lower project risks for issuance of carbon credits – Farmers benefit

Carbon Pricing was expected to increase farm costs by $3.2b in Australia at the fixed price of $23 per tonne CO2-e (increasing at 2.5% per annum for three years). Then after 28 August 2012: You may have been confused when the announcement from the government said we will synchronize with European Emissions Trading scheme by 2015 and effects will be felt immediately and most definitely from 2014 where we can expect our ceiling cap to be set by a European communities. This can be taken to be a positive step and as we (serious about economics) know economies of scale give more certainty to the market. One thing has not changed is the point where the market will fully transition to a flexible price determined by the market.

Being that Industry intelligence is vital for a successful business, it is right to ask questions and have data provided to be analyzed and have the facts assembled and crafted into a response. So without political spin we should give a bit of the background on Agriculture in Australia:

Agriculture accounts for about 15% of Australia’s total emissions, but it is notoriously difficult to narrow a number of the sector individual parts for what they contribute. It varies a lot and is in part why the Australian Government’s Clean Energy Plan for the carbon price does not apply to Australia’s agriculture sector, which means that farmers are not liable to pay a direct tax on carbon emissions. Farmers are also exempt from paying tax on their fuel consumption until 2014, when the government will begin to tax carbon emissions from heavy on-road transport.

Lets examine what CO2Land org also thinks is part of the reason agriculture is not applied to the carbon pricing, and it stems from the wording ‘carbon’. In Australia we legislated there are six greenhouse gases and each has different lasting affects on the global warming and climate actions. For instance:

  • Livestock farming is carbon which of which largely depends on how you count it and it can be greater than 21 times more potent than carbon dioxide and is attributed with at least 75% of agriculture carbon.
  • Pasture and grain growers’ account for at least 15% of the sector’s emissions. This is also very difficult to measure as much depends on the amount of fertilizer use, crop residue burning and harvesting activities.
  • Other factors that affect the sector are drought conditions, changes in livestock numbers, pasture quality and commodity prices affect on demand.

Therefore the issue for the industry with the carbon price is the indirect costs under the carbon price conditions, primarily in the form of higher prices for farming inputs and production. The rise in freight and fuel-based costs beyond 2014 will detract from the bottom line, as it will become more expensive to transport livestock and get fresh produce to market.  Now if the carbon price after 2014 is more likely to be stabilized by a more efficient global market scheme it should be reasonable to assume those price rises will be lower than predicted. Lets take a punt and say annual growth of agriculture production will increase or remain steady in 2014-15 and not decline by around 1%. This should indicate revenue impact of the introduction of Carbon pricing is now not as severe (it is worth noting that transport cost are around 16% of co2 emission in the farming product) and a more stable pricing mechanism will have direct downstream pricing benefits for farms. Therefore farmers should have a more relaxed view of the situation than previously.

CO2Land org was sent a notice that ( www.ibisworld.com.au ) IBISWorld published a special report on Carbon Pricing in June 2012 on the state of play as was seen at that time, and this in part formed this comparison to conclude the latest move to European Trading Scheme should be a good move. Reason: Likelihood of indirect costs not rising to the levels predicted and a near complete counter to the increase in on-road fuel costs from 2014. And, less discount on our buyers and sellers actions in forward sellers markets – lower project risks for issuance of carbon credits for developers.

Carbon price -positive posts today

Carbon price featured in two positive posts today. Both would give some certainty to farmers under carbon offsets schemes. The first was reported by AAP, 28 August 2012, on what CO2Land org has tipped and that is that the European Emission Trading scheme was in a state of change and ultimately, all markets will benefit from these changes: The Australian Government announced plans to link Australia’s scheme to Europe’s emissions trading scheme from 2015. Also announced was an equally important event, The Department of Climate Change and Energy Efficiency, Carbon Farming Initiative team, announced the opening of Expressions of Interest for grants funding to develop carbon farming methods.

Why are the two linked? Aspects of both effect Australian companies that will be able to sell credits in Europe and farmers wanting some certainty to the ability to generate credits through changes to their land practices, and that had an issue in that it was well posted Australia might not have generated sufficient credits to meet the domestic demand.

The link is also important for project developers that are used to assigning risk to issuance of carbon credits and they can now be more certain that the projects will conform to pricing expectation without the need to vary or discount. Without it the only other option was to assign a risk to earlier transactions and take a greater discount.

What else is good? Currently Europe permits are trading for about 8 euro (high $9) and traders can offer that to you now to meet future liabilities. Sorry Tony, this means the carbon price will most likely be cheaper for Australian businesses by the effective date and possibly before, and the beauty of it is the European Union will be the one that will put the brakes on if things get too aggressive. Yes, someone else to watch over the price.

What else would farmers like? Current restrictions of the liability that can be met by overseas carbon schemes will be more price friendly through the European Scheme and that scheme will become a floating-price emissions trading scheme and the Australian linkage to Europe will be a free market with price advantages that can be traded without affecting the level of carbon cuts needed.

We will leave the clean energy advantages for another post.

 

ever heard of Climate Change Authority, Clean Energy Finance Corporation.

What? You never heard of Climate Change Authority, what about Clean Energy Finance Corporation.

The Energy Users Association of Australia (EUAA) would like to make sure you are up to speed, and encourage you to consider attending their important briefing in Sydney this Thursday, 30 August 2012.

Why would you know more for attending? Because Roman Domanski (Executive Director, EUAA) has engaged the CEO of the new Climate Change Authority, and the Chair of the new Clean Energy Finance Corporation to present the outline and effects of their charge. These two are responsible for advising the Government on the carbon price and the renewable energy target, amongst other things, and responsible for providing funding for clean energy, low carbon and energy efficiency projects.  Of course there is more to the program but you should check that out for yourself.

Because CO2Land org likes to know a little more, a short research brings up:

1. The Climate Change Authority was created as an independent body to provide advice on the Australian Government’s policies for reducing carbon pollution (reviewing the Renewable Energy Target, Pollution caps, carbon pricing and Carbon Farming Initiative):

  • Has a Board of nine members with skills in science, economics, climate change mitigation, emissions trading, investment and business.
  • The Board is supported by a CEO and support staff.
  • Importance is to make recommendations on the steps Australia should take towards the 2020 target and on the longer-term path towards the 2050 target.
  • The Authority will conduct regular, public reviews and its reports will be made public.

2. Clean Energy Finance Corporation (CEFC) is made up of a panel of experts appointed by the Government to advise on the design of the $10billion Clean energy package. The package is announced to:

  • encourage private investment and help overcome capital market barriers to commercialising clean energy technologies.
  • The expert review panel consults with key stakeholders and report with recommendations to assist with the drafting of legislation, allowing the CEFC to start operating from 2013-14.

CO2Land org notes that the EUAA and the agencies recognize that it is an act of being together that will be a success factor with putting a price on carbon pollution, and the establishment of responsible bodies that will help Australia meet the environmental and economic challenges of competing in a low-pollution world.

If you have any interest direct your queries direct to:

 

Energy Users Association of Australia

Suite 1, Level 2, 19-23 Prospect St

Box Hill  Vic  3218 Australia

T +61 3 9898 3900

F +61 3 9898 7499

W www.euaa.com.au

 

The operative of ‘Consistently’, ‘Resilience’

We were discussing some difficulties with methodologies and land use change. The operative of ‘consistently’ became problematic as climate change is about uncertainty in weather patterns!!!

My friend said I have a meteorology business for exactly that reason. So where are you at I asked: Answer, we are in the middle of contract negotiations with XXXX Airport and have 2 different capital raisings underway (one for an existing project and one for an exciting startup). However, I think you know I have an interest in seeing if this carbon space can work. CO2Land org should add this friend’s track record in other spaces is pretty good. So why only express and interest in the carbon space, why is there a hesitation to get fully into it when it is so important?

Assuming CO2Land org decided on a capital raising venture, my friend said adopt this approach if it is based on Carbon Farming Initiative (CFI) and determine: How many farmers do you believe you have willing to participate, and how many hectares do you believe could be allocated? In truth without an approved methodology – none! But we have lots of potential!

Assuming we have potential (and pending approval of our methodology – allow 12 months or more for approval) we have to determine: What proportions of these (farmers and hectares) consistently fall into the rainfall categories:

a)      800 -899mm per annum or greater

b)      700-799mm pa

c)       600-699mm pa

d)      500-599mm pa

e)      Below 500mm pa

Now we enter into a circular argument (The operative of ‘consistently’ became problematic as climate change is about uncertainty in weather patterns!!!). To add another dimension we can talk of timeframes for participation: Is it 7 years, 25years or 100years – back to you later – but assume 100years remains. Notice how many time the word assume is used – remember the old adage – to assume is to make an ass of you!

Many landholders can be looking at what best suits their contribution to participate in abatement activities, Some will decide on the Carbon Farming Initiative (CFI), some Biodiversity Funds (BF) and some might just choose business as usual (BAU). CO2Land org has previously stated BAU is a means of denial and a work to go broke slowly tactic.

So what causes some to think BAU? Possibly, some might have been very keen on biodiversity a few years back and question the efficiency and effectiveness. In recent times those that have effective strategies in place and locked up their properties had had this turned around by coal seam gas well and minerals exploration. Additionally, as reported by The Conversation, 11 July 2012, was that 168 countries including Australia signed the Convention on Biological Diversity in 1992-93 to achieve  “a significant reduction in the current rate of biodiversity loss at the global, regional and national level” by 2010 – by 2010 not one of the 168 countries could demonstrate significant progress toward meeting this target.

Then consider: Australia has plenty of food and exports about 50% of production, we only create about 1% of the global food supply – Australian farmers are efficient in terms of the food and fibre produced per unit of labour input – but most of our farming systems are based on high inputs of expensive fuel, fertilizer, chemicals, and machinery – with very high wage costs and a high Australian dollar, it is increasingly difficult for Australia to hold existing markets. Then comes the question from CO2Land org, and our biggest retailers import food, yet we are the most efficient country in the world per unit of labour input – and if we can recycle most fertilizer use, why is not that encouraged?

How is your methodology, well maybe it takes a long time to get a approval for good reason, if you want a biodiversity outcome the following could worry you as “There is an emerging view that although forests remove a substantial amount of CO2 from the atmosphere, much of the carbon is being stored in living woody biomass rather than as dead organic matter in soils – carbon stored in soils is desirable from a management perspective in that soils are more stable over time, so carbon can be locked away for hundreds to thousands of years and not be re-released to contribute to atmospheric CO2. Source: The Conversation 12July 2012. Maybe CFI based on carbon stored in soil is the way to go!

Now a little more on why your methodology may be too narrow in its focus and it revolves around the word ‘Resilience’. According to the Decision Point, August 2012, Resilience is not about not changing as far as natural habitats are concerned – it is concerned with holding a system in exactly the same condition erodes resilience because the capacity to absorb disturbance is based on the system’s history of dealing with disturbances.

Once again CO2Land org does thank Garry Reynolds of Caring for our Country, DAFF for the reference sources.

Human Creativity – ideas and innovation

I long for where Human creativity meant ideas and opportunity will be captured and questioned and then crafted into a business. While lamenting, along came a story that human creativity has not changed, and the problem is we might be running out of big NEW companies. This leads to looking deeper into why this could happen.

A story from Alyson Shontell, 23 August 2012, (http://www.businessinsider.com/startups-have-gotten-very-boring-2012-8#ixzz24PkQEhSJ ) in essence says the space is too crowded and starting a company used to be more difficult.

CO2Land org does agree starting a company is more easy, however funding is getting more difficult, banks have tighter lending rules, old (family) money has all but dried up or is invested in the minerals boom (particularly since 2007-08) and we are back to the time when only people with boatloads of money could afford to launch one (a start-up company) and see it to maturity. However, the difference to how it was before is marketing, this is more important and in particular we need to know how to use the changed practices in marketing to your advantage and this is more critical than being a engineering genius. That said we have to point out the improved technology, and social media can create something for a condition to start-up a company that is neither being novel or necessary. The condition for this is because – “Founders can scale consumer products relatively quickly too. Angel investor Chris Dixon called 10 million users the new one million.

CO2Land org then ponders: Is innovation of this type going to reach a ‘peak oil’ type of scenario and when, and what drives us to start-up a new company that is different especially where we might have products that are familiar, can use and understand, and have been around for the years. A good example might be how a director of an affiliate company said my PC was fine until Microsoft made it more complicated, so I changed to Apple and had to learn all over again! This is a very good example of how we did not want to change until it was forced on us, and the moral of the story is do it before it is done unto you! By that is meant things will change through human creativity and that creativity can at least be influenced by our ideas if we participate (is this not the correct way of a human touch?).

Back to the Alyson Shontell story: “The interesting innovation now is happening in [business-to-business] and infrastructure, which doesn’t seem as intellectually interesting but can have a large impact,” an investor told us. “[Business-to-consumer] might just be tapped out for the moment after a good 5+ year run.” It would seem the Alyson Shontell claim is an indicator of the shift in how we do business, and CO2Land org recently published a story on how branding perceptions has changed (Time for a real review). Both support the view the intellectual is less interesting and more important is systems based on hardware, enterprise software, infrastructure and bio-whatever.

CO2Land org does fully agrees those in this B2B space are different and have their thoughts arranged in a way different to B2C and may have an easier time in start-up as they can be better, more predictable bets for investors.

Watch this space for more affiliate action – soon! And, Twitter, is becoming more and more important in watching this space.

Announcement from Smart Energy

Being some were concerned that smart grid technology was slipping off the radar, be consoled with the following: Hello Smart Energy members,

I thought you might be interested in receiving a copy of a recent interview that Smart Energy’s sister site, Energy IQ, conducted with Andrew Blaver, Implementation Manager for Perth Solar City at Western Power Corporation.

Andrew discusses how smart meters and other smart grid technology have helped Western Power to create an economically efficient electricity system. He also talks about how access to real time data has enabled them to change the way they interact with customers, increasing engagement through customer acquisition and retention strategies that are more tailored to individual needs. You can read the interview here: http://bit.ly/NmyMe6

Andrew will be revealing more about the impact that real time energy data has had on consumer behaviour and customer engagement in his session at the Solar Cities 2012 conference, taking place in Brisbane in October. For more information on the event, you can download the agenda here: http://bit.ly/O6QGlF 

Kind regards

Siân Jenkins
Smart Energy Group.

CO2Land org says excellent, all the best.

 

Did not use your networks – why your bid failed!

One of the biggest letdowns is putting in a bid where you know you have a special rapport with the group calling the tender, a very competitive product and good reason to believe your price is well structured – then along comes the news – you are not successful.  What went wrong – you are told, nothing went wrong you did not meet the criteria!

So what is meeting the criteria? Short answer – depends on what drives the business activity being called for in the tender. So is a sound understanding of the required activity enough? Short answer – it depends on whether the activity is public or private. So is it the money? – Well it depends – so lets look at projects of government (Federal and or State) and about 30% found price the reason, 37% possibly, 33% not very likely. So is it the economic conditions? About 58% say yes, 37% very possible, 5% No reason to think this is the reason.

Compare this to carbon intervention programs: Initiatives based on economic drivers (47%), based on accounting functions (53%). It is therefore very possible when putting in a bid you could underestimate the impact of factors other than price (in other words external factors) by 11% (58% – 47%).

How can you factor in an 11% margin for the effect of external matters? Co2Land org is not going to try to answer that question. However, polling your networks might be very useful to narrow this margin. If you research through professional and social media you can quickly profile and assign a probability of the likelihood it will impact on your bid assessment. Think about it – how often do you find yourself thinking something should be done about that and next day it is news?   This is even more important when the assessment is weighted score (This is when each criteria is not equal in the marking).

 

Bugs to cure our climate ill’s

Something we all know, we need help to adjust to climate change – and in other civilisations and cultures we have been told of stories of using nature to cure our ills. In the search for our cure for the climate ills, we should consider “Soil ‘bugs’ help plants survive – Posted by Layne Cameron-Michigan State on Wednesday, August 15 2012”.

It follows that climate change will occur quicker than plants can adapt – obviously a food security risk for the world. In a report put forward by Proceedings of the National Academy of Sciences, “a new study shows how plants interact with microbes to survive the effects of global changes, including increased atmospheric CO2 concentrations, warmer temperatures, and altered precipitation patterns”. While the report is called new, many have previously speculated or even preached that healthy soils and microbes in balance are promoters of healthy plant growth. This story is new in the way it explains how microbes in the soil adapt quickly, doing most of the work so plants can survive. “In doing that the microbes in the soil work overtime to give plants the power to face the challenges of a rapidly changing climate. (Source: “growing plant” via Shutterstock)”

The method of the conduct of the experiment involved multi-generational sampling of manipulated environmental factors above and below ground, and paying close attention to the interaction between the plants and microbes in the soil.

CO2Land org has recently been discussing how this type of research has far reaching implications that can provide measures to not only give assurance of economic, national accounting of sustainable agriculture and a healthy future – but illustrates that there needs to be more of this type of literature and studies to assure we have something to leave behind for the future of our kind.

 

Time for a real review

Smart forms of research has found that customer service and sales skills are considered the least important when building a brand, and it would seem big brand and government know this very well. This might explain why any meaningful programs are explained in a way of the language of spin. For what is done would we not prefer to hear or feel that our policy makers value some measure of the actions and actively seek feedback from those that influence our lives at least every 6 to 12 months from a startup campaign. This view suggests government is a business – a business that must please its total stakeholder basis.

Why should this happen? Take a look at quotes taken from the writings of Laurissa Smith and Anna Vidot (www.abc.net.au ), on Monday, 20/08/2012, the story ‘Carbon farmers challenged by rigorous process’: “The guidelines which set out how they can make money from schemes like the Federal Government’s Carbon Farming Initiative are still being developed…It’s still sitting under consideration with the Domestic Offset Integrity Committee which is the committee tasked under the clean energy regulator to review the methodologies…So we hope that it’s going to become available for public interest by early 2013.” This is extremely frustrating when you consider the Department responsible made announcements of a body as set up for Carbon Offsets in June 2010.

In fairness some methodologies are already approved – 3 with the possible 4th soon, and the promise is new methodologies on the way would allow farmers to earn credits not yet seen for not yet approved promotions on their properties.

Following on with the need for measures and feedback, consider another story featuring Anna Vidot, it too is clearly linked to our food security, the National Retailers Association says the sector is suffering from “review fatigue” and is an easy target for people concerned about the viability of Australian food processing. The story is leveraged on how the industry is responding to recommendations made by a Senate committee which has just concluded a year-long investigation into food processing in Australia. Rather than call it a broad based affair, the report is labeled ‘wide-ranging’ across areas of diverse ranges. The report makes more than 30 recommendations from industrial relations to food labeling.

If we refrain from discussing the market dominance of Coles and Woolworth, views of a political advantage etc, and concentrate on finding evidence of how customers and suppliers are satisfied with their treatment by the big two, you can narrow down to the need for a survey of supermarket activities. That survey concept could also be used to find evidence of government performance, and that survey could, ideally, be reviewable on a half yearly or yearly basis. Correctly structured we could be well assured ‘all funny business’ would be stamped out of politics, and we would remove the election cycle porkbarreling we are so used to in new policy announcements.

If we explore this a little further, from the retailers: “We’ve had a number of reviews in this space, and the last Australian Competition and Consumer Commission review found that there was workable competition in this country… The supermarkets already do an enormous amount of research and collection of data… Many of the suppliers you’re talking about are big multinationals in their own right…From the perspective of farm-gate suppliers, in the case of Coles and Woolworths, the majority of their suppliers have been with them for 20 or 30 years.”

Then from a peak body for the manufacturers, the Australian Food and Grocery Council sums it all up very well: “If you’re looking at how we become more competitive, to improve productivity and compete effectively against imports and secure export markets, innovation is absolutely fundamental to that…,[It’s about] giving that a commercial focus and providing some leadership, or a catalyst if you like, for some of the innovative effort that assists in improving productivity and identifying and securing export markets…But it’s not easy and we welcome the fact that this report has identified this as an area for future action.”

Can you see the similarities that each industry faces, it follows: Call for interest, formulate, approve, review, report, review the review, determine if real, and review if the review equals very little intervention other than a market correction and then all care and no responsibility taken.  And, what if each industry could review the performance of the politician and review that appointment?

 

Waste, Land, Climate Changes

Waste movers:

South Australians have done what is the environmental equivalent of taking more than 300,000 passenger cars off the road, or planting 2 million trees and set a new record for recycling, diverting almost 80% of waste from landfill in the past financial year. Source: The Adelaide Advertiser 26 June 2012.

A printer cartridge in a landfill will take between 450–1,000 years to decompose, and creating the plastic for one laser toner cartridge uses 3 litres of oil. In 2012, in Australia an estimated 5 million litres of oil could be saved annually by using remanufactured printer cartridges. The claim is 450 million toner cartridges and 1.5 billion ink cartridges are expected to be used and thrown into landfill this year

Aluminum is almost endlessly recyclable – it saves 95% of the energy it would take to make new metal – nearly three-quarters of all aluminum ever made since 1886 remains in use today.

The Land Changes

Small family-owned and managed farms are struggling for survival in the face of corporate and large-scale agriculture – research released by the Australian Farm Institute (AFI) found that in Victoria last year, only 28% of family farms were of sufficient scale and profitability to earn enough income to support the families owning them – more than one-third of all family farms relied on adults living on the farm to earn wages elsewhere – another 39% of farmers earned so little from trying to grow and produce food that their family income was below the median of all Australian households. Source: SmartCompany 26 June 2012.

Farms with under $100,000 of sales a year tend to have in excess of 95% of their net income from off-farm wages – there is a “strong disconnect” between the public perception of where food comes from and the reality, with 20% of farmers producing almost 80% of total production – the AFI says that while the major retailers and food producers advertise their connection with the average Joe farmer, a bloke on a tractor with his hat on, that’s not the reality – the reality now is much larger-scale farm businesses.

A recent national Landcare survey found that 93% of the landholders surveyed practiced Landcare on their farms, and 73% said that they feel they are part of Landcare – 61% said that Landcare plays an important role in building social capacity in their local community – 95% of farmers indicated that Landcare has not ‘had its day’ yet – 79% believe the movement needs to evolve to meet the challenges of the future – and 80% see the movement as having a major role in responding to national challenges such as food security, environment and climate adaptation. Landcare 09 August 2012.

The US is the biggest producer of corn, soybeans and wheat in the world – the first 7 months of the year have been the hottest on record and the country is experiencing the worst drought in 50 years – a poor harvest will mean global prices will rise and global stockpiles will be depleted – whereas Australian farmers envision a good season and bumper crops. Source: SunHerald 12 August 2012.

Climate Change

The Arctic’s glaciers, including those of Greenland’s vast ice caps, are retreating – the Greenland ice sheet has recently shed around 200 gigatonnes of ice a year- this is a 4 –fold increase on a decade ago -– the area covered by snow in June was roughly a fifth less than in the 1960s – the land is also thawing and the permafrost is shrinking – alien plants, birds, fish and animals are creeping north. Source: The Economist 16 June 2012.

The Arctic is warming roughly twice as fast as the rest of the planet – as the ice melts it is replaced by dark melt-water pools which attract more solar heat – this causes local warming – more melting and more solar heat gain. Source: The Economist 16 June 2012.

Thank you to Garry Reynolds DAFF NRM Co-ordinator.