Australia’s Carbon Farming Initiative - Discussion Paper

Written by: Kim le Cerf and Beth McLachlan, EPA Victoria

In November 2010, the Australian Government’s Department of Climate Change and Energy Efficiency released a consultation paper on the Carbon Farming Initiative (CFI), a new scheme to give farmers, forest growers and landholders a framework to generate carbon offsets.

Since the Federal Government announced the wind-up of the Greenhouse Friendly scheme for 1 July 2010, there has been uncertainty around a domestic offset accreditation scheme.  While some of the uncertainty for offset buyers has been addressed through the National Carbon Offset Standard (NCOS), the CFI is the first policy announced by the Government to clarify some of the uncertainty for offset developers, by outlining a possible approach to the creation of domestic offsets under NCOS .  

This article will discuss:

1. CFI proposed scheme design and process
2. Types of recognised offsets under the CFI
3. Criteria for accreditation under the CFI

Proposed scheme design process

The discussion paper outlines the guiding principles for the design of the scheme as:

• Ensuring environmental integrity – credits represent genuine and additional emissions abatement
• Enabling broad participation – all land owners and managers can benefit.

It also proposes a process for the creation and management of offsets under the CFI scheme.  The image below demonstrates the key steps in the proposed process. 

• Methodology Approval: Methodologies would be developed by the Department of Climate Change and Energy Efficiency and the Department of Agriculture, Fisheries and Forestry in collaboration with industry and private project developers.  Once approved the methodologies would be made into determinations (legislative instruments) under the CFI legislation.  A detailed methodology assessment process is outlined in the consultation paper. 
• Recognised Offset Entity: The scheme would allow only recognised offset entities to participate.  The key requirement for recognition would be to pass a ‘fit and proper’ person test.
• Project Approval: Projects would need to be approved by the administrator before they could generate CFI credits.  The administrator would assess the project against:
  • Use of approved offset methodology
  • Kyoto/non-Kyoto parts of the project and applicable methodology for crediting period
  • Entity/proponent owns rights to the carbon in the soil and/or vegetation (for bio-sequestration projects)
  • Entity/proponent demonstrates they have obtained consent of all persons who have registered interest in the project land.
• Reporting: The discussion paper outlines a reporting approach which would require project proponents to report to the administrator at least once during the projects crediting period, but if they choose to, can report annually.  Changes to the project may also be required to be reported if made after reporting occurs.  Projects may also be required to be independently audited.
• Crediting: The paper outlines the process by which the credits would be generated.  Credits would be created once the report has been independently audited and approved by the administrator.  Australia’s registry for Kyoto credits, the Australian National Registry of Emissions Units, will be used to issue, transfer and cancel CFI credits, allowing the Kyoto CFI credits and other Kyoto credits to be managed on the same registry. 
• Termination or Transfer of Projects: Under the Scheme, projects can be terminated or transferred to another recognized offset entity, at any time.  Having said this, specific challenges around bio-sequestration projects will mean they have additional requirements prior to termination or transfer. 

Types of recognised offsets under CFI

Within the CFI, it is proposed that two types of credits will be issued; Kyoto and non-Kyoto CFI credits.  This enables the scheme to include a wide variety of land sector abatement activities to generate credits, including;

• Reforestation and revegetation
• Reduced methane emissions from livestock
• Reduced fertiliser emissions
• Manure management
• Reduced emissions or increased sequestration in agricultural soils (soil carbon)
• Savanna fire management
• Avoided deforestation
• Burning of stubble/crop residue
• Reduced emissions from rice cultivation
• Reduced emissions from landfill waste deposited before 1 July 2011.

By allowing both types of abatement to be accredited under one scheme, it reduces the administrative costs for the Government and the scheme participants (who may generate both types of credits).  Where the offsets are produced by a project which is counted towards Australia’s Kyoto Protocol target, “Kyoto” CFI credits are produced.  Where Kyoto CFI credits are generated between 2008-2012 (the current Kyoto commitment period), permits could be exchanged with the Australian Government for Kyoto Protocol units (either Assigned Amount Units, AAU’s or Emissions Reduction Units, ERU’s), to allow for trading within Kyoto schemes. 

Criteria for accreditation under CFI

To ensure demand for CFI credits will come from international and domestic markets, for both compliance and voluntary purposes, all abatement credited under CFI will seek to meet internationally recognised standards.  This is to assure the integrity of the abatement to be real and verifiable.  The standards include:

• Additional: a project must result in abatement that would not have occurred in the absence of the scheme.
• Permanent: a project must demonstrate the removal of carbon from the atmosphere and its long-term (at least 100 years) storage in plants, soil or other carbon sinks.  There would be no real abatement if carbon were to be stored and subsequently released.
• Avoidance of leakage: the project must not an increase in emissions elsewhere, which nullify or replace the abatement that would otherwise result from the project.
• Measurable and verifiable: abatement must be able to be accurately measured or estimated to ensure each offset credit represents one tonne of carbon dioxide equivalent (CO₂-e) of emissions reduction or removal.
• Conservative: assumptions, numerical values and procedures should be conservative, to ensure abatement and other claims are not over-estimated.
• Internationally consistent: estimation methods must be consistent with the National Greenhouse Accounts where relevant, and internationally agreed methodologies and reporting practices adopted by the United Nations Framework Convention on Climate Change.
• Supported by peer-reviewed science: scientific evidence must be peer-reviewed, or if based on peer-reviewed science there must be independent and expert opinion validating the application of the approach or model in the relevant circumstances.

The Carbon Farming Initiative Consultation Paper is open for submissions until January 21, 2011.  More information is available at http://www.climatechange.gov.au/government/submissions/carbon-farming-initiative.aspx.