? We ve thrown a large CO 2 bomb into a naturally variable system...and it s gone off. CO 2 is already over 390 ppm and climbing? what will temperature do?

5 The frog s water is beginning to boil 2010 was the equal hottest year on record with 2005 and 1998, despite a strong La Nina effect (by contrast, 1998 was extreme El Nino) 2011 and 2012 were further years of extreme weather events: was the 2 nd wettest year on record over land, with floods in Australia (3 rd wettest year on record), Brazil (900 dead, worst natural disaster in its history), Thailand (one third of provinces submerged, cost 14% of GDP), Philippines (1200 dead) - drought continued in Horn of Africa (50,000+ dead), Mexico (2010/11 worst on record) - Record temperatures in 2011 in USA and record drought in 2012 Arctic sea-ice in summer 2011 and then 2012 was the lowest volume on record The last three decades were each the hottest on record The 10 hottest years on record have all occurred since 1998

6 yet some still claim the globe is cooling!

7 There are many policy options to reduce emissions. Emissions trading Carbon taxes Offset schemes Other policy measures Market-based Set the volume Final cost not known Price-based Set the price (cost) Final volume not known Project-based Credits for mitigation/sequestration Validation & verification required Regulations & standards Grants/rebates/subsidies Incentives/penalties

8 Environmental plantings methodology Methodology for Quantifying Carbon Dioxide Sequestration by Permanent Environmental Plantings of Native Species using the CFI Reforestation Modelling Tool One of only 4 currently approved methodologies Involves the establishment and management of permanent native forests Supported by tools that: define carbon estimation areas using the CFI Mapping Tool estimate carbon sequestration using the CFI Reforestation Modelling Tool calculate total abatement using the Reforestation Abatement Calculator

9 Environmental plantings methodology For landholders who want to establish permanent environmental plantings to: provide shelter for stock / minimise erosion / reduce salinity / improve water quality / provide habitat for wildlife Requirements Permanent planting of species native to the local area. Mix of species or, where a monoculture occurs naturally, a single species. Land that has been clear or partially clear of forest for five years. Only direct seeding or planting does not cover natural forest regeneration. Potential to grow to at least two metres, with crown cover of at least 20%. No harvesting of wood products (max 10 % debris pa for eg firewood). No grazing for first 3 years, or at any time if it would stop regeneration. Limits on management techniques in high-rainfall areas (>800mm).

10 Potential returns: is it worth it? Establishment costs Assumptions: Project: Reforestation monoculture Tree species: E. globulus (Blue Gum) Project size: 1,000 hectares Price / ACCU: A$15 Item Unit A$/ha Site preparation 1x 150 Seedlings 3x3m 1,100 Seedlings (2nd) 5% 55 Planting 1x 300 Replanting 5% 15 Fencing 1x 1,000 Transaction costs Item Unit A$ Initial accreditation 1x 3,000 Legal advice (contract) 1x 2,000 Verification 1x 40,000 Verification (audit) every 5 yrs 30,000

11 AUD per ha Potential returns: is it worth it? Cash Flow 6,000 4,000 2,000 Expenditures Receipts Net Revenue ,000-4,000 Year

12 Minimum project requirements Minimum project size: depends on the sequestration potential of each land-use system. A project must be capable of sequestering levels of carbon leading to the generation of gross revenues in excess of start-up and transaction costs. Legal ownership: A project owner must provide evidence of legal land ownership or control over the same (e.g. land lease) in order to sell carbon credits. Bundling and aggregation: Aggregation of small projects under one umbrella in order to lower fixed costs smaller landowners are able to participate Availability of Funding in order to cover: costs associated directly with the development of the GHG project documentation, auditing and registration and then on-going monitoring, reporting and verification Commitment: Project owner must maintain carbon stocks for the commitment period associated with the standard (e.g. 100 years permanence period) MRV: Project owner or third party must be able to track and report on carbon stocks and disclose any significant carbon stock reversals (e.g. fires)

13 Risks Carbon price: Fixed until 2015 at $23 per tonne indexed at 5%; Market price thereafter linked to EU price? Political & policy uncertainty: Coalition blood oath to repeal carbon price Coalition supports CFI, but their Direct Action policy is to buy abatement at lowest cost may not be from land based projects Under the coalition, there will be no compliance buyers and no $250m Non- Kyoto Carbon Fund Permanence: 100 year lock up (Note that Coalition is talking about a possible medium term option) Operations: DIY vs service provider/consultant vs aggregator/broker Control and cost-savings vs responsibility and complexity

14 Future forestry methodologies? Other methodologies under consideration by DCCEE Human-induced regeneration of a permanent even-aged native forest Methodology for quantifying carbon sequestration by permanent tree plantings on marginal agricultural land using sampling techniques Native forest from managed regrowth Quantifying carbon sequestration by permanent environmental plantings of native species established through direct seeding, planting or application of Ecoblanket using the CFI reforestation modelling tool (and sample testing for soil carbon) Measurement based methodologies for farm forestry projects Native forest protection projects Reforestation and afforestation

15 In summary Carbon credit projects can be a feasible and financially attractive option for landowners. Landowners are not commonly aware of (a) the financial and additional benefits from carbon projects, and (b) the obligations and responsibilities involved in developing a carbon project. There are considerable risks associated with CFI projects, particularly in the near term. CFI projects are new enterprises and new learning and knowledge is required. You can t just do this stuff anywhere you like. Be careful DO YOUR HOMEWORK

16 Thank you and questions? Freddy Sharpe CEO T: (02) M: E:

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