Australian agriculture can’t afford to sit around and wait until 2013 for government to decide how it fits into the Carbon Pollution Reduction Scheme (CPRS), a global expert in carbon trading said last week.
In Australia for the CarbonExpo 2008 conference on the Gold Coast, Dr Ken Newcombe told Rural Press that the farm sector needs to quickly shape itself into a carbon offsets provider selling offsets products to industries regulated under the CPRS.
Dr Newcombe considers it logistically unlikely that Australian agriculture will ever become a “covered” sector under the CPRS, but it has a big incentive to be in the carbon business—the sooner the better.
“Government’s not going to insist that you have to reduce your energy use on the farm,” said Dr Newcombe, who heads his own carbon finance company, C-Quest Capital, based in the United States capital Washington DC.
“It will get at you, for instance, by insisting that the distributors of petroleum products are regulated.
"If you’re not an offset provider and those distributors have to go and buy offsets from somewhere else, it simply means that the cost of that energy to you is going to go up.
"The distributor still has to buy carbon somewhere, or invest in more carbon efficient power plants or systems, and that cost will be passed on.”
“It seems to me that your interests are best served by saying to government, ‘Give us the opportunity of getting revenue from carbon finance to drive us towards a more energy efficient agriculture right now’.”
“The processes that make farmers more energy-efficient have knock-on benefits for production anyway.”
Dr Newcombe, who grew up on a South Australian dairy farm, led the development of the world’s first carbon fund for the World Bank, which now has US$1 billion invested in carbon offset projects.
He was later a vice-chairman of Climate Change Capital in London, and before starting his own business was a managing director of Goldman Sachs in its Fixed Income, Currency and Commodities Division in New York.
He is a founding member of the Voluntary Carbon Standard (see www.v-c-s.org), which among other functions provides a rigorous internationally recognised, regulatory framework for trading soil carbon.
Agriculture should choose for itself what practices provide the most credible opportunity for moving into “carbon conservation agriculture”, Dr Newcombe said.
“Something that I certainly will support very strongly, wearing my Voluntary Carbon Standard hat and as an investor is the intensive grazing approach (Holistic Management) that Alan Savory has developed over many years. Holistic grazing management is one of the least controversial technologies in terms of long-term soil carbon storage prospects.”
“You need to then say, ‘What’s our opportunity to establish credibility in this space?’ and choose an approach which tells government that this can be administered very cost-effectively and reliably—and more importantly to use the climate change agenda and carbon finance to increase productivity of agricultural systems in Australia.”
Any approach needs to be more rigorous than that used by the Chicago Climate Exchange (CCX), which pays US farmers for carbon offsets on the premise that certain activities, like minimum-till, generates certain quantities of soil carbon.
That system has been effectively discredited, Dr Newcombe said, but a sound methodology for trading soil carbon is feasible.
“My advice is to use the Voluntary Carbon Standard to spearhead this approach, and support a performance-based benchmark which makes it very clear what the carbon increment is, to simplify the picture for investors and producers,” he said.
“And then go to government and say, ‘This is not so complex after all. Look at the benefits. You should be including this before you bring the hammer down on the final design of the CPRS’.”
“Farmers win because they get carbon revenues. And because of the carbon revenues, farmers are not only able to contribute to the cost-effectiveness of this public policy objective, but will quite likely get knock-on benefits, like reducing their energy costs and energy dependence, and gain some other production benefits.
"They can only specify those themselves.”
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