Carbon Farming Initiative
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Fact sheet - clearing the carbon confusion for dairy farmers
Carbon and farming is a complex issue. This 4 page fact sheet provides a snapshot of the key points for farmers - note that it's a large file, and may take 30 sec to download...
View 'Clearing the carbon confusion for dairy farmers' fact sheet
Objectives of the Carbon Farming Initiative
The Carbon Farming Initiative (CFI) has 2 objectives:
- To help Australia meet its international obligations to reduce its emissions of greenhouse gases;
- To create incentives for farmers, forest growers and landholders to undertake greenhouse gas abatement projects and generate saleable carbon credits for the domestic and international carbon markets.
In addition, there is an on-going focus on using CFI projects to enhance environmental protection and to improve industry resilience to the impacts of climate change.
Proposed Abatement Activities
The CFI will allow a very wide range of abatement activities that loosely fall into 3 groupings:
- Increased carbon storage into recognised Kyoto carbon sinks, such as carbon stored in forestry and revegetation for both commercial and conservation uses;
- Reduced carbon emissions from recognised Kyoto carbon sources – primarily from methane and nitrous oxide; and
- Increased carbon storage into sinks that are not recognised towards Australia’s Kyoto targets – including soil carbon and some forestry and revegetation management.
Activities that generate Kyoto compliant credits can be marketed locally and internationally. The likely buyers of these credits will be companies with an obligation to pay for emissions, who may find it cheaper to purchase carbon credits from agriculture rather than to directly reduce their emissions. For example, a power station may find it cheaper to purchase credits than to install carbon capture and storage technologies. Australian companies who are required to begin paying $23/tonne of carbon pollution from July 1, 2012 are one market for these Kyoto compliant credits, but there are international marketing options for these credits and these will almost certainly be the ‘highest priced’ credits.
Activities that generate non-Kyoto compliant credits will need to sell those credits into the domestic carbon market. Here there are two types of buyers:
- Australian companies that have to pay $23/tonne for carbon pollution from July 1, 2012 may find it cheaper to purchase credits than to reduce or eliminate their emissions. Credits generated by the CFI will be suitable for purchase by this market.
- There is a second , entirely voluntary market for non-Kyoto credits where buyers are acting altruistically - such as an airline offering passengers the option to pay more and fly carbon neutral. It should be expected that carbon credits in this domestic/voluntary market will fetch a significantly lower price than credits in the Kyoto compliant market.
To assist individuals and organisations understand what abatement activities might be allowed under the CFI, the DCCEE have published a ‘positive and negative’ list. The positive list identifies activities that are most likely to be eligible – such as capture and combustion of methane from waste or manure. The negative list identifies activities that may reduce or sequester emissions, but are ineligible because (for example) they pose a significant risk to communities or the environment – such as establishing vegetation on land that has been cleared of native vegetation since the baseline year of 2007.
Participating in the CFI
The administration of the CFI is quite complex, involving methodology approval; establishment of a recognised offsets entity; project approval; reporting; crediting; and compliance/termination. It is not anticipated that farmers will be able to engage with the CFI individually, but will need to work through an ‘aggregator’ who will manage the project and act on behalf of a significant group of farmers.
All methodologies (such as reducing methane from cows by feeding additives) must be approved by a new body – the Domestic Offset Integrity Committee. More details about the administration of the CFI are available in the ‘CFI explanatory memorandum’
Under the CFI, the Government does not purchase the carbon credits in the longer term, though there are some interim arrangements. In order to provide confidence to the buyers of these carbon credits, the Government is setting high integrity standards to underpin the scheme and therefore to maximise the price buyers are willing to pay for Carbon Farming Initiative credits. These standards include:
- Additional – a project must result in abatement above that which would have occurred with standard practices.
- Permanent – sequestered carbon must stay there for a minimum of 100 years.
- Measurable/verifiable/enforceable – emissions abatement must be able to be measured or estimated, verifiable by third party audit and appropriate enforcement provisions to address non-compliance.
The above standards are essentially the Kyoto standards, to which the CFI bill adds:
- No leakage – the project must not cause increases in emissions elsewhere, which nullify or replace the abatement that would otherwise result from the project. Leakage issues can be simple (removing dry stock from a dairy farm would reduce emissions, but simply transfer them to the farm where they were being adjusted) or more complex (building up soil carbon can increase soil emissions of nitrous oxide) but they must be addressed in any proposals for CFI credits.
- Conservative – conservative estimates and procedures should be used to ensure that claims are not over-estimated.
- Supported by peer-reviewed science – scientific evidence used to support a methodology must have been subject to independent review and critique by scientific peers prior to publication in scientific journals.
- Participation in the CFI is voluntary so there is no pressure on dairy farmers to get involved or to sign up to any schemes;
- The CFI is not being set up to interact with individual farmers – ‘integrators’ will act as intermediaries to aggregate and market the carbon credits from multiple farms and then distribute payments to individual farmers;
- Be cautious, ask questions, get independent advice and understand what you are getting into before signing up with any CFI middlemen/aggregators – then think about it some more;
- Productive, well managed dairy farms are in the best shape to face the future, no matter what climate/carbon challenges emerge – don’t lose sight of the main game by chasing carbon credits;
- Productive, well managed dairy farms using industry best practices have the lowest emissions per litre of milk produced;
- Current dairy industry modeling suggests that well managed dairy farms have few options to profitably reduce emissions of methane and nitrous oxide unless the carbon price is very high;
- Similarly, well managed dairy pastures that have been established for many years have few prospects for increasing soil carbon storage;
- Conservation plantings (eg riparian zones), undertaken for other reasons, may be able to attract an additional benefit from the CFI – planting trees for the carbon benefit alone is unlikely to be cost effective in most circumstances;
- For dairy farmers, schemes to reduce/avoid methane or nitrous oxide carry less long term risks than schemes that require carbon to be locked up in soils or vegetation for 100 years. Soil carbon is particularly problematic
- Dairy Australia (and partners, including the Commonwealth Government) is undertaking research into all aspects of dairy farm emissions and abatement strategies;
- Australia is leading the way regarding rumen methane research so despite the fact that there seem to be few current opportunities, the future may contain more.
- Participation in the CFI is voluntary so there is no pressure on dairy farmers to get involved or to sign up to any schemes;
- The CFI is being established to work with ‘aggregators’ rather than with individual farmers and these ‘aggregators’ will be seeking to sign up land managers, including dairy farmers;
- Your farmer clients need to understand the long term liabilities (100 years) of some activities such as soil carbon sequestration and the potential of these liabilities to impact negatively on farm valuations;
- Dairy farmers who are following industry best practice are already undertaking all the currently sensible activities that minimise greenhouse gas emissions and are best placed to meet any future challenges;
- Dairy Australia (and partners, including the Commonwealth Government) is undertaking research into all aspects of dairy farm emissions and abatement strategies so watch this space as things are constantly changing;
- It is not possible to tell (at this stage) how the opposition policy of direct action would affect the CFI operation or carbon price;
Check the current status of Australia’s plans to put a price on carbon at the Department of Climate Change website.
Updates re progress of the CFI are available at the Department of Climate Change website.