COSIER, Mr Peter, Director, Wentworth Group of Concerned Scientists

PARKES, Miss Claire, Senior Policy Analyst, Wentworth Group of Concerned Scientists

[14:09]

CHAIR: Welcome. I think you were here when I ran through the facts about these proceedings deserving the same respect as the proceedings of the House itself and that the giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I am sure you have presented to committees in the past and are aware of that. We have your submission. I invite you to add to it or make some opening statements.

Mr Cosier : Thanks very much, Mr Chair, for the opportunity to appear before you today. I hope we can be of some assistance. We are all wrestling with climate change and with this new concept of terrestrial carbon offsets. I will only make a brief opening statement, just to provide some context to our submission, in the hope that we can spend as much time as possible answering your questions. The focus of our submission is on how to manage this new economic opportunity both in the long term and by using the positive and negative lists to manage the transition. Managed well, with a price on carbon, this bill presents the opportunity of a generation to pay farmers to manage our landscapes more sustainably. Healthy landscapes store vast quantities of carbon. It is complex, and there are no simple answers. We have some wonderful opportunities, but we also have some significant risks. I am sure, Mr Chair, you would agree with me that we do not want to be sitting here in 20 years time fixing up another environmental problem as we are now trying to fix the Murray-Darling Basin, so let us use this opportunity to get it right from the beginning. That is basically the basis of our submission.

We need to plan where to grow trees, we need to produce food and we need to work out where we might do both. That planning needs to be done by working with communities, not by communities having top-down rules imposed upon them. Good planning will pay enormous dividends in the future. We know that there is a lot of uncertainty about how this carbon market will work or not, especially in the short term. There are different estimates on how much carbon abatement the carbon farming initiative would deliver, largely due to uncertainty about how landholders will respond to the scheme and uncertainty on the price they may be able to receive for the credits they generate. It is unknown to what extent we will be able to achieve co-benefits for the environment and rural communities and how some of the big risks of perverse outcomes might occur.

There has been a lot of good work done by agencies such as CSIRO and ABARES, but there is much more work to do. We believe that the most effective way of managing the risks is to work with state and local governments and our existing natural resource management bodies to put land use planning schemes in place where necessary and appropriate to guide carbon farming into the areas of highest benefit and away from the areas of greatest risk. We also believe that the initiative of a co-benefits index presents an opportunity for the Australian government to explore complementary economic instruments to achieve the model benefits that are possible. In summary, if we plan well, a price on carbon linked to an offsets market is a once-in-a-lifetime opportunity to pay landholders to manage our landscapes more sustainably. Thank you very much for the opportunity, Mr Chair.

CHAIR: Thank you very much, Peter. We have heard—and you might have heard—the evidence of the previous witness when we were talking about soil carbon and the difficulty in measuring it. Does the Wentworth Group of Concerned Scientists have a view or any professional opinion to provide in respect of how well we can measure soil carbon today?

I have written papers which suggest that there has been a lot of research carried out and that it can be done and measured fairly well. Clearly, there are people who dispute that. Can you give me some feedback from the Wentworth Group of Concerned Scientists?

Mr Cosier : With the preface that I am not a soil carbon expert—so I am interpreting expertise as many others need to do—there are three issues. There is the question of the science, there is the question—as we heard from the previous speakers—of the cost of monitoring and then there is the question of whether farmers will take it up anyway. So in answering the question of how much we will get, we need to answer all three questions; actually there are four questions, because then there is the question of at what price they will change behaviour.

As to the science question, there is no peer reviewed science of sufficient robustness to provide anybody with a reasonable estimate. Is that bad? It is not good. But is it surprising? No, it is not—we have never had a carbon market provide this opportunity before, so it is not surprising that we do not have the science behind that information. One of the things that we think is excellent in the design of this bill is that it creates the institutional circumstances to encourage that innovation in science, to answer that question. So do we think we should be grabbing any opportunity we can to store carbon in soil? The short answer is: absolutely. A large part of the degradation in our agricultural landscapes is because we have mined those landscapes from carbon, and the way to restore those landscapes is with carbon. But we need an economic mechanism to do that. Will this provide that? Obviously the question of price is a big question there, but there are a lot of other questions that we honestly do not know the answer to and we probably will not know the answer to until we get the system up and running.

Ms HALL: You opened—and finished, really—by saying that it was a once-in-a-lifetime opportunity to pay farmers to manage their land. You talked about planning where trees go and where we grow food and how this was a unique opportunity. Given this is a voluntary scheme, how do you envisage that this planning process will take place and how effective do you think it will be?

Mr Cosier : First of all, we support the voluntary scheme.

Ms HALL: So do I.

Mr Cosier : We support agriculture being exempt from the process, largely on the basis that the vast majority of agricultural land on this planet will always be exempted, so why would we not exempt agriculture? So we are very supportive of a voluntary mechanism. But we also know, from the last 20 years of the Landcare movement, that there are a lot of farmers out there who know how to manage their land better than we have managed it in the past; they just have not been given the economic tools to do that, because they compete on an international price. So the basis of our submission—and Claire can speak to this in more detail—is that, with all that uncertainty, we can model the economics all we like but we will still only have an economic model; what we will not have is a system that guarantees that the carbon is directed into the right place in the landscape. Rather than build a new set of institutions to manage carbon, why don't we use the ones we have got, which are our natural resource management bodies, which are building in capacity and have done so over the last decade, with resources that are quite capable of delivering that holistic landscape planning? Then we can use the land use planning system, which in urban areas in Australia we have been very used to over the last 50 years. We use the land use planning schemes to manage urban development, so why don't we use the same system to guide this carbon economy? Claire might have something else to add.

Ms Parkes : In terms of how it might roll out, the regional natural resource management bodies around the country see this as a great opportunity to channel carbon finance towards getting multiple benefits—so to getting biodiversity benefits, salinity benefits or soil quality benefits. They see it as a great opportunity. They have already been out there for a long time building up the capacity in their communities to undertake natural resource management projects, but what we see is needed is better spatial planning for where the carbon finance can deliver both carbon abatement and environmental benefits.

Ms HALL: My next question follows on from that question, and it deals with the need to improve carbon literacy. How can that be best achieved? What is the role of government and the other parties in that?

Mr Cosier : It is quite consistent with what Claire was just talking about, the capacity of the natural resource management bodies. One of the jobs that we gave them when the Natural Heritage Trust was established was to provide a capacity-building function, to be the broker of knowledge between science and farmers. One thing we know about Australian farmers is that they are great innovators. We also know that the vast majority of them are very keen to improve the sustainability of their farms. So it is not like we are having to push something onto a community that does not want this information. They are sitting there waiting for it. You asked a lot of questions, Mr Chair, about soil carbon, for example. There is soil carbon in the cropping lands, which is where most of the focus has been, but there is also the opportunity for soil carbon sequestration in the grazing lands. I am sure you have received many submissions about that.

Our great hope is that with a carbon price we can deliver some cost-effective monitoring systems that encourage that new innovation in grazing management in Australia. I have no doubt that, once we get the carbon price turned on, those people will have their methodologies in really quickly and will do it by learning. It goes back to a core question. The whole philosophy of Landcare, the Natural Heritage Trust and so on has been that farmers can only manage their farm but landscape processes happen at a landscape scale. Water systems flow in catchments and biodiversity is connected across the landscape, so the question is: if you want to manage Australia sustainably, how do you give farmers the knowledge about their contribution to larger landscape management? That is really the role of these natural resource management bodies. There are some obvious things, like riparian vegetation—the vegetation on river systems. I have never met a farmer who would not love to be paid to restore the vegetation along their river system. That is a very simple one, but we have some very complex ones. Some of the work we are doing—that Claire is doing—is looking at how we deal with the more complex stuff and put that in a simple way that farmers can understand.

Ms HALL: You mentioned perverse outcomes. What perverse outcomes do you think could occur as a result of this legislation?

Mr Cosier : Three, potentially. The first is the lack of environmental flows in rivers. If you had massive forestry plantations in many of the catchments in eastern Australia and in Western Australia, if the worst-case scenario happened and over the next 50 or 100 years they were converted from food production to carbon farming, it would probably drain the rivers. That is a huge environmental risk. There is a great economic risk, too. We have seen that with the managed investment schemes, where it is economic for an individual to go out of agricultural production and into forestry production. That is a good decision for an individual but it has flow-on community, economic and social impacts if it happens at too large a scale. Those are two potential outcomes. The third one is the potential for monocultures to impact on biodiversity, which is already struggling from overclearing across Australia.

Ms HALL: Finally, would it be fair to say that you are supportive of the legislation that we are looking at here today?

Mr Cosier : We are very supportive of the legislation. We think it is an excellent framework to deal with a very complex issue. A lot of the questions that we have noticed that people have been asking in their submissions are really related to the next levels of information—the regulations and probably systems underneath that, like the accreditation standards. But it is very complex legislation, so you cannot fix it all in an act. That is why we have subsidiary legislation. We think the structure of the legislation is an excellent way to deal with the complexity and also to drive innovation.

Ms HALL: Thank you very much.

Ms BURKE: Some of the things you have been referring to have been talked about by some of the other presenters today, particularly Environmental Defenders, such as the notion of doing it project by project as opposed to a whole environmental impact. A couple of things happen: the notion of leakage, the notion that the polluter should pay as opposed to offset. Some of the stuff you are talking about reminds me of this. You have to get the whole of it right. I have to admit that I do not see in my head, on the map of Australia, how you can do that. In terms of using the land appropriately, as you and the last presenters discussed, how do you ensure that trees are not grown where we should be planting crops and protecting the water catchments. Have you envisaged how you actually do that so it is not a matter of a farmer doing something really innovative in one place that actually has other impacts downstream? In the market system of trading these credits, how do we get the outcome we want, which is the reduction of greenhouse gases in our environment? It is confusing me no end, I have to admit.

Ms Parkes : My answer to your first question would be that, as the Wentworth Group says, regional natural resource management planning is key in this, because the job of the regional natural resource management bodies is to marry up the science, the community views and the government's priorities into looking across the landscape, what the most appropriate land use is and where the priorities are in the landscape. At that scale, those regional groups can take that view of a landscape and, hopefully, accommodate some of those issues where something someone does here might have an effect downstream.

We also think that should be put into land-use planning schemes, so the way in which state and local governments manage and improve land use and do zoning. That more regulatory approach will manage adverse impacts, or manage unwanted land use change.

Ms BURKE: I am not sure if you are involved at the sort of micro level that the two guys before you were talking about—the notion of additionality, that farmers are already doing some of this stuff now because it is best practice for their production as opposed to the other greater good for the environment. How do we actually recognise that so it has legitimacy in a scheme as well as the greater good for the environment? The research side as well; it is dollars to do and it does cost—it is new methodologies and changes, and some farmers are great. As you say, some are terrific innovators; others are not. I am always reminded of that ad with the guy who talks about Sunday soil, and that his destiny is to leave the land in a better situation than he found it in. I think that most farmers actually operate like that, and we do not give them credit for it. It is the notion of how we ensure that that is sustainable for the farmer and for the entire environment, as well as recognising what is good practice, but doing it within a market based mechanism where those issues of additionality and leakage are. Have you looked at those?

Mr Cosier : Yes; we could be here for a week or until next year, because it is the great question that is challenging this country: how do we pay farmers to look after our landscape? That is 7½ million square kilometres, we have 20 million people and we have 300,000 farmers. They cannot be expected to do it all; we have to pay them to do it somehow. We have made small attempts at it, but they really are petty cash.

What we have here is a carbon market potential, but at the end of the day we are buying carbon. We have to purchase carbon; the challenge for us is that for recognising we are purchasing carbon, how do we also get the other benefits from that purchase? We in Wentworth are, and have always been, very favourably inclined to market mechanisms. We believe they are far more efficient than command and control mechanisms of government—government grant systems. But all good markets need to be regulated, so we are saying, 'Well, let's regulate this market so that we get all the good outcomes we want and we don't get the bad outcomes that we don't want either'.

For the individual farmer, additionality and leakage are complicated questions. Part of the education question is that there are a lot of laws about carbon farming, and there is a lot of expectation out there that, in our opinion, will not be met because they will fail those fundamental test of additionality and leakage. For example: if a farmer were to destock their farm and get paid to grow soil carbon or grassland systems, we know that the world is not going to eat less cows—that is what leakage is. Somewhere else, somebody will grow more cows, so you cannot pay the farmer here to do that but not charge the farmer over here to increase the number of cows. We have to deal with those complex questions of leakage.

You would have also had many submissions saying that it is not the holy grail and it is not the great nirvana that people have been promising. Certainly in the short term it is not, both capacity-wise and financing-wise. But—and this is really back to our core submission—for all of the farmers out there who just want money to do the things that they have never been able to afford to do to make their farming systems more sustainable, our great hope is that the carbon market will provide that tipping point of income so that they can do what they have always wanted to do.

Ms BURKE: I have been asking about the notion of the chicken and the egg: do we need the carbon price before we do this to make it viable and to make people buy into it, or is it good to just start this for the sake of getting on with it—from the Wentworth's perspective?

Mr Cosier : It is never too early to start, to be honest. We know what we need to do to fix the Australian landscape. Our farmers know what to do. We have institutions from the last 20 or 30 years—CSIRO and government agencies. We know what the core problems are. We know that we have built regional capacity that can answer those questions. If we could get some money systems into what we already know, we would achieve great things. So get a carbon price and go, but go cautiously.

The cautiousness in what we are saying is that the planning that we have been talking about will take time to do well. We think one of the great innovations in this bill is the positive and negative list. It is a great way to simplify a lot of complex economic questions. One would also use it as a transition mechanism to push the carbon away from where it might be a problem and into areas where it might be a great advantage. This would be as a transitional mechanism before we have the right planning systems in place, which will take two or three years.

Ms BURKE: And do you think the permanency issue—the 100 years—will lock people out, putting them off? Will it just seem too complex and too far-fetched that we have to commit to 100 years?

Ms Parkes : I think the issue of 100 years permanence is creating a few problems in people's perceptions of it. The Wentworth group's thinking is that it has to be permanent for it to be credible in the market, but perhaps we have to tone down 100 years. Something that has not come out as fully as it perhaps should is the fact that farmers can get out of it if they want to. They are able to relinquish their credits. They are able to pay back. So the idea of 100 years permanence where you have to stick with that land use has been a problem, but there are mechanisms in the scheme that enable people to get out if they want to.

CHAIR: On that: there was concern raised about the mechanism to get out which enables the farmer to pay back the credits or units, because at the time that they may want to get out the price may have changed significantly from the time they paid for it. Therefore, it might not be so easy to get out and they might have to do that at a loss. That is a risk they take and, therefore, it might be a disincentive.

Ms Parkes : Yes, I can see that might be a problem.

Mr Cosier : Yes. To reinforce Claire's point, that is a real issue and is one of the reasons why we think there will be a considerable constraint on farmers adopting this in the short term. My personal view is that they will adopt it where there are no-regret actions. A no-regret action is, for example, if you want to put riparian vegetation on your farm. That usually puts up the price of your property and does not affect or has a minimal impact on your farming enterprise. You say to yourself, 'I'm never going to want to clear that land again; so, if I will get paid for doing that, that'll be great.' But if you are entering into a changing farming management enterprise where you are aware that if you are paid to sequester carbon and you wish to relinquish those credits you have to buy credits at the market price, knowing the price of carbon is going up by what Treasury estimates to be four per cent compound per annum, you are going to be very risk averse in changing your land use. You are really locking in a land-use practice, effectively, because you will not be able to afford buying your way out.

So the models cannot show that behavioural question that farmers will make. But, to go back to Claire's core point: we do not see any need to use the '100-year' phrase. If you just say, 'If you are paid to sequester carbon and you wish to relinquish it, you are allowed to, but you have to pay for the relinquishment credits,' just leave it at that. We do not see any great advantage in them putting this 100-year stuff on it. I know that if I go in to buy a farm and someone says to me, 'There's a covenant on the bit of land that you want to buy,' and it has this 100-year thing on it, I'm not going to touch that. But in fact is it not a complicated thing at all. If you sequester it, you get paid for it; if you relinquish the credits, you have to buy them. Just leave it at that. Make the rule more transparent.

CHAIR: I will take up something relating to a couple of comments you made. One of them was when you were referring to the leakage issue. You referred to the example of the cattle being sold by one farmer but taken up by another. I thought you said earlier that you did not think the land sector should be included in any carbon price legislation. But a moment ago, when you were talking about the leakage, you referred to the person who is now contributing additional emissions as having to somehow pay for that. Could you explain your thoughts on the question of land being included in carbon pricing. I was also particularly interested in your comment that it should not be because most of the land mass of the world will not be.

Mr Cosier : This is a very interesting, intriguing and complex dilemma. The principle is that if you sequester carbon more you get paid for it and if you emit carbon you have to buy it. We have said that the agriculture sector will be exempt. If you want to stop that leakage, the only way you can stop the leakage is, when you give a credit for sequestering carbon, to deduct the loss of carbon that is likely to happen as a result of the removal of that stock. So you would have a net carbon account for that farm rather than just paying the credit, because you know somewhere else in a voluntary system the market will sequester something else.

We have developing countries and non-developing countries. The developed countries—Kyoto Annex I countries—have said that they will do X. Developing countries will come later. The vast amount of food production in this world is by non-Annex I—non-Kyoto—countries. So, yes, Australia is a great exporter of agricultural products, but in the global scale of things we are about one or two per cent of the planet. So why would you impose restrictions on Australian farmers that is highly unlikely to be imposed anywhere else on the planet? It just does not make sense. It is not a practical thing to worry ourselves over. It is not a philosophical issue; it is just a practicality issue. Why get into that stuff when we have all this other hard stuff to deal with? Let's just exempt agriculture from this process and use the incentive voluntary mechanisms, because that is what will be used in the developing countries as well.

CHAIR: Thank you for very much. You will get a draft copy of the transcript of today's proceedings. Feel free to contact the secretariat if you think something needs to be changed there.

Mr Cosier : Thank you.

Proceedings suspended from 14 : 47 to 15 : 00