soil carbon trading: lessons learned from forests

Annette CowieNSW Department of Primary Industries

Soil carbon trading: Lessons learned from

forestry

N S WD P I

Biosequestration - reforestation

N S WD P I

Biosequestration – soil OM

Sequestration potential: Sequestration potential: GuesstimatesGuesstimates

Potential increase* tCO2e/ha/year

Range; Average

NSW totalMtCO2-e/year

Cropping 0 - 2 0.7 2

Pasture management –Higher rainfall

0 -1.8 0.9 8

Rangeland management

0 - 1 0.4 8

*Relative to conventional practice

18Mt = 11% total NSW (2006) = 100% NSW agriculture emissions

Sequestration potential: reforestationSequestration potential: reforestation

Sequestration rate tCO2-e/ha/year

Annual rainfall mm

400-600 600-800 >800

4-10 6-12 10-25

1.5 -2Mha reforestation required for 18Mt/yr sequestration

Montagu et al Carbon Sequestration Predictor

Across Australia: 657 mt CO2e from 2.25m ha, over 40 years cf annual emissions 560 mt CO2e

Hatfield-Dodds et al, 2007

Biosequestration in soil is Biosequestration in soil is significantsignificant

How do we encourage it?

Can soil carbon trading work?Can soil carbon trading work?

• Should landholders be paid for soil carbon?

• Can a workable scheme be designed?• Will it be an effective incentive?

• What can we learn from forestry?

Forest C trading Forest C trading Allow forest offsets:• NSW GGAS• Greenhouse Friendly• Kyoto, incl Clean Development Mechanism• California• Chicago CCX• CPRSNo forest offsets:• European ETS

Participation alternativesParticipation alternatives

• Optional offset mechanism

• Full coverage of sector

Can soil carbon trading work?Can soil carbon trading work?

• Should landholders be paid for soil carbon?

• Can a workable scheme be designed?• Will it be an effective incentive?

• What can we learn from forestry?

Benefits of soil carbonBenefits of soil carbonBiological

• Energy for biological activity

• Nutrient cycling

Physical• Structural

stability• Erosion

resistance• Water

infiltration• Water holding

capacity

Chemical• Nutrient holding

capacity• Buffer against pH

change

↑ Soil carbon = ↑ Soil health↑ Resilience

Should landholders get credit?Should landholders get credit?

Yes: Climate change mitigation is a public good

Can a workable scheme be Can a workable scheme be designed?designed?

Project level emissions trading requires:• Standard product• Efficient estimation of emissions and

removals• System for verification• Market structure, buyers

Can a workable scheme be Can a workable scheme be designed?designed?

Hurdles for offset projects:Offsets must be • Credible (real net abatement) • Permanent (or deal with non-permanence) • Measurable• Additional • Verifiable

Hurdles for offsets: credibilityHurdles for offsets: credibility

Is it real?Is carbon sequestered? Is there a net benefit?

Are there negative offsite impacts? (Leakage)– Increased emissions offsite, attributable to the project,

should be considered Are ‘life cycle’ emissions considered? – Emissions due to fossil fuel use, indirect (fertiliser,

herbicide), and non-CO2 greenhouse gases should be considered

Nitrous oxideNitrous oxide

• Increased soil N, by fertiliser, legumes or some organic amendments, will increase N2O

• Emissions of N2O could partially negate the mitigation benefit of increased soil C sequestration (GWP of N2O is 298 x CO2)

• C credit for offset activities should be discounted for increase in N2O (but uncertainty in estimation is high)

Hurdles for offsets: permanenceHurdles for offsets: permanence“abatement should represent a permanent

reduction in CO2 equivalents in the atmosphere”

Biosequestration is vulnerableNSW GGAS forestry offset:• “100 year rule”

Can only trade carbon that will remain sequestered for 100 years

• Registration on title: forest carbon rights, restriction on use

Kyoto CDM: temporary credits

Hurdles for soil C offsetsHurdles for soil C offsets

Handling (im)permanence• restriction on land use?• restoration provision?• alternative approach to permanence?

Hurdles for offsets: measurementHurdles for offsets: measurement

Can it be measured / estimated?• Easy for forests

N S WD P I

Counting Carbon in plantations - easy!

Carbon makes up 50% of tree biomass

Predict carbon from growth models, inventory

Focus on stock change, not absolutes

Allometric approach for estimating carbon in treesfrom inventory data

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Hurdles for offsets: measurementHurdles for offsets: measurement

Dealing with uncertainty• GGAS: discount for uncertainty “70% rule”

Can only trade quantity for which 70% probability that actual sequestration exceeds traded C

Hurdles for offsets: measurementHurdles for offsets: measurement

Soil C• Monitoring is not feasible• Cost-effective accounting

– Based on calibrated models informed by baseline measurement

• Credit based on modelled rather than measured impact of land use

Hurdles for offsets: additionalityHurdles for offsets: additionality

Is it new abatement? (“Abatement should be “additional” to “business-as-usual” if it used to offset emissions”)

• Additionality test determined by scheme• GGAS: environmental• GF, CDM: financial

Hurdles for C offsets - verificationHurdles for C offsets - verification

Is it verifiable?• GGAS: audit• Spot checks?• Remote sensing?Soil C• Compliance based on land management

practice rather than measured soil C stock change (CCX approach)?

Will it be an effective incentive?Will it be an effective incentive?

• Sufficiently attractive to encourage participation?

• Costs vs returns– Legal : ownership– Record keeping, GIS– Monitoring– Reporting– Audit

• Risks

New South Wales GGASNew South Wales GGASConservative calculation methodsStrict rules for accreditation, accounting, record

keeping, reporting, audit “Restriction on Use”

= Confidence in the market-place

But= High transaction costs, low net return

= Barrier to participation

www.dpi.nsw.gov.au

© State of New South WalesDepartment of Primary Industries

NSW Greenhouse Gas Abatement Scheme

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What about risk?What about risk?

• Terrestrial carbon is vulnerable: risk of loss• Australia elected to exclude “Article 3.4

activities” due to perceived risk of losses

N S WD P I ‘Factoring-Out’

COP 7 Marrakesh Accord: ….accounting excludes removals resulting from

(i) elevated carbon dioxide concentrations above their pre-industrial level; (ii) indirect nitrogen deposition; and (iii) the dynamic effects of age structure resulting from activities and practices before the reference year

IPCC invited to develop methods for “factoring-out” direct human-induced changes from changes due to indirect human-induced and natural effects, and effects due to past practices in forests

Requirements for Soil carbon trading – Requirements for Soil carbon trading – lessons from forestry (1)lessons from forestry (1)

• Credibility of concept– Document the potential– Handle non-permanence– Satisfy additionality, report leakage– Adjust for impact on whole farm GHG balance

• Marketable product– Standard offset unit – fungible credit– Compatible with international markets

• Compliance approach– Based on practice, not measured stock changes

Requirements for Soil carbon trading – Requirements for Soil carbon trading – lessons from forestry (2)lessons from forestry (2)

Minimise barriers• Eligibility requirements:

– practices, legal -ownership• Accreditation costs• Participation costs

– Cost-effective GHG accounting: models– Record-keeping, monitoring and verification

• Marketing costs– Pooling mechanism

• Risk– Factoring out effects that aren’t directly human-

induced

Can’t wait for 2015

Mitigation needed now!