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Australian National Registry of Emissions Units Bill 2011; Carbon Credits (Carbon Farming Initiative) Bill 2011; Carbon Credits (Consequential Amendments) Bill 2011

CHAIR —I welcome the representatives of the Carbon Farming and Trading Association and thank you for coming to the hearing today. The committee has received your submission as submission 29. Do you wish to make any amendments or alterations to your submission?

Mr Kiely —No, nothing substantial.

CHAIR —Do you wish to make a brief opening statement before we go to questions?

Mr Kiely —I would like to make a brief opening statement, Chair.

CHAIR —Please proceed.

Mr Kiely —Firstly, my wife and I are also directors of Carbon Farmers of Australia. I have a booklet with me and in it are printed slides that I prepared to register with you a key point—and that is passing by the slide that describes who we are. With them I want to show you what climate change is on the farm where we live. We had 75 millimetres in 35 minutes one day when we were crutching sheep. You do not hire a shearer to crutch sheep if there is any possibility of rain, so this was completely out of the blue.

CHAIR —Instead you had a lot of happy sheep!

Mr Kiely —They were bamboozled. My son was managing the shed for us at the time and he took some advice from the previous Prime Minister that we should adapt, so he adapted by kayaking around the pens. Two weeks later, without authorisation from me, he spent enough money to get himself up in a plane to take photographs of our property and the result is really a clear indication of what we mean by carbon farming.

Mrs Kiely —Because we had taken our animals off most of the property and we had been feeding them in a sacrifice area.

Mr Kiely —The photograph of the river is the most descriptive, because it is a comparison of two farming styles. Our neighbour has since changed his approach and has a lot more of what we call biomass on the ground—ground cover. The issue that I submit people overlook is that climate events are not being caused by future emissions or today’s admissions; they are being caused by the legacy load of emissions that are in the atmosphere and have been for the past century. That is recognised by very senior people in the climate science business.

Senator NASH —Can I just interrupt and ask you where you farm?

Mrs Kiely —We are in central west New South Wales.

Senator NASH —Whereabouts?

Mrs Kiely —Goolma, a little tiny one-pub, two-church town.

Senator COLBECK —An appropriate balance.

CHAIR —And lots of sheep.

Mrs Kiely —And lots of sheep.

Mr Kiely —Not enough sheep at the moment. We have more grass than we have sheep and it is a bit of a problem. We sold at the bottom of the market and need to buy at the top of the market. The draw-down of CO2 from the atmosphere is the most important role that soil carbon can play. Soil carbon is fully deployed. It is a critical mass and it has maximum capacity, at the flick of a switch, to draw down.

Professor Lal, who is the world’s foremost scientist in this field, estimates that we can draw down the equivalent of 50 parts per million over the next 50 years globally. This will allow us time to decide on our response to climate change, to install it and get it up to critical mass. Alternative energy sources, were they given the green light today and as much money as it is possible to spend on them, will not be deployed to carry baseload within 25 years. Those of us living with climate change every day have come to believe that climate years are like dog years—there are seven dog years in one of our years. Change happens that quickly. So soil carbon is not just any old category of sequestration; it has a special role to play, a role that no other source can play. We cannot plant enough forests in the next 10 years to do the job. Our response to the legislation is predicated on that view. Professor Lal describes it as ‘a bridge to the future’ and ‘low-hanging fruit’. He said:

Soil carbon sequestration is a bridge to the future, until carbon-neutral fuel sources and low-carbon economy take effect.

To build that bridge to the future, we need as many farmers as possible to sequester as much carbon as possible as fast as possible. We believe the principles of carbon farming should be considered and all legislation shaped with consideration of that outcome.

Senator NASH —Thank you very much for your presentation. What stocking rate do you use on the sacrifice paddocks?

Mrs Kiely —We sold all the wethers, as you do, so we have just our breeding stock. We had about 1,000 ewes and followers, and that was down from about 2,000 because, as you remember, that drought got progressively worse.

Senator NASH —It did. Those 2,000 are over how many acres?

Mrs Kiely —Over 1,700.

Mr Kiely —We learnt a lesson. Our sacrifice paddock was much too big. An animal with a healthy psychology is as important as an animal with a healthy body, and so more space to roam around in was the consideration.

Mrs Kiely —To give them shade and shelter, all of those things—and water—without building a purpose-built feedlot.

Senator NASH —I was very interested in the recommendations in your submission, one of them being:

We recommend that the ‘business as usual’ rule, which penalizes Landcare farmers and other progressive landholders who have taken up carbon farming techniques early and rewards laggards who continue to degrade their soils.

This is one of the issues that seem to be emerging as a real concern—that those farmers who have already been undertaking good farming practices and have been contributing to carbon soil sequestration are excluded from any benefit under the current legislation. Is that what you mean by that recommendation? Would you like to expand on that?

Mr Kiely —That is true, and it is the ultimate perverse outcome. The impact of that is that there will be property not under contract for carbon farming. By that I mean that these progressive farmers will eventually sell out or pass the farm on and there is no guarantee that that regime will continue. We believe that people would not desecrate a carbon rich environment because of the obvious value of such a thing, but it is not guaranteed. Farmers have a very acute sense of injustice and it could bring the whole process into disrepute. I have a sense of injustice associated with it, and I can see the reason for it: why should anyone be rewarded for business as usual? Farmers are not rewarded by markets very much. Our society chooses not to pay farmers sufficiently for their labour and investment—

Senator NASH —I agree with that.

Mr Kiely —such that land will be treated with the kind of respect it requires. So I would look upon any payment to a farmer who was already engaged in these practices as a stewardship payment designed to right a distortion in the market.

Senator NASH —There is a view that any of the carbon credit units that are going to be allocated have to be as a result of this additionality—something that has not been done before. That is obviously what is contained in the legislation. In your view, what should that be changed to? Should there be a benchmark of stored carbon at which you get paid? What changes do you want to see to address this issue of good farmers who have already been utilising these practices being rewarded? What changes do you want to see in the legislation?

Mr Kiely —I am not shamefaced in saying this. We just believe that the additionality concept is not relevant in light of as many farmers as possible sequestering as much soil carbon as possible as quickly as possible. The additionality principle was designed in another space. In fact, the problem agriculture has is trying to fit an activity that is associated with biological cycles into an industrial model. The industrial model was designed for big power industrial emitters. Forestry barely fitted in, and the Europeans do not recognise forests in the market, but then you try to fix soil carbon in and it just does not work. Given the importance of soil carbon, we believe that without special pleading agriculture has so many roles to play that are the co-benefits, particularly food. We believe they should reform the protocols.

Senator NASH —Are you saying that any carbon stored on farm should be able to be assessed for the purposes of gaining a carbon unit?

Mr Kiely —All additional carbon.

Senator NASH —That is what I am getting at: additional to what?

Mr Kiely —Additional to the baseline. I do not believe people should be rewarded for what they are sitting on; they should be rewarded for what they create.

Senator NASH —Using you as an example, are you going back to pick, say, a point in time at which you would say, ‘This was the baseline for our property until we changed our practices. We have increased the carbon by X tonnes in the soil. Therefore they should be counted.’ Is that what you are saying?

Mrs Kiely —I think we are prepared to start from the legislation. We have a methodology that is 80 per cent developed for the CFI to send to the DOIC. Our baseline is predicated on what is there when you start that process—when you go out and do that baseline. We are doing measurements; we are not relying on the models and we are not relying on estimation.

Mr Kiely —Two of our committee members have increased their soil carbon 2½ and three per cent in the past 10 years. We are not asking that they be paid for that. They are skilled carbon farmers and they can increase their soil carbon.

Senator NASH —So you are saying those practices that exist and under the current rules would not meet the additionality test can use the existing methodology that they have been using but the increased carbon from this point in time would be counted?

Mrs Kiely —Yes.

Mr Kiely —It would not be fair to do it any other way.

Mrs Kiely —Nobody has started to find out how much we can do—only through estimates, and we understand where those figures of Mick Keogh’s come from. We may be able to go further than people have thought of before, because the science has not had a chance to show how we can do this to the maximum, basically putting it on a war footing and saying, ‘If it is really important to the Australian community and the international community that we increase our soil carbon beyond two per cent, Mr Scientist, help us do that.’ At the moment the science has been asked to look at what we have been doing. The figure of six tonnes comes from Peter Grace’s SOCRATES model. He has put in IPCC best practice guidelines to do that. We have that piece with us. It comes up with only six tonnes as the maximum. Those are predicated on IPCC guidelines and data that went into our national accounts which they acknowledge were from carbon-mining techniques. We just have not ever done the exercise in a way to find out what we can do; we have estimated it on previous methods. We believe there are things we do not know yet that we can help people understand.

Senator COLBECK —Your submission says that a lot of the focus has been on avoiding emissions rather than taking up carbon, and a lot of the practices and the designs of protocols have been factored around that and therefore do not properly recognise the opportunities, methodologies or accounting systems there might be for that. I would like you to comment on that. The other thing is the permanence issue that you raise in your submission and how that might limit potential uptake. I am interested in exploring with you other scales of permanence that exist and how they might fit within a process or a system.

Mr Kiely —Permanence is the deal killer. No farmer would be silly enough to agree to 100 years for soil carbon or 100 years for anything. A finance lender would want to know seriously the impact on the value of the property of agreeing to such a thing. We did some research into the 100 years thing and discovered it was a policy decision, not a scientific measure. In some of the peer reviewed literature, we came across this proposition about avoided emissions—which are unquestioned; if you buy alternative energy, you are apparently substituting for burning a tonne of coal. Someone selling abatements for avoided emissions is not asked to guarantee that that tonne of coal will not be burnt any time in the next 100 years. It could quite possibly be; in fact it will be. The Americans call their 700 million tonnes of coal a national security asset, and you know what the Americans are like when it comes to national security. We believe that 100 years is a perverse outcome. The result is said to be necessary so buyers can be confident they are getting value—that is, genuine abatement—so they get nothing. There is nothing available for them. We have found examples where the IPCC and the Verified Carbon Standard have allowed other periods of time recently—20, 25, 30-odd years. We believe we could work within that sort of time frame.

Senator MILNE —Thank you and thank you for your information. It is very well presented in some of the graphics. I have exactly the same concerns as you have about the ability of farmers to take advantage of the Carbon Farming Initiative in the soil carbon space. You might not have heard it this morning, but I asked ABARES and the CSIRO whose methodologies are already accepted and would be ready to go on day one, and they relate to reafforestation, manure management and prescribed burning of savannas. Manure management and savannas are very small. Reafforestation is clearly where the bias will be, because the methodology is there. A lot of the rules you have discussed that you are not happy with are there because of the conflict over land use, about whether to use the land for food, fibre, fuel or carbon. There is an attempt to try and deal with land use conflicts, and soil carbon comes out of that. You are asking for a separate set of offsets. The offsets have to be either Kyoto compliant or in line with international standards. By your own admission, you are 80 per cent of the way there but not 100 per cent of the way there. Might it not be better, at least in the short term, to look to a fund which can fund the additional research methodologies—looking at compliance, transaction and all those issues—so that it is separate from the market and enables this work to get started and some of these projects to be undertaken, given all the co-benefits to agricultural production, such as reduced fertiliser use, better water retention and all those things?

Mrs Kiely —We have done this solid for six years. We are dedicated to this. We have looked at this every which way. We have asked every single scientist we know and we have gone overseas to the scientists. Jeff Baldock has spoken at our conference four years in a row. We were instrumental in helping him get that research money that he has got. He has admitted that to us. When we then go and look at the way that it is being spent, I do not have confidence that, if we go down that route, we will produce what carbon farmers—and there is one really good one sitting behind me right now—can produce in a much shorter time. Our methodology has within it a fund. Whether or not we can mandate it, when we are trading, a proportion of the trade will be going to a research fund. The trouble with the science has been that it has gone out onto farms and has not engaged the farmers sufficiently, and we have Norton’s syndrome happening. That is where the science cannot replicate what the farmers are doing. We can see why when we go back to see what their methods were. We want science. Farmers are not scientists, but we believe that, if we take the soil carbon as a baseline and allow innovative practices on top of that, the soil baseline will be approved, according to the hoops that we have to jump through, and that will be the way that the science can then come and say, ‘Okay, let’s measure that.’ Jeff Baldock has stopped part of his research right at the moment on the innovative farmers because of lack of funds. What we are coming straight up against now is this lack of funds. We have spent the time and energy in finding solutions to that. That is how I feel about that.

Senator MILNE —Okay, but the issue here is: do you concede that, with the way it is currently construed, there will be no benefit to soil farmers under the Carbon Farming Initiative?

Mr Kiely —We agree with that, with the way it is currently configured. We are asking for the government to take its campaign to have non-anthropegenic emissions—that is, fire and drought—removed from article 3.4. We are requesting that the government step that up to a complete reformation of the protocol.

Senator MILNE —But, if you are rewarded for soil carbon in a market mechanism and get paid for having it there on the basis that it is permanently there, and then there is a drought and you lose that soil carbon, you will have to pay, in a market mechanism. That is the way that it works. You cannot just get paid for doing something and then not get charged when you lose it. There is a five per cent reversal buffer, and I am yet to be persuaded that that is an adequate buffer. It might well prove to be inadequate and there will be an additional cost. Anyway, that is a scientific question at a landscape scale. I know the government is trying to get the force majeure provisions into article 3.4 on what constitutes an extreme drought or an extreme fire event or whatever, but what I am saying to you is: all that may be the case and it may get proven in Durban; it may get proven in five years time; this is proposed to start now if it gets through. If we have a market mechanism, it would start next year. I believe that will happen. What I am saying to you is: you will not benefit under what is being proposed. I am asking you to come back with a notional view about how you could benefit in the interim while all these things are being sorted out.

Mr Kiely —I would just make a couple of points. Those two farmers that I referred to grew their soil carbon 2½ and three per cent in the last 10 years, which was probably the worst 10 years that we have had, with the drought. The idea that fire and drought will destroy soil carbon has been very much overplayed by the science community. We are very flexible in our approach to this. We would welcome any system, any methodology. What we want to see is the behaviour. What will it take to get farmers to do what is necessary? We are in no position to dictate terms, but we believe we have the strongest argument that, if there are no farmers, there is no abatement and if there is no abatement there is no hope.

Mrs Kiely —Also, the buffer pool within the methodology that we are putting forward is much, much higher than five per cent.

Mr Kiely —It is a one-to-one buffer. A 75 per cent buffer is a 95 per cent certainty interval.

Mrs Kiely —We have done our work around the rules as they currently exist, and we will be doing that. If I have leave to give you our executive summary at some point in time, that would be fantastic.

Senator MILNE —You are very welcome to table it.

Mr Kiely —There is an illustration of the buffer system in the handout.

Senator FISHER —Thank you for your presentation. How many members do you have and how on earth are you funded?

Mrs Kiely —We spent the kids’ inheritance. That is the answer to the second one!

CHAIR —I heard a cheer go up around the country.

Mr Kiely —We have only recently established the association to try and get some money in.

Senator FISHER —Mrs Kiely said you had been doing this for six years. Do you mean the association or on your farm?

Mr Kiely —Prior to that we called ourselves the Carbon Coalition Against Global Warming and we were totally unfunded and disconnected. We do not take money from Monsanto or from anyone apart from individuals. Our membership, because we have only just launched, is small but our supporter base is more than 500 or 600 people who have been supporting us for the last six years. We have just spent everything we have owned to do this, hoping that a fairy godmother would turn up.

Mrs Kiely —People have told us that we have the passion, and we say that is great, but you actually cannot eat it.

CHAIR —I suppose there have been lots of people with passion and lots of people hoping for fairy godmothers. I think we are looking for something a bit more tangible—not that having a passion is not tangible. But can I ask you this: in terms of getting the best out of what you have done, wouldn’t it be better if there was a price on carbon?

Mrs Kiely —Yes.

Mr Kiely —Yes.

Mrs Kiely —People constantly tell us that unless we have a price on carbon we will be in this voluntary market, which is meant to be very small. I say to that at the moment that there is no guarantee after 2012 that the voluntary market will be all that exists. The voluntary markets are the markets that are starting to grow. We also have evidence within other countries that where you sell domestic offsets into your domestic market you can get a premium of double. So it is about the value proposition that you put around it. We need to help people understand that this helps their farmers. We adopted out our sheep in the drought and we raised enough money to feed them. We believe there is a genuine feeling in the city about helping farmers. If we help people understand that this makes their soils better, our water-holding capacity better and our ability to cope with drought better, I think there would be an uprising that would say to the government: why the heck haven’t you done it before this?

CHAIR —Mr and Mrs Kiely, thanks very much for the effort you put into this. Before we suspend the hearing, can I indicate that we have had two documents submitted. One is ‘Soil carbon at the speed of science’ and one is ‘Norton’s syndrome’. Is it the wish of the committee that the documents be tabled? There being no objection, it is so ordered.

Proceedings suspended from 10.04am to 10.18am