Movements – a Viable CFI methodology

Under debate for some time has been whether reforestation, and afforestation should be part of the CFI. It was thought only conservation planting was viable as a measure under Natural Resource Management (NRM) rules. In more recent times part of discussion was a concern that political movements would be disruptive.

Two announcements made by the Australian Government on these matters by newsletter on 12 April 2013 may be helpful for the debate. Namely:

  1. First reforestation and afforestation project approved, and
  2. No changes to methodology development following changes to the Cabinet.

Posted on April 8, 2013 by co2land, Makers – a Viable CFI methodology the point was made it is not a simple process to develop CFI Methodology and program rules are a major factor in participating, and the recent Government announcements will address most of those points (but not the coalitions position).

On point 1: The Clean Energy Regulator under the Carbon Farming Initiative has announced the first project using the Carbon Credits (Carbon Farming Initiative) (Reforestation and Afforestation) Determination 2013. There are now 53 projects approved under the Carbon Farming Initiative. All projects declared eligible under the CFI Act are published on the Register of Offsets Projects.

On point 2: Work on the development and assessment of Carbon Farming Initiative methodologies undertaken by the Department of Climate Change and Energy Efficiency (DCCEE) will continue apace under new Ministerial Responsibilities announced recently by the Prime Minister.

DCCEE’s energy efficiency functions will be have been transferred into the Department of Resources, Energy and Tourism (DRET) while the remaining policy functions currently performed by DCCEE, including the CFI, will be have been transferred to the newly-named Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (DIICCSRTE).

Former DCCEE staff working on the CFI and other land sector measures will move to DIICCSRTE and continue their work accordingly.

Whether participating in CFI or not is still very much a matter of it depends on the location and the carbon sequestration rates that would be possible for it to be viable.

If we start by avoiding the cost of participation discussion, one non-scientific way to help you decide is to ask: Did the area to be used have really large trees present in the past? If yes it could be very viable. It follows that nature will want to regenerate those areas into large carbon rich forests. In gathering your evidence you could include old local history photos of the areas showing the large density of trees on them. In choosing a more scientific way: Gather the Lot & DP numbers and/or GPS points, and the CFI environmental tools should be useful to tell the landholder the likely sequestration rates. However, as we said in the former Co2Land org post the uncontrollable factor in proving if it is viable is the price of carbon. Notice it was not said the ‘carbon price’ as that is an artificial price set for the transition period.

If we focus on the cost of developing a methodology for inclusion into the CFI program register the major factor is cost in terms of the capability to enter into initiative. You may find innovation is required for a “creative” way to recover the cost of developing a methodology. Or is it? It follows that once published on the climate change website it becomes public information. However, it will still take some effort and there will be a need to lobby Government to allow the methodology to be used by another entity. In equity you should anticipate any agreement might require a royalty payment to the original developer.

If you can overcome the matter of cost, it becomes a question of what CFI environmental tools you refer to for the CFI Mapping and Reforestation Modeling tools. Also the methodology costs will depend on the level of verification and any additional research required, in many cases there are sufficient prior studies (such as survival & growth rates in the targeted region) and accepted calculation methods to do this could be found from a literature search, or you could talk to others trying to develop the same thing. It is understood the web page: http://www.greeningaustralia.org.au/our-projects/land/bio4 will promote further research on this matter.

One suggested project to study as a background search is the NSW Blacktown Council and their Regenesis Project. That project has lessons that can be of benefit to be aware of in your deliberations. One example lesson is they had a significant grant to develop their concepts and actually generated the first carbon credits only to have a later policy decision rule projects within urban boundaries to be ineligible. Notwithstanding, the core of their work is valid. You can view the Regenesis projects on the website – www.australiancarbontraders.com and then click on the Regenesis link on the front page.

So frustration will continue and innovation continues to be encouraged – for those eligible – and that suggests you need friends to be recognized as able to be innovative. At cross purposes you might argue!  An anonymous friend, name provided but withheld, said “in an entirely different forum some years ago we flagged this as a problem for the then announced Innovation Strategy. The senior public servant delivering the local launch responded: We can’t have people solving problems in unique ways that we can’t predict, you wouldn’t know where would it all end up!

It would seem the core problem with the current grant model is that it is primarily a funding model for the usual suspects, as practiced the truly (open) competitive component is only a small % of the funding available.

We need a better approach that covers needs of Universities and commonwealth and state research agencies separately.”

Then we hear funding has no longer been provided for strategic innovation!

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Makers – a Viable CFI methodology

Recently a discussion group was asked for information on the area needed to make a Carbon Farming Initiative (CFI) methodology viable. I follows the answer is not as simple as it should be and part of the problem is the rules can change and even the responsible entity itself might change. This statement is not an example of a remote possibility, it is very much what is likely to happen.

First issue: The market.

Currently a Australian Carbon Credit Unit is reported as holding steady at approximately the Carbon Price Mechanism expectation of $23 (actually ACCU spot price is $22.60 at 4 April 2013). Compared to the trading prices of others. For example the Carbon + Market Daily (www.cedaily.com.au) shows European Union Allowances (EUA eligible on Australian Scheme from mid 2015 – June 2016: AUD $7.48 – no change) 
* Certified Emission Reductions (CER eligible on Australian Scheme from mid 2015 – June 2016: AUD $0.67 – up 6.4%) 
* New Zealand Units (NZU spot can’t be used to meet liabilities under the Australian scheme: NZD $1.97 – down 2.5%) 
* Australian Carbon Credit Units (ACCU spot Kyoto units issued under the CFI that can be used to help meet Australian scheme liabilities: AUD $22.60 – no change). They also report of conflicting market drivers, and this is in addition to the Coalition threats to dismantle the carbon price mechanism, that the European market is struggling to hold above EUR5 on moderate volumes. Problems include:

1) An increasing likelihood that backloading will be passed as more countries come out in support of the proposal; and

2) High auction volumes relative to emitter demand.

3) Increased selling in the New Zealand market as more participants’ look to switch out of their NZUs and into cheaper international units.

4) June 2016 prices for EUAs and CERs reflect the cost of these units to an entity liable under the Australian scheme’s floating price phase.

5) The EUA (December 2013 contract) is a focus as this drives price movements and is a key indicator of EU (European Union) market sentiment.

Conclusion – first issue: Transactions involving carbon give rise to substantial risk (including regulatory risk) and are not suitable for all investors. It is recommend that you seek your own independent legal or financial advice before proceeding with any investment decision

Second issue: Carbon Auction Rules.

The Clean Energy Regulator is likely to be required to offer 60 million carbon units in 2013-14 under draft carbon auction rules. The potential is the opening price is at 60% of the international market price. Follow the link of the

exposure draft of a carbon auction determination, and it will outlines arrangements for auctions that are set to begin next financial year.

If you are relying on an incoming Coalition Government to repeal the determination, you should note s113(9) of the Clean Energy Act allows the Regulator to hold auctions even without the determination. It might not be so simple as a statement to win votes – it is written in stone so to speak.

Conclusion – Second issue: Without control of the senate, or if the senate is hostile, a Coalition repeal instrument would be disallowable. This introduces additional risk, and additional to regulatory risk. As in the first issue it is recommended you seek your own independent and financial and legal advice.

Third Issue: ACCU methodology.

It costs up to $1M to develop a methodology acceptable under CFI. Once accepted the transaction cost to create the ACCU’s is said to be about $70,000. Although it is not a definite cost, it can be less but a reasonable guide and it requires you to look carefully at the potential yield of each project and whether you can smear the transaction cost across the entire project to determine the minimum size for it to be a worthwhile program.

One way to develop a methodology and reduce your cost base is to apply to the 

Methodology Development Program (MDP) for a grant to develop the methodology. The 

MDP is a 
$19.6 million for the development of methodologies for use in the Carbon Farming Initiative. The fund is administered by the Department of Climate Change and Energy Efficiency (DCCEE).

However, recently the Government has moved from 26 March 2013 that DCCEE be in transition to be part of a new super department called the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education. 

It is reported as a move the Australian Government hopes will be seen as logical and a way to portray that climate change is taken seriously across all of government and across all portfolios. Details changes are yet to be fully announced, albeit it is known the Climate Change Adaptation Strategy has changed with 140 projects, 33 university programs and 100 researchers affected – source ABC.net.au.

Conclusion – Third issue: Before expending too much time on the methodology. The suggestion is you follow up on who would administer the program post transition to the super department, and the will to continue with the program. Any changes will have cost implications for your efforts.

If only we had certainty!

Confident with no confidence – QLD style CID

Asking a cursory ‘Trust you are having a good and Happy Easter up in Queensland’. The reply was a shocker: “We are stuffed, I suppose the next thing we will get is a letter in the mail, stating we have to walk off our property so they can push every thing over for Ergon and the mines – Love Sharron”.  What was referred to is an alleged flawed process for the duplication of the 63 klm long 110kV power line from Warwick to Stanthorpe in Queensland, and the mounting speculation a public announcement has been held back from that process.

Ergon Energy is sponsoring the Community Infrastructure Designation (CID) process, under the Section 200 of the Sustainable Planning Act 2009 (SPA). The SPA details the process required for CID, providing an emphasis on ensuring that adequate environmental assessment and public consultation occurs prior to Queensland Government approval.

But it is suspected Ergon Energy has not been fully consultative with landowners and the community on the proposed corridor and cracks are appearing in the approval tactics under the Queensland Government’s CID process. According to the ‘grape vine’ what is held back is announcing mining is coming to Warwick, which is backing off Cherribar Resort owned by Chinese investors (a Resort set up to supply 400 homes for dignified living of people of Chinese origin), and the facilities includes the operating of their own airstrip. The timeframe is said to be in about 18 months, and soon after Cecil Plains coal seam gas and open cut mining has started.

CO2Land org then felt compelled to research this story further and then noted the Southern Free Times has been running stories on the progress of the proposal by Ergon Energy to build an additional power line to supply the Stanthorpe area. A quick check indicated this means 3 supply lines to cater for the area. (Stanthorpe – translated as old English meaning ‘tin town’ – is a town situated in south east Queensland, Australia. The town lies on the New England Highway near the New South Wales border 223 km from Brisbane via Warwick, 56 km north of Tenterfield and 811 m above sea level. The area surrounding the town is known as the Granite Belt. At the 2011 census, Stanthorpe had a population of 5,385.)

According to the local government council, the population of the Southern Downs Region has increased over the past 5 years at an annual average rate of 1.4%.  They say this rate is above the national average for inland regions not affected by the current resources boom. They also say the population increase has been brought about partly by the “tree change” phenomenon, and partly by the affordability of high quality housing – currently averaging 40% less than Brisbane prices. That said it would be hard for Ergon Energy to argue population growth numbers justifying such a large expenditure on an underutilized power line – at a community expense, certainly not justified for at least another 10 years without a resources boom planned!

However, the headline of Southern Free Times of 28 March 2013 read “Stanthorpe needs Power Reliability Says Springborg” – the opening paragraph included “The State Member said he remains confident in the decision making process of a Stanthorpe Power Line Community Reference Group, despite rifts in the group and a loss of community support”. Looking deeper into the story we find 6 of the 11 member CRG have resigned!    This sounds a bit odd – the State Member (also the Qld Gov Minister of Health) ‘remains confident’ and the CRG has no confidence in the CID process? So what is really going on here?

On reading the entire story it is noted a number of good points are raised in the Southern Free Times and the expected well scripted responses come from Ergon Energy.  But what was not covered were some big burning matters such as: Fair compensation for the loss of use or abandoning the use of your homes and property to make way for a duplication of the 110kV power line (it seem Qld in cutting the red tape for approvals also avoids the option of owners selling land affected at market price, or even accept a fair rent for the use of the land). Next, the line will be redundant unless significant growth for the need for power increases above the expected planned growth scenario. This is something the regulators must test for who benefits and whether the abandoning of the need in the lifetime of the line will result in undue costs to the community. Especially if the ‘grape vine’ is correct as to the actual need for such a large duplication.

The big issue in all this is not even remotely covered. That is the case for smearing the costs with the community when it may be a benefit for say a new mine or foreign investment interests, and that user might pull out of the area before the economic life of the line is reached.  We can think of numerous examples where this happens and one ripper is Cobar in NSW – the lines were put in and the mine shut down leaving the community to pay the costs. Costs that we now know could be avoided.

What evidence is there that financial and lifestyle costs could be avoided? The answer is actually in the responses from Ergon Energy to the Southern Free Times. A absolute major give away and indicator of the real agenda  – Ergon did not say that all alternatives had been evaluated, they said proposals to met expected demand for alternatives had not been included in time. They also said two lines currently serve the area including an 110kV and a 33kV line. They argued the 33kV line can only supply half of the current peak load. Extrapolate that to peak loads and the capacity of the current 110kv line is fine and allows for load growth of the predicted 18% over the next ten years. It also means demand response measures, if taken, will cater for peak load without new infrastructure. It also means a duplicate 110kV power line will at best be utilized 5% of the time – if you research the Power of Choice submissions with AEMO you will find similar analysis.

Also noted in Springborg’s response is he said new infrastructure was required and without detail other than a general statement the community is entitled to reliable power. Maybe the CRG should ask a few more questions, like:

  1. Why do you need more than what is stated as the need in growth scenarios (reference to published planning and forecasts from other than Ergon)?
  2. Why do you think technology will not provide solutions at a least cost other than conventional distribution of power? and,
  3. If a new industry development other than what is required by a community in growth were introduced would that industry pay a fair and reasonable rent for the infrastructure?
  4. Would a fair and reasonable rent be returned to the community?

Of course these questions are very likely to elicit more the well scripted replies to the questions, but then you could just ask them again only at a different level. For instance, if the state said the means is more important than the ends, it should be tested thoroughly.

Co2Land org now asks: If we consider the four primary schools of thought in general jurisprudence :

  •   Natural law is the idea that there are rational objective limits to the power of legislative rulers.
  •  Legal positivism, by contrast to natural law, holds that there is no necessary connection between law and morality and that the force of law comes from some basic social facts although positivists differ on what those facts are.
  •  Legal realism is a third theory of jurisprudence which argues that the real world practice of law is what determines what law is; the law has the force that it does because of what legislators, judges, and executives do with it. Similar approaches have been developed in many different ways in sociology of law.
  • Critical legal studies is a younger theory of jurisprudence that has developed since the 1970s which is primarily a negative thesis that the law is largely contradictory and can be best analyzed as an expression of the policy goals of the dominant social group.

Has the Queensland Government and Ergon (a government entity) set the theme of better practice or has the quest for the means of the market overtaken good policy for the ends to look after the community?  If the means is more important can we say the community consultation businesses that influence, is only in the interest of making a market other than setting up community representative groups with limited knowledge of the true agenda? Therefore are these groups only to give comfort to the Minister of state that all is well on a certain issue?

DoIICCSRTE – again one more time around

If you wondered if the writing is on the wall for climate change adaptation strategies what better declaration other than to say we need a new super department and call it the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education.

As of 26 March 2013 the transition has started in a move the Australian Government hopes will be seen as logical and a way to portray that climate change is taken seriously across all of government and across all portfolios. In asking the question will it work? Consider:

Logical – The movement of Energy Efficiency to Resources; energy and emission reduction policies best fit is with Climate Change.

Illogical – the same super minister overseeing mining companies will manage renewable energy.

Means – the urgent need to decarbonize the economy.

Ends – to cut funding to over 140 projects across 33 universities around Australia. To affect more than 100 researchers in the ability to carry out critical work on climate change adaptation.

The game is to be seen as promoting innovation. That word innovation is being used as a football – or should we say moneyball.

If you are not aware the opposition is committed to reducing expenditure by $23b and if you think of what the Government has done – it is making that very difficult to do as the expenditure trimming has started and it will be difficult to extract efficiency dividends on already lean departments without stopping practices all together.

Therefore it is a game of tactics as both the government and opposition are committed to strategy for climate change. The tactics appear at this stage to be:

Government – creating a Super department and reducing the Department of Climate Change staffing numbers from about 1000 to around 600, and reducing funding to research facilities.

Coalition – reunite Climate Change and the Environment in a relationship it believes makes more sense, and revisit six green star accommodation at the Nishi building at a cost of $10 million a year.

Co2Land org take s particular note of the coalition stance and where they say it makes more sense – it does for control purposes. However, it will fall into the same traps of the Howard era and quickly be unworkable as a policy instrument. But then again that will allow ‘yes minister’ to continue and compel a review at opportune times.  The term then was a ‘broad policy approach’ – history to repeat itself?

Because it is good reading we suggest you research this matter asking the questions:

And what happened to Climate Change Adaptation? Has that once commonly used title now gone altogether? Then follow up on the link –

The ABC did a story last month about the future of the body charged with preparing the nation to meet the challenge of global warming, the National Climate Change Adaptation Research Facility.