Earthing Carbon

: It is now clear to the international community – as it was not eleven or eight years ago – that changes in land use and agriculture will have a central role in avoiding high costs of climate change. If we move too slowly and overshoot the Paris targets, soil- and plant-based sequestration – including through the capture of carbon wastes from plant-based industrial processes and storing or using them in ways that keep them out of the atmosphere – will be the main avenue to achieve negative emissions.

The transformation of food, agriculture and land use that is necessary for climate change mitigation is also needed for global development, to improve human health and to maintain a stable global ecology more generally. There will be one agricultural and land use transformation to serve these four great purposes.

To make good use of this opportunity, Australia will need systematic incentives for reducing emissions in agriculture and land, and to provide sound reasons to believe that they are here to stay. And it will need to restore old national strengths that have been allowed to decline in recent years: our strengths in research and education on agricultural, pastoral, forestry and related industrial activities. Alongside our industrial opportunity in renewable energy, our strength in growing and using biomass will set Australia up as the superpower of the low-carbon world economy.

Size, scope, opportunity

Recent reports from the Intergovernmental Panel on Climate Change (IPCC) have elevated the importance of capture of carbon in the landscape. It is estimated that natural climate solutions can provide 37 per cent of cost-effective reduction in global carbon emissions for a two-thirds chance of holding warming below 2°C. These reports indicate that native forest restoration and reforestation could sequester up to 480 gigatonnes of carbon dioxide in terrestrial ecosystems – sufficient to meet the negative emissions needs of many 1.5°C scenarios.

The unusually large endowment of land and woodlands relative to population gives Australia immense advantages in the production of biomass, as well as in the capture of carbon in the landscape.

We still can’t speak definitively on the size of the opportunity. Australian research funding and effort over the past decade have not matched the economic and environmental importance of the subject. The general story is of immense potential for sequestration of carbon through changes in Australian landscapes, but of small and diminishing research effort to define the potential and the means of unlocking it. Two developments have contributed to this unsatisfactory situation: the absence of generally available incentives and a general reduction in research and development on agriculture, pastoral activities, forestry and climate change.

Counting carbon

In 2008, I concluded that climate mitigation in the land sector required comprehensive carbon accounting. The inclusion of land under the Kyoto Protocol framework was incomplete. With the adoption of the Paris Agreement in 2015, and the subsequent rulebook adopted at the end of 2018, all countries will be required to report emissions under the same United Nations Framework Convention on Climate Change (UNFCCC) reporting framework, applying the latest guidance from the IIPCC, which includes a more comprehensive approach to land-based accounting.

The Paris Agreement raises an expectation that the long-term mitigation goal will be achieved through a balance between anthropogenic emissions by sources and removals by sinks.

What have come to be known as "natural climate solutions" have become much more prominent in international and especially the European and North American discussions.

Research a decade ago did not permit definitive assessment of how much carbon could be captured in Australia in these ways. However, in 2011, I speculated that the value of land credits sold into the emissions trading scheme could equal, by 2030, the contribution now made by wool to the Australian farm economy.

My treatment of carbon in the Australian landscape in 2008 and 2011 drew upon pioneering work by the CSIRO and the state departments of agriculture, as well as research at universities. A CSIRO publication in 2011, published after my second Review, highlighted the importance of the opportunity: "Our soils and forest store large quantities of carbon: somewhere between 100 and 200 times Australia’s current annual emissions. We can potentially increase these stores in our rural lands and perhaps store or mitigate enough greenhouse gases to offset up to 20 per cent or more of Australia’s emissions during the next 40 years.

The decarbonisation of electricity and the electrification of industry and transport can remove about two-thirds of the reductions to net zero global emissions. The land use, agriculture and food transformation can deliver most of the rest.

A recent research project from the US Academy of Sciences suggested potential for 10 gigatonnes per annum sequestration in global and one gigatonne per annum in US landscapes over the period to mid- century during which the world needs to achieve zero net emissions. Australia should have sequestration potential comparable to that of the United States. The low agricultural value of most Australian land reduces the opportunity cost of management for carbon sequestration. It is of national economic consequence that we undertake the research to define the scale of and the means of unlocking the opportunity. In the meantime, the judgement on scale presented in 2011 seems modest. The big difference now compared with 2011 is that we no longer have the prospect of an emissions trading system into which land-based carbon credits can be sold.

Compared to other nations, Australia has two advantages in capturing carbon in the landscape. The first is our exceptionally large endowment of woodlands, forests and other land relative to population. The second is our exceptional expertise in land-based industries – from agricultural and forestry science, through agricultural and resource economics to public and private knowledge and institutional arrangements supporting commercial success.

Advanced knowledge and innovation were necessary for transplanting European-style agriculture to a strange and unpropitious physical environment. Research, innovation and education supported by public institutions were important from the earliest times.

In 2008, I brought into the mainstream discussion some early work by the CSIRO and state departments of agriculture on the immense mitigation potential of changes in land use. Nurturing vegetation on the dry, degraded mulga country where rainfall was spasmodic in Queensland and New South Wales could be transformative. Innovative uses of the properties of Australian eucalypts included farming of the mallee on the arid boundaries of crop cultivation for subterranean sequestration and for harvesting biomass.

The 2011 Review took the land use mitigation story further. It advocated inclusion of offsets from agriculture into the emissions trading scheme through what became the Carbon Farming Initiative (CFI). These arrangements were carried into the Abbott, Turnbull and Morrison governments’ Emissions Reduction Fund (ERF). The ERF was a clunky, truncated and less adequately funded version of the CFI. It required resources from general revenue, rather than from sales of emissions permits.

Nevertheless, Abbott’s ERF kept alive the sale of offsets as a way of providing incentives for farm sequestration. The arrangements developed by the Clean Energy Regulator showed how an offsets scheme related to land use could work, and that there was strong private response to incentives.

The Carbon Farming Initiative (CFI) allowed farmers and land managers to earn Australian Carbon Credit Units (ACCUs). Each ACCU represents one tonne of carbon dioxide equivalent stored or avoided by reducing greenhouse-gas emissions. The ACCUs could be sold to clear obligations under the carbon-pricing rules. In July 2014, the carbon price was repealed. On October 31, 2014, the new Coalition government’s climate strategy, the Direct Action Plan, was passed, which established the Emissions Reduction Fund (ERF). The shift was made from a carbon price to government-purchased abatement, and an expanded CFI, moving eligible projects beyond the land sector to include energy and transport. In the ERF, $2.55 billion was made available for direct purchasing of abatement under the reverse auctions, of which $226 million remained in May 2019. The government’s Climate Solutions Fund was announced on February 25, 2019 to appropriate an additional $2 billion from 2020–21 onwards to fund auctions to 2030.

The ERF involves a voluntary crediting and purchasing mechanism.

To ensure these emissions reductions are not displaced significantly by a rise in emissions elsewhere in the economy, a safeguard mechanism requires Australia’s largest emitters to keep net emissions below baseline (historical) levels. The safeguard mechanism applies to around 140 businesses that have direct emissions of more than 100,000 tonnes of carbon dioxide equivalent a year.

Projects that meet the requirements under the various methodologies can generate ACCUs for emissions reductions. Projects can sell their ACCUs on the voluntary market, or bid to sell them to the government in auctions run by the Clean Energy Regulator. Auctions are held twice a year. The ninth ERF auction was held on July 24–2, 2019. The average price per ACCU contracted has been $11.92 over the life of the scheme, with the average price at individual auctions ranging between $10.23 (April 2016) and $13.95 (April 2015).

There is a way forward that does not violate the current government’s electoral commitments. The first step would be to make the whole of the funding for the Climate Solutions Funds available for use now as legitimate carbon credits are certified by the Clean Energy Regulator. This would see the new fund exhausted over a few years.

The second step would be to require in the next parliamentary term, with the necessary electoral preparation, the beginning of phasing in of full offsetting of fugitive emissions by purchase of ACCUs. The full offsetting would be completed through the 2020s. Demand for credits from the farm sector would be further enhanced by the current requirement for all exceedance of baseline emissions within the Abbott safeguard mechanism to be accompanied by surrender to the Clean Energy Regulator of ACCUs. Alternatively, state governments through their mineral leasing or environmental powers could require offsetting of fugitive emissions by use of certified ACCUs – sourced from their own territory, as the local politics would favour expansion of opportunity for the local farm and station community. This is the approach proposed by the WA Environmental Protection Agency in 2019, in its Greenhouse Gas Assessment Guidelines.



Further into the future, when Australia’s international climate change mitigation credentials have been restored, linking to the European Union emissions trading system would avoid truncation of the mitigation effort. Time would be needed to negotiate change in European and Australian rules on trade in carbon credits. There would be initial European scepticism about the legitimacy of a number of Australia’s rules on farm credits. Where warranted, adjustments could be made. At the same time, Australia would need to persuade European policy-makers of the value of soundly measured and administered carbon farming.

Our efforts in persuasion would be supported by the recognition growing in the international community, including in recent IPCC reports noting the importance of natural climate solutions to the global mitigation effort.