Australian Carbon Traders AFAR

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

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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