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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Log dbh(cm)
log
Abo
ve-g
roun
d bi
omas
s (k
g)Heaton PFOurimbah NFWabby NFMckenzie NFMyall Lakes NFHills PFTooloom PFHannam Vale PF
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
NGACs created to Feb '07
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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!
