JULY 2009 AFIA What, when and how will agriculture be affected by the CPRS

JULY 2009 AFIA Overview Markets for Carbon and their drivers Voluntary Compliance Australian Government CPRS The policy effects Challenges for agriculture Emerging trends and opportunities

JULY 2009 AFIA “The topic of climate change is not a new one for farmers; adapting to change in climate has always been a part of the agricultural industry.” Peter Kenny (former AgForce president)

JULY 2009 AFIA “The pessimist sees difficulty in every opportunity. The optimist sees opportunity in every difficulty.” Winston Churchill

JULY 2009 AFIA Carbon Markets Generate efficiencies by maximising the volume of abatement per dollar – emissions trading Units – CER, ERU, RMU, NGAC, AEU, RECS, AAU – all represent 1 tonne of carbon dioxide prevented from entering or removed from the atmosphere Compliance market is over 117 times greater than the voluntary market

JULY 2009 AFIA Carbon Markets CPRS is an elegant model of upstream sectoral coverage 75% of emissions covered with six gasses Agriculture is uncovered at present Forestry is an opt-in Old credits are out and AEUs are in

JULY 2009 AFIA

Total Net Emissions By Gas

JULY 2009 AFIA

Total Emissions - Agriculture 1990 (Mt CO2 e) 2000 (Mt CO2 e) 2006 (Mt CO2 e) Source:

JULY 2009 AFIA Billion of Tons of Carbon Emitted per Year Currently projected path Flat path Historical emissions 1.9  2105 Seven “wedges” Wedge Theory

JULY 2009 AFIA Energy Efficiency Decarbonized Electricity Fuel Displacement by Low-Carbon Electricity Forests & Soils Decarbonized Fuels Stabilization Triangle GtC/y 14 GtC/y Seven Wedges Methane Management

JULY 2009 AFIA Carbon Pollution Reduction Scheme Only forestry can be counted as an offset Tax incentives to establish sinks More favourable model to permanent plantings Less favourable for harvesting 100 year permanence No accreditations – registration required NCAS is the only approved methodology

JULY 2009 AFIA Arnie Sells the Hummer! California – the first US state to impose a cap on expulsion of carbon dioxide and other gases

JULY 2009 AFIA

Carbon Pollution Reduction Scheme Agriculture ‘uncovered’ until 2015 with a decision made in 2013 Large CfoC investment in soil carbon Voluntary initiatives gaining interest Price impacts on energy use and inputs

JULY 2009 AFIA Emerging trends Large capacity for soil carbon sequestration Methane controls through grazing regimens, vaccines, feed and genetics Nitrous inhibitor application, stand off pads and herd homes (dairy) Biochar/agrichar Algae production Measurement tools such as

JULY 2009 AFIA Lower Value $Higher Value $Highest Value $ Voluntary scheme or project offsetting Retail Scheme with Govt or third party endorsement Domestic Compliance Regime EU/Kyoto Compliance Regime Voluntary Purchaser Compliance Purchaser Contractual Carbon Commodity Statutory Carbon Commodity International Carbon Commodity Carbon Property Right (legal basis for carbon commodities) No Underlying Property Right

JULY 2009 AFIA Methane Emissions / Feed Digestibility “We are yet to come to grips with the variability of emissions that exist at the farm scale, due to the significant impact diet has on an animal’s production of methane” Former DAFF Minister Peter McGauran

JULY 2009 AFIA Methane Emissions / Feed Digestibility Reduced methane production AND increased soil carbon sequestration can be achieved at the same time through management Balance of C3 and C4 plants Fodder selection for lower C:N ratio – lucerne has 10 fold lower ratio than wheat stubble Timing rather than time (duration) of grazing

JULY 2009 AFIA Options for Agriculture Project based – schemes for nitrous oxide reduction, soil programs and methane reduction Accountability upstream – processors Free permit allocation Non-coverage with policy support for reductions SECTORAL NO-LOSE TARGET

JULY 2009 AFIA Sectoral No-Lose Target (SNLT) All abatement and emissions covered All agri activities Obligation with the Australian Government – consistent with the upstream nature of the CPRS Benefits reallocated to the sector Equitable – all farmers benefit, supports all industries and can generate broader sustainability practices

JULY 2009 AFIA TARGETt PERMITS

JULY 2009 AFIA Contact Details Matthew Reddy Executive Director Carbon Advantage M: