MAKING CARBON WHILE THE SUN SHINES
A winning formula for farmers and the environment.
DROUGHT HASN’T stopped Peter Yench from reaping almost $1 million a year, pre-tax, from his farm in Cobar, north-western New South Wales, for each of the past three years. With good rainfall this year the 21,000ha property, Bulgoo, is now lush, green and looking, the 75-year-old farmer boasts, “like God’s own country”.
But up until late last year it was as parched and grey as hundreds of pastoral properties that had endured years of drought in this semi-arid zone. Peter runs sheep on Bulgoo and from 2016 to 2019 his flock dropped from 8000 to 600 as the property’s carrying capacity dried up along with the water in its dams and its soil. And yet that six-figure cheque kept arriving annually. Better still, it’s destined to keep coming for at least the next decade, no matter what weather conditions prevail. Peter’s farming success is in a block of about 10,000ha set aside on Bulgoo that supports an open woodland dominated by eucalypts – native vegetation that’s evolved to cope with droughts. It’s the kind of scrub that’s traditionally been cleared out here to make way for pasture or crops.
About a decade ago Peter entered into an agreement under the Carbon Farming Initiative, as the federal government began exploring innovative carbon capture options to reduce the nation’s total greenhouse gas emissions. He locked in a vegetation management plan for his property that avoided native vegetation clearing. And the big pay-offs began a few years later with the 2015 launch of the Emissions Reduction Fund (ERF), which provides financial incentives for greenhouse gas mitigation.
The ERF facilitates ways to measure and pay for either sequestering carbon – pulling carbon dioxide (CO₂) out of the atmosphere and locking away the carbon component – or preventing the release of CO₂ in the first place.
Peter was one of the first landholders on board and his way of farming carbon is among the simplest. The ERF details “methods” by which individuals or organisations can be involved and Peter uses the “avoid deforestation” method. “But you need a minimum of about 5000ha to make it worth it,” Peter says. He’s hoping to access other methods (there are currently 26 available for farmers) under the ERF by ploughing his carbon profits into building more carbon storage capacity on Bulgoo through initiatives such as planting 100,000 saltbush plants and 2000 kurrajong trees. These natives will also further droughtproof the property, helping to reverse the impacts of overstocking, a disastrous legacy of a past agricultural style Peter has no interest in pursuing.
“A lot of farmers are getting into carbon because it’s allowing them to improve their country, carrying capacity and finances,” Peter explains. Named Carbon Cocky of the Year at the 2019 National Carbon Cocky awards, which recognise carbon farming excellence, Peter is among the most enthusiastic advocates for this very 21st-century agricultural style. “It’s better management, that’s what it is – better for the land, for the environment, for the planet – a win-win all round. And the government wins too because it increases tax revenue.”
MOST CARBON FARMING is more complex than that of Peter’s original contract. He mostly just needs to leave his carbon block alone to do what it does naturally, which is photosynthesise…and Bulgoo’s native forest does that reliably and predictably well. During photosynthesis, plants suck CO2 from the air to produce sugars, locking elemental carbon away in leaves, bark, roots and even fallen leaf litter, away from the atmosphere where it’s doing so much harm. Peter’s land, nevertheless, still needs to be mapped, assessed and monitored scientifically to determine how much carbon is kept out of the atmosphere by leaving it intact. And, doing all that, along with determining payment rates, is where carbon farming can become very complicated.
At the heart of this market is the Australian Carbon Credit Unit (ACCU), which represents 1 tonne of CO₂ “stored or avoided”. ACCUs are like government-issued stocks, and the methods via which they can be generated are overseen by the federal Clean Energy Regulator. The federal government price being paid for an ACCU has increased during the COVID-19 crisis. It was about $16 at the time of going to press, but some farmers have decade-long contracts with an even higher locked-in rate.
To sort through carbon farming’s logistic and legislative requirements, most landholders employ a carbon project developer or carbon trading adviser. The range and number of operators appearing in this new space are changing rapidly. Presently, there are about three or four large players, each handling 10,000sq.km or more. Included in these is Sydney-based GreenCollar, which Peter uses. But there are many more smaller boutique operators, such as Carbon Farmers of Australia (CFA), a family business based in the Central West of NSW that has been involved with lobbying for and helping design carbon offset opportunities for farmers for as long as perhaps anyone in the world. “We’re a fairly small industry; everybody knows each other, and we call ourselves ‘copetitors’ because we’re both colleagues and competitors,” CFA director Louisa Kiely says of a profession that’s barely a decade old.
The primary market for ACCUs is the Commonwealth government. But to complicate matters further, and potentially make carbon farming even more profitable, there is a secondary market.
“The secondary market is smaller, but it can bring a higher price,” Louisa says, explaining that if a farmer she represents secures surplus ACCUs or doesn’t have a government carbon abatement contract, they can look for a secondary market buyer. “And that can be everyone from BHP to Origin Energy, AGL, the list goes on. It’s often larger companies, who are either buying ACCUs to protect themselves from a future shock of a carbon price rise or they are looking for an immediate return to offset their own carbon footprint.” Buying ACCUs that cover the amount of CO₂ a company generates through its operations allows it to claim and advertise that it’s carbon neutral, meets government regulatory expectations, or both. “They can make claims against it, because it’s backed by law, it’s a financial instrument, it’s been through audit, it allows them to say ‘we’re clean and green’ and all of those things, with total integrity.”
The most common method used by farmers to capture carbon is “human-induced regeneration of a permanent even-aged native forest”, or “natural regrowth HIR” for short. It involves allowing native forest to regenerate on a property. But to make decent money from it requires a large area. And so CFA lobbied for and helped develop the “soil method” of capturing carbon.
“Developing the soil carbon method was incredibly important and remains so because the soil is the largest carbon sink over which we [farmers and landholders] have control,” Louisa says. “If we didn’t have a soil carbon method, many smaller farmers would miss out, and so, in conjunction with others, we put it forward and after a number of iterations it was approved.”
AREPORT PUBLISHED early this year in the journal Nature Sustainability estimated that the world’s soil has the potential to sequester 5 billion tonnes of CO₂, equivalent to the USA’s annual emissions.
In one respect, Australia is well ahead of the world in this, last year becoming the first country to issue soil carbon credits.
The project was developed for the ERF by carbon project developer AgriProve for Niels Olsen, whose family runs a beef farm in Victoria’s West Gippsland. Niels has invented the Soilkee Pasture Renovator system to improve his soils. So far, almost 2000 carbon credits have been generated on his 100ha property.
“Australia is in the fortunate position of having a wide array of innovators in the farming space and tremendous case studies of farmers who’ve improved their soil health for a productivity outcome, and Niels is one of them,” says AgriProve’s managing director, Matthew Warnken. “This is about building organic soil carbon, which means increasing organic carbon matter either by applying it on top, such as compost, or growing it in the soil, which you can do by using multi species plantings over the top of pasture.” This includes a range of annuals, and the more variety, the better. One popular plant is tillage radish, which has long tuberous roots that can grow down about half a metre, physically breaking up soil, improving rainfall infiltration, and taking organic matter deep into the soil to feed microbes, such as bacteria and fungi. It’s these microbes that are key to fixing carbon in soils by feeding on excess sugars released by plant roots, but created of course by the above-ground leaves sucking CO₂ out of the air.
Matthew, who has been a key player in the carbon sector for more than a decade, believes soil carbon offers huge opportunities in Australia and is working with the Soil Carbon Practitioners Industry Working Group to see that it becomes a mainstream option for farmers .“Agri Prove has more than 100 farmers already wanting to participate in projects,” he says. “Once fully implemented, this represents an annual ACCU flow of about 200,000 carbon credits.”
Soil is a good carbon storage option for farmers in mediumto high-rainfall areas. “Australia has 300,000sq.km of land potentially suitable for building soil carbon,” he says. “This could deliver 130 million tonnes of abatement per year, achieving carbon drawdown via active rather than passive stewardship.”
Australia is well ahead of the world in this, becoming the first country to issue soil carbon credits.
Chris Hall, a third-generation southern NSW farmer and the NSW 2019 Farmer of the Year, has begun the process of preparing the soil on his 100ha property to increase its carbon content. He hopes within a few years to be using that to generate carbon revenue that supplements his income from cherries, sheep, cattle and cereal crops by more than $20,000 a year.
“The number one thing is just growing plants,” Chris says, explaining that simply ploughing a crop back into the soil after it has been harvested isn’t enough to increase soil organic matter content as many farmers think. “It’s about collecting sunlight and the more sunlight you can collect, the more sugars plants produce and any excess the plants don’t need they pump into the soil where microbes use it as a food source, which helps them to build carbon.”
In between crops Chris keeps his soil covered with a diverse range of plants that he feeds with nutrients proven to increase photosynthesis, so they are collecting sunshine at an optimal level. This, of course, further feeds his soil microbes, which keep building his soil carbon. The process also naturally keeps out weeds, encourages the return of native pastures and increases his soil’s water-holding potential.
Because synthetic fertilisers, herbicides, fungicides and insecticides all damage soil microbes, these have all been phased out from Chris’s farming practices for more than two years. Good plant nutrition, which helps control pests and diseases, is his focus: “Through plant health we build the plants’ own immunity and without chemicals we have more microbes in the soil building carbon and more beneficial insects to control insect pests.”
THE ERF first issued ACCUs in 2014–15 – 15.5 million of them, representing 15.4 million tonnes of carbon either kept from or pulled out of the air over Australia and worth at the very least $231 million paid to 278 projects, one of which, of course, was that of Peter Yench on Bulgoo. Last year 786 projects were issued 68.8 million ACCUs.
For landholders, the biggest opportunities to tap into this growing market have so far been in vegetation methods, such as the avoided clearing method used by Peter. Most of those have been in southern central Queensland and northern central NSW, and around the wheatbelt of WA. After that it’s projects in the savannah rangelands across the top third of the county, where landholders have been doing most of the heavy lifting to try to offset Australia’s carbon emissions and help it meet its 2030 Paris Agreement requirements.
One of the biggest facilitators of carbon projects in northern Australia is the Aboriginal Carbon Foundation (AbCF),
Managing savannah rangelands with Indigenous knowledge hugely reduces greenhouse gas emissions.
which supports traditional owners to manage the land with fire as they've done for millennia. Fires in northern Australia are healthy for country and managing the savannah rangelands with Indigenous knowledge hugely reduces the greenhouse gas emissions from these fires. There are scientific tools, such as the Savanna Burning Abatement Tool (SavBAT) and Northern Australian Fire Information (NAFI), that can determine how much CO₂ Indigenous burns prevent from entering the atmosphere and ACCU credits are allocated accordingly.
The AbCF, however, sells its ACCUs, not to the federal government as most farmers do, but at a premium, with environmental, social and cultural co-benefits, for which mostly corporate Australia is keen to pay in the secondary carbon market.
“That market has collapsed over the last two or three months, but up until COVID-19 we were selling at between $21 and $25 a tonne,” says the AbCF's CEO Rowan Foley, explaining that in the last two years alone this has produced millions of dollars for Aboriginal communities. The AbCF sells carbon credits to organisations such as NAB, KPMG and even the Sydney Opera House. The Queensland government may also be a major buyer through its Land Restoration Fund.
“Some people think this is a bit of a greenie thing – you know carbon farming and climate change abatement and environmental values,” Rowan says. “But we're working with AgForce [a member organisation of the National Farmer's Federation], who are pretty conservative and they love our work. We have a memorandum of understanding with them.”
WHEN IT COMES to balancing the books on CO₂ emissions, it's widely agreed Australia certainly fails on the energy production side, but there's much evidence to show it's doing well on the other side of the equation.
“Australia might not be a superpower in clean energy but it certainly is in terms of carbon drawdown,” agrees John Connor, CEO of the Carbon Market Institute, an independent peak industry body for business and climate in Australia, which sees carbon farming as a valuable and growing part of the Australian economy.
“What's exciting about this is that, as complicated as it may be, these carbon markets are actually supporting new generation restoration and repair efforts of our country,” John says. “While giving corporate payments for environmental services has been around for years, this is actually driving it and it's vital we get the right systems of accreditation and be able to measure properly for those environmental and social benefits.”
Getting landholders to do the right thing by the country inevitably requires a combination of “sticks” (penalties) and “carrots” (incentives), John says: “Carbon is turning out to be a good carrot for a number of reasons.”
All this success in the carbon abatement area, which also undeniably brings with it rewards in terms of environmental, social and cultural gains, comes with a profound caveat.
“Yes, this is a big continent and there are huge opportunities for carbon sequestration,” says Dr Pep Canadell, a senior scientist with the CSIRO Climate Science Centre and executive director of the Global Carbon Project, an international consortium of scientists that advises the United Nations' IPCC (Intergovernmental Panel on Climate Change).
“Australia's biological carbon sink is certainly part of the portfolio of mitigations we have available,” Pep says. “But it's just one of many.”
The “big elephant in the room, by many times”, he says, is the non-renewable energy sector that's responsible for so much of the world's total CO₂ emissions. It's important, he adds, that Australia doesn't see its success in biological carbon sequestration and abatement as a panacea for reducing or stopping CO₂ emissions that come from burning fossil fuels.
While Pep agrees that ascribing a financial value to CO₂ is a valuable aspect of the carbon sequestration and abatement sector, he says it needs to go further. There are models being put forward within the IPCC that value a tonne of atmospheric CO₂ far higher than Australia's ERF, or even Australia's secondary carbon market, does. “Some models are calling for a value of several thousand dollars a tonne to be placed on CO₂ ,” Pep says. “And that would provide the sort of financial incentive to do all of the things we need to do in terms of technology, in order to stabilise the planet's climate.”
And that might just be the sort of carrot that the world's biggest producers of CO₂ need to ramp up their adoption of renewable energy options.