Australian Carbon Traders AFAR

News in brief from AFAR ... September 2010

(become an AFAR member for more detailed news items)

The election has finally been settled .................for now.

The election of the ALP as a minority government creates a wealth of opportunity for landholders to enter into the carbon market.

The ALP has two main policies that will directly impact on landholders and the carbon market. They are the National Carbon Offset Standard (NCOS) and the Carbon Farming Initiative (CFI). The AFAR will operate within both the NCOS and CFI markets.

The Carbon Farming Initiative is essentially the forestry component of the CPRS that links forestry credits with internationally tradeable carbon credits. This creates the opportunity for landholders to create carbon offsets that can be sold on the domestic and international market. The rules will be very similar to the CPRS regulations framed for forestry. The Carbon Farming Initiative will require legislation to be passed and that could take some months.

The National Carbon Offset Standard is also planned to go ahead. The NCOS is a voluntary standard that allows organisations to demonstrate their carbon neutrality through a standardised monitoring and reporting framework. The NCOS also allows for a standardised approach to developing eligible offsets domestically, and for the use of international offsets.

For domestic offset projects the NCOS will require methodologies to be developed that create emissions abatements outside of the proposed CPRS and Australia National Accounts (for Kyoto accounting). This essentially means agriculture.

Potential methodologies include:

" Treatment of enteric fermentation

" Improved forest management (existing veg in 1990)

" Promotion of natural seed sources

" Non forest vegetation such as heathland and wetlands

" Other non tree crops such as saltbush

" Agricultural waste treatment (combined with RECS)

" Grazing management

" Soil carbon sequestration

" Energy efficiency projects

Renewable Energy Certificates (RECS)

The Government has also re-committed to the Mandatory Renewable Energy Market which will create opportunities for projects such as solar projects, wind farms and biofuels such as ethanol, wood pellets, co generation, gasification, algae, waste and sugar cane. So if you have any good ideas let us know! A number of larger companies have already made commitments to be carbon neutral under the NCOS and are looking for good domestic offset projects. It will be some time before these policies become legislation as the mechanics of government begin to grind once more. The NCOS will be overseen by a Domestic Offset Integrity Committee (DOIC) which will give the final approval to NCOS Offset projects.

The Politics of the Cross Benches

The Carbon Farming Initiative will require legislation to be passed and as no side can guarantee to pass legislation on their own numbers. The politics of the cross benches is important.

There are six "unsecured votes" in the Lower House. Tony Crook and Bob Katter have sided with the Coalition on motions of no confidence and supply. Tony Windsor and Rob Oakeshott have both supported the ALP on motions of no confidence and supply. The Greens member Adam Brandt has also confirmed support of the ALP in no confidence and supply motions and the independent Andrew Wilkie has likewise pledged to support the ALP. However all independents are maintaining their right to vote as they please on individual legislation.

Tony Windsor and Rob Oakeshott both support action on climate change and see the market based mechanism as the best approach. Bob Katter is opposed to any form of climate change action but does want action on the renewable energy sector and, in particular, the production of biofuels and ethanol from sugar cane. Wilkie and Brandt support action on climate change; Tony Crook is more concerned about the resources super tax and how it will be distributed.

AFAR Stats

63 members
35 landholders
Over 50 assessments done
16 projects listed
23 projects preparing to be established
13 projects planted and ready to register and trade
Over 16,000 hectares of projects
Over 300,000 tonnes available in planned and planted projects combined

AFAR updates completed

Files added to landholder control panels
Increased file size limits on photos and documents
Offset companies now directly on the AFAR and soon to be linked to projects

In the works

Improved linkages between the AFAR and trading platform and transaction log
Simpler tools and individual landholder (project) statistics
Payment system to allow purchasers to buy directly
Simplified forms and standard documentation

CSIRO looking for sites...

CSIRO is looking for sites to undertake destructive sampling. The research is aimed at getting better data to inform the National Carbon Accounting System which s used to calculate changes in carbon. For further information contact us at enquiries@australiancarbontraders.com.

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News in brief from AFAR ... July - September 2010

(become an AFAR member for more detailed news items)

The delay of the introduction of the CPRS until at least 2013 has caused some confusion in the market place as to how forestry will be able to generate carbon credits or permits. Under the CPRS, forestry was to start creating credits from 1 July 2010 and would be able to sell into the market after 1 July 2012 (the formal commencement of the full trading scheme). The Department of Climate Change has not been able to confirm or deny any changes to these dates.

For forestry projects wishing to continue to revegetate land with the aim of claiming carbon offsets in the future or wishing to trade carbon permits with other companies or individuals in the meantime, it is recommended that they follow the guidelines that have been established under the CPRS.

It should be possible to establish either a carbon right or similar land title based instrument such as a caveat or deed plan on title to establish the ownership of the carbon rights and lands in the interests of the project proponent. A complimentary contract or agreement can then be established to ensure that any carbon "value" such as permits or offsets will be passed on to the counter party (buyer).

The key considerations for such an arrangement are:

1) the carbon sequestration has been calculated in accordance with the CPRS guidelines

2) There is clear ownership of the property and carbon rights (through the land title instrument)

3) The delivery date and carbon commodity is defined with due consideration given to the uncertainty in Government legislation

4) the roles and responsibilities of both counterparties are well defined and agreed upon, including who is responsible for the establishment and management of the vegetation and who is responsible for the registration, monitoring and verification costs.

In most instances the most appropriate method would be to enter into what is called an off-take agreement. An off-take agreement requires the project proponent to develop the carbon sink project to an agreed standard. In this case the aim would be to create Australian Emissions Units under the CPRS and deliver the carbon permits within a time frame and price range.

It is quite common for off-take agreements to include part or all of the payment up front at the establishment stage.

In this manner the project proponent should be in a position to develop the project with the certainty that payment for the carbon will be forthcoming and the purchaser would be confident that carbon will be delivered within a given time frame and price range.

NCOS

The NCOS was due to start 1 July 2010. This scheme (the NCOS) is designed to be complimentary to the CPRS and replace the Greenhouse Friendly Scheme. The important difference is the NCOS is designed to operate on abatement and sequestration measures that are not covered by the CPRS and not covered by Kyoto commitments, this in effect rules out forest sinks from the NCOS but does allow non Kyoto vegetation, improved forest management and soil carbon.

There are a range of schemes and standards available for the purpose of carbon sequestration. Some of the more popular include:

The International Standard for Carbon Accounting - Voluntary
The Australian Standard for Carbon Accounting (AS4978.1) - Voluntary
The Greenhouse Friendly (GHF) standards (managed by the AGO/DCEE) - Voluntary
NSW Greenhouse Gas Reduction Scheme (GGAS) standards - (managed by Independent Pricing and Regulatory Tribunal of New South Wales) - Mandatory
The Climate Community and Biodiversity Alliance standards - Voluntary

The various schemes and standards have common basic requirements for the eligibility of forest sink projects. These eligibility criteria include the spatial, temporal, carbon accounting, vegetation, and financial requirements of projects.

Link to NCOS: http://www.climatechange.gov.au/en/government/initiatives/national-carbon-offset-standard.aspx

Ecosystems Market Place releases State of the Voluntary Carbon Markets 2009

NEW YORK | 14 June 2010 | Last year was a tumultuous one for the voluntary carbon markets, which saw transactions equivalent to 94 million tons of carbon dioxide emissions reductions, a 26% drop compared to 2008, according to the fourth annual State of the Voluntary Carbon Market Report issued today by Ecosystem Marketplace and Bloomberg New Energy Finance. The total value of traded credits declined 47% to US$387 million in 2009 and the average price of an emission reduction was $6.5/tCO2e.

Links: http://www.ecosystemmarketplace.com/pages/dynamic/article.page.php?page_id=7584&section=news_articles&eod=1; http://moderncms.ecosystemmarketplace.com/repository/moderncms_documents/state_of_v_carbon_2010_0614.pdf