1 Options for Catchment Management Authorities in the Carbon Market Andrew Campbell Triple Helix Consulting July 2007 www.triplehelix.com.au Outline • Introduction – Climate Change, Carbon Trading and Biosequestration – Why should CMAs be interested? • Some existing biosequestration schemes • The PM’s emissions trading task force & other developments • Opportunities and Risks for CMAs • Options for CMAs in the carbon market – Do nothing — Watching brief – Guardian of the RCS — Quality Assurance – Carbon counter — Facilitator – Strategic Investor – Market Player
Transcript
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Options forCatchment Management Authorities
in the Carbon Market
Andrew CampbellTriple Helix Consulting
July 2007
www.triplehelix.com.au
Outline• Introduction
– Climate Change, Carbon Trading and Biosequestration– Why should CMAs be interested?
• Some existing biosequestration schemes
• The PM’s emissions trading task force & otherdevelopments
• Opportunities and Risks for CMAs
• Options for CMAs in the carbon market– Do nothing — Watching brief– Guardian of the RCS — Quality Assurance– Carbon counter — Facilitator– Strategic Investor– Market Player
Observed carbon emission trajectory compared toprojections and stabilisation scenarios
Climate change summary
• Stronger evidence (i) of warming beyond natural variability and (ii) thathuman-driven emissions of greenhouse gases are the primary cause.
• Climate change impacts now observable. Adaptation to climate change isno longer a question of ”if” but rather of ”how”, ”where” and ”how fast”.
• Recent trend observations of C emissions, temperatures and sea levels,coupled with new understanding of feedbacks, imply more severe climatechange through the 21st century - and rapidly increasing risks of seriousimpacts, notably for water availability.
• In 2006 Stern assessed that the economic costs of inaction far outweighthe costs of acting to avert severe climate change.
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Carbon trading and Biosequestration
• Reducing net global emissions is urgent
Three ways to do it:
• Avoid, reduce or offset carbon emissions
• Biosequestration (tree planting) is a key offsetmechanism
• For many sectors, it will take time to re-tool to avoidor reduce emissions
• So offsets will be needed for many decades to come
• The best way to get revenues from offsets is through a carbon market
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Existing Australian BiosequestrationSchemes
Two types:
• Mandatory (formal, regulated)
– NSW GGAS the only Australian example
• Voluntary (informal, unregulated)
– Many examples in Australia and OS
– A new entrant almost every week
– Diverse, patchy, inconsistent, hard to track & evaluate
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Exemplar biosequestration schemes• Greenfleet
– Voluntary scheme established in Victoria in 1997– $40/year offsets emissions from one vehicle by planting 17 trees– Greenfleet pays landholders for reveg - prefers sites >10ha– Does not require a covenant
• CO2 Australia– Accredited under NSW GGAS (rigorous measurement
requirements)– Mallee plantings (unfenced belts) in mid-low rainfall zone– Can integrate into grazing & cropping systems– Farmers retain ownership of land, pay nothing– Trees and carbon are owned by CO2 Australia– 10% strike rate with farmers expressing interest
Landholderrecruitment
Eligibility Test
Monitoring
CarbonModelling
Project PlanTemplate (s) supplied
by LCS
FieldAssessment
Verification
ProjectRegistrations
ComplianceReporting
LandholderPayment
FieldAssessments
LCS Developsand Delivers
Training Course
Independent AuditLCS to manage
GISData
RecordKeeping
Regional ServiceProviders
Delivery Model CarbonSMART
Regional Services(CMAs)
Independent
Delivery Agent
LCS = Landcare CarbonSMARTCarbon pool manager, keen to partner with CMAs, recognises existing plantings
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The PM’s Emissions Trading Task Force
Report sets out key design parameters:• A ‘cap and trade’ model with a long-term aspirational goal• Maximum practical coverage of all sources and sinks, and of
all greenhouse gases• Carbon offsets through vegetation sinks are expressly
recognised, including during the transition phase to a newnational scheme
• Agricultural emissions (for example methane from ruminants orcarbon released during soil cultivation) are excluded at thisstage due to measurement difficulties;
• Land use change (for example land clearing)is also excluded.
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Key issues to watch as a national scheme emerges
• The long term emissions reduction target
• The level at which the cap is introduced
• Timeframe over which carbon rights need to be secured
• Whether end-uses of timber get counted in forestry schemes
• Whether measurement difficulties for Ag emissions can beovercome
• Whether a two-tiered market of mandatory and voluntarytrades persists– And hence the distinction between
’industrial’ and ’charismatic’ carbon
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Opportunities and Risks for CMAs
Opportunities
• Revenue stream
• On-ground action– More incentives for
landholders
• Influence big investments– Encourage projects consistent
with RCS and vice-versa
– Attract support for more’environmental’ sinks projects
• Implement RCS
Risks• Financial (ROI)
• Technical
• Policy
• Resourcing
• Reputational
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Options for CMA involvementin carbon trading
(not mutually exclusve)
• Do nothing• Watching Brief• Carbon Counter• Quality Assurance• Guardian of the RCS
• Facilitator• Strategic Investor• Market Player
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Do Nothing(reasoned inaction)
• Minimises risks• And opportunities, at least from ‘early
mover’ positioning• Could be surprised by sinks projects
that are inconsistent with RCS
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Watching Brief
• Slightly more proactive than do nothing
• Allocate some resources to becomingliterate in carbon markets
• Keep a close eye on NSW pilot project(7 CMAs with DPI Forests)
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Guardian of the RCS• Promote and defend the Regional Catchment
Strategy
• Seek to influence the carbon market accordingly
• Consistent with CMA core business and may liftawareness of the RCS
• But trying to influence a market you’re not in isvery difficult
• Blue gums an instructive example
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Quality Assurance• Certifies environmental value of sinks projects
(either formally or informally)
• Could be seen to be ‘picking winners’
• Requires rigorous, defensible systems thatwon’t be cheap to establish
• But such systems will have wider value forCMAs beyond the carbon market
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Carbon Counter• Measures and monitors carbon in its projects
• CMAs already engaged in mapping and monitoring
• This would take that up a couple of notches
• May have spillover benefits for CMA projectmonitoring
• Economies of scale may favour multiple CMAs
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Project Facilitator• Steers carbon investors towards desirable
projects from RCS perspective
• Extends the Guardian option, by getting involvedin project design and marketing
• But does not involve direct participation in themarket
• Requires a good understandingof the market and its players
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Strategic Investor• Through partnerships or joint ventures with specialists• Variations on the Landcare flowchart
– CMAs stick to core business, leaving carbon market intricacies to theexperts
– Gives CMAs more direct control over projects
• CMAs could choose to co-invest in desirable projects (e.g.NSW Northern Rivers)– But could be seen to be subsidising corporate activity
• Out-sources some of the risks (not reputational)
• Dependent on skills, modeland credibility of chosen partner(s)
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Market player• carbon pool manager and broker either directly or through a
subsidiary• Develops a new line of business for CMAs• ‘Bulking up’ the carbon from reveg projects and on-selling it into
the market• Riskiest option, exposure to realk market risk• Requires legally robust contracts with landholders and rigorous
carbon accounting systems• Arguably not core business - “CMAs no better placed to manage a
carbon pool than a grain or a lamb marketing pool”• Voluntary market in charismatic carbon
may be more prospective• Crown frontages a particular opportunity
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Summary• Carbon market is immature and fluid• Environmental plantings not very competitive as
sinks• Unless the carbon can be marketed as
charismatic• Considerable technical and legal challenges in
the mandatory market• But likely opportunities in the voluntary market for
some years yet• Working together across CMAs
makes sense
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Policy implications & suggestions• Now is a good time to be trying to influence the detail in
designing a national scheme
• This will be important if mixed species environmentalplantings are to be competitive
• Key priority is to improve rigour and precision of carbonaccounting
• And to develop simpler contractual arrangements withlandholders
• Offsets on Crown Frontages merit specific attention
• Value in sharing info/experienceacross CMOs nationally
