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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 —Welcome, Mr Grant, Mr Porter and Mr Powe, and thank you for attending this hearing today. The committee has received your submissions and numbered them 10 and 27 respectively. Do you wish to make any amendments or alterations to your submissions?

Mr Grant —No.

Mr Porter —No.

CHAIR —Do you wish to make a brief opening statement before we go to questions? As you do, would you like to start, Mr Grant.

Mr Grant —Thank you for the opportunity to present before the inquiry. Our view is that the Carbon Farming Iniative is a good one. It is good because, most critically, it replaces the cancelled government-run Greenhouse Friendly program. To put some perspective on why we have this view, we had a program run by government with these rules. It was shut down and we were left stranded so we need something to replace it. It is also good because it is voluntary so if you do not like it do not participate in it. It provides government backed rules which we need to ensure that we have a credible market that can be relied upon. It enables both consumers and producers to operate with confidence because it involves government backed audit, government backed methodologies and a government backed registry. It will enables companies like ours and other participants to access international trade. Imagine if you grew wheat and you could not export any to the international market. Through this initiative we can.

It provides investment confidence for the market and, importantly, we already know that such schemes work well—for instance, in New South Wales that state’s Greenhouse Gas Abatement Scheme has been running for eight years. We are also operating in New Zealand where we have an emissions trading scheme—and carbon forestry is in fact the number one initiative in New Zealand. As well we have put in our submission some specific points which I will not reiterate.

Mr Porter —Thank you also for the opportunity to present to the inquiry. As we made clear in our submission, Greenfleet is Australia’s largest and longest project originator of biodiverse carbon forests. We have planted seven million native trees since 1997. Our perspective, echoing Andrew’s comments, is that we are very supportive of the CFI per se, and we see it importantly filling a gap in the market that has been left by the Greenhouse Friendly program’s demise.

We have raised a number of specific points in our submission. The only ones I want to bring out and emphasise are that we believe that it is very important that projects and methodologies approved under previous schemes be able to be rolled over as much as possible into the CFI to give continuity and certainty in the marketplace. We are also very strongly in agreement with the intent of the bill that carbon only be counted once, that there be no opportunities for double counting. We are very comfortable with the role of the ACCC potentially in this space, although we did raise an issue about the automatic cancellation requirements on a project basis. We see it being far more effective on a carbon basis rather than a project basis—that is, one would not have to drop one entire project. The last comment I would pull out that we made is that we believe the starting date for where project abatement is recognised should be 2008 as the start of the Kyoto accounting period.

Senator NASH —Greenfleet, you are a not-for-profit organisation. Can you briefly run the committee through how your process works?

Mr Porter —Certainly. I will start and then Tim may wish to add some further detail. In essence, Greenfleet commenced as an organisation which initially allowed individual motorists to offset the emissions from their vehicles by investing in what was essentially future carbon. So our commitment to vehicle owners was, ‘If you pay us a certain amount of money we will plant a certain number of trees that over a certain period will extinguish the CO2 emitted from your vehicle.’ That is the business model that we started with. We have diversified that to some extent. We have some relationships which are essentially extensions of that—for instance, offsetting fleet emissions, much larger ones—and we have some more commercial arrangements that we have made since then.

Mr Powe —And our client base has extended from individuals to now include corporations, various government agencies and larger groups that are not necessarily involved in offsetting just their fleet emissions. Some are choosing to offset their whole business emissions, so it is beyond just transport.

Senator NASH —How many clients do you have?

Mr Powe —Currently several hundred—

Mr Porter —Large clients—

Mr Powe —That includes individuals. There might be 300 or 400 individuals in some states, plus business clients, plus large government departments. Not all are active at any one time. Some people will offset their emissions for a number of years, depending on the profile of greenhouse or carbon at that particular time. Then they might discontinue their donations and then they may continue them in subsequent years.

Senator NASH —How does the process work? I assume you do not buy land but you access land and do it in partnership with landholders. Is that correct?

Mr Powe —Correct, yes.

Senator NASH —What and when is the benefit to the landholder out of this process?

Mr Powe —The landholder gets a biodiverse forest planted on their property to ameliorate a range of environmental issues that the landholder is interested in. The landholder may also get a share of the carbon right, and we negotiate that with individual landholders, depending on their level of interest in securing some carbon benefit.

Senator NASH —That is some sort of dollar figure that goes back to them? What I am getting at simplistically is: apart from the biodiverse issue—they can go and plant trees themselves anyway—for you to go and access landholders to plant trees for you to get a benefit back for these people, there has got to be something in it for the landholder for something they could ostensibly do themselves. Is it the cost of the planting or are there other financial benefits?

Mr Powe —Greenfleet pays for the trees and the labour in planting, the project design. We also undertake the carbon certification process under our particular program, such as Greenhouse Friendly. Then we may also share some of the carbon offset revenue with that landholder at some point in the future. Once our obligation has been met to our supporters, who have paid for the trees, and the particular property will continue to sequester carbon beyond the date that that obligation is made, then we may share in that additional carbon with the landholder.

Senator NASH —What is the trigger for the ‘may’ share? What is the trigger for sharing or not sharing at the point at which the obligation has gone back to the originator of this?

Mr Powe —Interest from the landholder.

Mr Porter —And these are negotiated on a case-by-case basis.

Senator NASH —Interest from the landholder: if it is a case of a dollar figure, wouldn’t everybody be interested?

Mr Powe —No, surprisingly not. Some are just motivated because they want the trees for free, they want the forest planted to fix up a salinity problem or an erosion problem, and they are just happy with that.

Senator NASH —Do they know they can be a financial beneficiary, or does that only start to be negotiated once they have brought it up?

Mr Powe —No, we certainly invite them to participate in future carbon if they wish.

Senator NASH —Is there any downside to them to sign up to do that? I am just trying to get my head around why they would not take it up.

Mr Porter —It is always going to be a negotiation with the individual landholder by Greenfleet. Some may, as Tim rightly says, be interested in the environmental or other benefits that come from some replanting on their land that just comes naturally, and some may be interested in the carbon rights at a future date. It is a case-by-case negotiation. I suspect that most will be interested in a financial benefit, and more and more will see that come up. Remember that many of these negotiations occurred when there was no serious consideration of a carbon pollution reduction scheme or a carbon price existing. Many of these negotiations occurred when we were talking hopefully about future carbon prices, future salinity benefits and so on.

Senator NASH —Just on the measurement of carbon that is contained within the standard trees you plant, how do you measure that? I can go and look!

Mr Powe —In the past we have used the methodology as approved under the Greenhouse Friendly program.

Senator NASH —So you just use the standard set of rules?

Mr Powe —That is right.

Senator NASH —If it is all right I will put some more questions to you on notice; we do not have a lot of time. Mr Grant, do you want to do the same thing and run us through very briefly how CO2 Group Ltd works?

Mr Grant —In terms of the specific question we have 20 clients. We have about 500 agreements with landholders across Australia. That includes New Zealand. I could not give you a precise number because we are in partnership with about 400 Maori communities, so the landholding ownership there is much more complex than it is in Australia.

Senator NASH —You are a for-profit organisation as opposed to—

Mr Grant —We are a listed public company. The way our business model works, in partnership with landholders, is we will either pay them an upfront amount for land—which is typically a greater amount than the market value of their land—and then we meet all of the costs of establishing a forest and managing it. The financial motivation—if that is their sole objective—is to get paid for the deployment of their property. We either pay that amount upfront or pay it as a rental over whatever period the farmer prefers. Most want it upfront. In earlier years we explored sharing carbon revenue with landholders but it triggered the provisions of the managed investment scheme under the Corporations Act and, as a business, we did not support that. We discontinued that.

Senator NASH —Could I ask you both to also take on notice something else. It will be interesting to see—obviously, you cannot give us confidential details—geographically where your plantings are.

Mr Grant —I am happy to share that information. We are as far north as Geraldton in Western Australia, then south-west across to Esperance. Then we are in Victoria and New South Wales. They are in the low to medium rainfall regions, the wheat belt regions of Australia and recently we have gone into Queensland.

Senator NASH —Perhaps you both would be kind enough to provide us with a map.

Mr Grant —I am happy to do so.

Senator NASH —That would be great. Finally, have either of you accessed the tax breaks for carbon sink establishment measures?

Mr Grant —Our clients have rather than us. For example, some of the establishment costs associated with building the sink have been accessed, yes.

Mr Porter —I am not aware that we have.

Mr Grant —No. I owe you another answer to your question about measurement. We have a licensed model with CSIRO where we model carbon yields and then we adopt either the New South Wales Greenhouse Gas Abatement Program methodology or that of the previous Greenhouse Friendly program. We are currently submitting a methodology to the so-called DOIC—Domestic Offsets Integrity Committee. We have also adopted the voluntary so-called verified carbon standards. Our particular business model is to get the highest possible measurement standards. For example, I have a 15-person team of dedicated scientists who quantify, with accuracy, the amount of carbon in the forests.

Senator NASH —The DOIC is not set up—you are just working with—

Mr Grant —The DOIC is set up; it is open.

Senator NASH —In spite of the fact that the legislation has not gone through?

Mr Grant —The legislation refers to the methodology, but it is not dependent upon it. So if you want to take a project under the Carbon Farming Initiative you would first have to have a methodology approved by DOIC. DOIC is up and running, because it needed to be in terms of replacing the Greenhouse Friendly program. This is why we support the initiative. We have approved methodology. These projects continue come what may and they are happening. To date, we have over $200 million invested in projects. The CFI simply provides a registry and an audit process to give it certainty and consistency in standards.

Senator MILNE —Further to Senator Nash’s question about the intersect between your business model, Mr Grant, and the 100 per cent tax deduction for carbon sink forests, can you just explain a bit further how that works. I was not quite clear on that.

Mr Grant —The tax, as you may recall—

Senator MILNE —I recall it well.

Mr Grant —was an issue for another inquiry on carbon forests and carbon sinks. It is not a 100 per cent tax deduction; it is only for the establishment costs associated with creating a carbon forest. That in reality means that about 30 per cent of the costs are deductible at the point of establishment. That is consistent with the building sector or much of industry. The issue leading up to that was that, bizarrely, carbon was treated as horticulture; it was not treated as forestry. So the forestry tax deduction provisions were not applicable and the tax department viewed carbon as a fruit that is harvested from a tree. They gave it no tax deductibility. It was the worst tax treatment of any business activity in Australia. The amendments put forward by the previous government that went through the lower and upper house basically gave equivalence. It is certainly not a 100 per cent upfront deduction that forestry enjoys; it is only the capital costs of establishing—

Senator MILNE —In relation to what you just said previously, you lease the land from the landholder and you incur the costs—

Mr Grant —It is the project developer, so if it were the landholder who was developing a carbon forest, the landholder would enjoy that tax benefit. So it is whoever funds the project and owns the project.

Senator MILNE —I want to get more specifically to how this may work because obviously agroforestry is a good thing in the rural landscape and it enhances a whole lot of productivity benefits et cetera. The concern there is that if you incentivise, given as you rightly indicate the methodology is already there, it is proven, provided it is accepted it will automatically go through. So if and when the Carbon Farming Initiative becomes law, then the first people who would be able to benefit from it are those with proven methodologies?

Mr Grant —Correct.

Senator MILNE —Obviously, apart from manure management and savanna burning, reforestation, afforestation or avoided deforestation are the ones that would benefit first before others with proven methodologies? I am interested to know what you think is the potential for this sector in terms of abatement under the Carbon Farming Initiative. If it were linked to a market mechanism, such as a carbon price, how much greater is the abatement potential then? How do we avoid monocultures and end up with biodiverse plantings in the right place? Maybe you can address that perverse outcome?

Mr Grant —I will try to unpack those questions. Firstly, the initiative does not provide a market stimulus for investment at all, because you need liable parties for that to occur. The initiative does not change the market economics; it just provides a set of agreed rules that you as a participant would adopt where a carbon price starts. So assuming that both parts go into place then it creates demand. We have been a participant under the New South Wales Greenhouse Gas Abatement Scheme since its inception, which was on 1 January 2003. The scheme allows for carbon forestry and, in that time, it has been the most untalked about scheme in the world, unfortunately, but it is the third largest scheme by market volume. Only one private sector company—and that is ours—has created a credit from carbon forestry. The reason for that is that it is hard, it is complicated, it requires quite advanced levels of technical skills and, as an investment, it is very marginal in its own right. So the fear of this being a mass land use change I personally believe is unfounded. We are also operating in New Zealand, which has an emissions trading scheme. Interestingly, in New Zealand forestry is celebrated and advocated and it is the No. 1 priority for the government to help it meet its Kyoto target. All of the carbon forestry has been dedicated towards marginal land, because market economics dictate that pulp and paper and other high-end uses predominate. It is our view that, in Australia, that use will be identical. We as a company do not operate in prime agricultural land because it is uneconomic and carbon would need to be north of $100 or more a tonne for it to ever be economic.

On questions of scale, we have worked with the Wentworth group, Landcare and catchment management authorities and a whole range of others and we have contributed to the Garnaut review and the CSIRO report. Our perspective is that the level of contribution that land based abatement will make in the hypothetical documents is probably out by a factor of 10. It might contribute possibly several million tonnes per annum but not in the 40 to 50 for a whole variety of reasons. Land turnover in itself, if you analyse rates of land turnover in MIS forestry and you apply those most aggressive assumptions, you still get a very low rate of land turnover in rural Australia.

Regulatory approval is very complex. It takes a period of time to get projects approved. Seed—the simple reality of there being sufficient seed will be a constriction on growth, so whether it is biodiverse or single species, there is a finite amount of seed that has been collected and that will determine the rate. As a consequence of the crash of MIS forestry and the global financial crisis, all of the industry infrastructure has fallen away quite dramatically—nursery bench space and the practical things.

Our view as a company is that it will make a modest contribution—an important one because it is proven and it is here and now—but we do not share the view that it is something that should be feared. We think it is a public good and it will make an important contribution. I am a bit surprised by the level of concern over it in industry.

Senator MILNE —Can you address the issue that has been brought up by the representatives of an Indigenous community who were here earlier and also some of the land trusts of people having done the right thing and covenanted their land or put it into Indigenous protected areas or whatever will not benefit and that this will be an active disincentive for people going into protected management in various ways. How would you address that?

Mr Grant —It is a very tricky area. To be able to credit a project first and foremost, you need to demonstrate that you have legal title for the carbon. Each state has its own set of rules surrounding carbon rights and forestry rights, so it is on a state-by-state basis. For example, only recently did Victoria enable that the Crown retained all the carbon on crown land as in Western Australia. A lot of Indigenous landholders do not have free title to their own carbon, so it is a property rights question rather than a carbon farming issue question.

Senator MILNE —They were arguing that they would like to participate and they cannot because of all the legal complexity around exclusive and non-exclusive use and that sort of thing.

Mr Grant —I think the issue is more the baseline one. We put in our submission that the baseline should be 1 July 2008 and, arguably, the government has got free carriage of all that activity and investment by others. It counts towards our Kyoto target, whereas in New Zealand you have the opposite: the baseline goes back to 1990. Pre-1990, forest owners were allocated by the Crown carbon. We have a kind of interesting situation in Australia where the private sector has funded projects but cannot get recognition for that carbon because the government has included it in its own accounts. That underpins the reason why would like to see the baseline set at 2008, not 2010.

Senator MILNE —One last question: there has been the recommendation that there be a five per cent risk of reversal buffer because of the implication of losing carbon. Given your experience, since you have been in the business for a while, what is your comment on that? You must have lost carbon from projects and so on over that time. Is that a realistic risk of reversal buffer from your experience.

Mr Grant —It depends. In a previous life, I was a partner in Ernst & Young and worked with the New South Wales government in developing the greenhouse gas abatement scheme and therefore developed all their audit methodologies. It is a kind of scale and risk relationship. For a small project that has a low level of quality and a low level of entry, I think you need a more aggressive insurance buffer. For a large-scale project where the project is insured and there is a portfolio of projects, it is a bit heavy-handed. For example, in an earlier question, I think, Senator Colbeck asked, under the New South Wales scheme there is no buffer required but you have immediate consequence if you have a reversal. Similarly, in New Zealand, if there is an emission of any kind—so if you remove the forest or destroy it any other way, whether it be natural or human induced—you have an automatic liability. For a large company like us that is something we are comfortable with and we structure that risk and we insure it. For a smaller operator, that is a difficult thing for them to do and therefore a buffer and a poor concept works well. So it is horses for courses.

Our view is that you should be able to take either a lower level of compliance with a higher level of buffer, or opt out of that and not have the obligation but bear the full brunt of the consequence. In eight years we have had no reversals, by the way—not one.

Senator McEWEN —This question is for either organisation, or both. Could you respond to the arguments that come up in this debate that forestry projects take up prime agricultural land and therefore have adverse effects on water and food security?

Mr Grant —It is a great question. It comes back to the question of what is prime agricultural land. The Wentworth Group’s definition of prime agricultural land is land with annual rainfall greater than 700 millimetres. So in our case we do not have a tree in any landscape that has greater than 700 millimetres of rain, so we are not operating in prime land. We are operating in the marginal, highly cleared, remote landscapes of Australia. By way of example, over 30 per cent—sometimes 40 per cent—of properties we are looking at in Western Australia are saline, and too saline for trees. So not only are they lost for agriculture, they are lost for any land use. They are really stranded landscapes. And billions of government dollars have been expended in trying to arrest dry land salinity. This is like a last ditch opportunity that is private sector funded to make a contribution. I support the principle that prime agricultural land must be protected. It is uneconomic for us to use it, but it is also bad public policy. It is really important that people understand that prime agricultural land is not all agricultural land.

Mr Porter —From Greenfleet’s perspective we would echo that. Tim would you like to add anything?

Mr Powe —We plant in, I guess, more humid, wetter areas than what CO2 Group has, and our business model is in the high rainfall parts of Australia. Over 13 years I do not think we have displaced any prime farming or agricultural land. The returns just do not stack up—$130 per hectare per year over 20 years just does not measure up to wheat, fat lambs or lucerne. Ten tonnes per hectare per year for carbon times the carbon price of $13 or $14 per tonne and you get $130 or $140 per hectare per year over 20 years. After 20 years that number will decline as the trees mature and growth slows. If the carbon price in the market is $20 or $25 we will be at a substantial discount to that because we are planting with the carbon to come in the future. So we need to offer a substantial discount.

Mr Porter —If I may just add, one point to keep in mind as well is that we are talking about several markets, not one. There is a compliance market which will grow in scale as the carbon price and/or trading mechanism and/or whatever we end up with develops, and then there will be a smaller voluntary market which will often be outside of Kyoto compliant land which will address the needs of individuals who wish to offset outside the larger system. These markets will sit comfortably beside each other; they do already. But they have quite different impacts in terms of scale and the other drivers we are talking about here.

Senator McEWEN —Are there benefits for rural and regional Australia from forestry projects on what you have described as marginal land.

Mr Grant —The proportion of our plantings that are integrated with rural land—the 500 landholders who have partnerships—do it not only because there is a financial incentive. They have to live with the trees for 100 year or more. So they have to see intrinsic value in the trees. In large, highly cleared rural landscapes there are improved cropping yields, improved husbandry outcomes from livestock, and better protection against soil erosion, particularly in Western Australia where we are concentrating on the upper watersheds of catchments where dry land salinity is a big driver of rural degradation. It is remediation and getting some on-property insurance about further loss of their cropping land.

There is improved landscape amenity and improved catchment value. Again, this is a complex topic; it is not a binary system good/bad. It is a proportional thing. CSIRO has done some brilliant work in looking at what percentage of catchments could quite adequately carry dryland forestry before it impacted negatively on water catchment value. We are a long way short of that. I think—once having been a chairman of a catchment management authority—that even in the best-case scenario of all this policy we are still 30, 40 or 50 years away from that ever being an issue.

Mr Porter —I add that when we look at biodiverse plantations we get not just catchment benefits but benefits in terms of biological diversity, flora and fauna and landscape values which are much broader and which—as we have explained—in terms of the access that we have to land often without a huge financial return, people still value very highly.

Senator McEWEN —Mr Grant, just going back to the example you gave of forestry projects in land suffering from desalination, what would be the logical outcome of not doing anything with that land—if government did not do anything or—

Mr Grant —Sadly it is degrading before our very eyes. The other tragedy is that often the landholders do not even know it themselves because the salt is like a hidden cancer in the subsoil. The nature of our technical due diligence on a property is that we do a lot of detailed drilling and soil testing. We have had situations where we have brough to the landholder information of which they were hitherto unaware, that in fact their property has a short shelf life before it is not viable in its current use, whether it be for cropping or livestock. So that problem continues. We did have a national action plan on dryland salinity but that program has pretty much stopped. There is a massive reduction in government spending in trying to arrest it. You basically see the biological or engineered solutions—building drains to drain saline water. I commend to the committee a revisiting of some of the really important government work that has been done in Western Australia in particular but also dryland salinity is the substantial issue in New South Wales. And it does not wait for committees—it is continuing. It is like the forgotten truth in a way.

Senator McEWEN —And a very expensive thing to remedy.

Mr Grant —It is very sad to see. A lot of these properties will not be viable in a short period of time because of this issue.

Mr Porter —And it overlays a huge impact on rural communities that many governments have looked at over time and sought to address. As Andrew has, we would commend that the committee take account of it as much as possible.

Senator COLBECK —Just to follow on from those questions, that process is going to be a lengthy and staged one of actually recovering a lot of that ground with progressive type projects that walk their way through the landscape as the conditions and the landscape actually permit.

Mr Grant —The key thing is that the approach to date has been solely via government funded pilot projects which have not been of sufficient scale to make a meaningful impact in arresting the decline. My great hope with carbon forestry is that, rather than loading it up with more regulation and slowing it down, we incentivise it but direct it towards best end use. So let it be a positive incentive to go to the highest and best social good outcome in a catchment and let the market drive it, because private capital is like water—it will find the lowest point in the landscape; it will go to where it gets the highest return. So if we want to see that dryland salinity mitigation is a benefit or biodiversity is a benefit, provide economic stimuli and then  you will get it quicker rather than burden it with a whole lot of regulation and fear of the unknown.

Senator COLBECK —I am sorry that I did miss out on a little bit of your evidence earlier. You talked about $200 million that you currently have invested. What is the level of abatement that that provides?

Mr Grant —We have about 20,000 hectares under planting at the moment. Over its project life that will produce about one million tonnes of carbon abatement, but the full amount of investment to date will double that. So the number is potentially two million to three million tonnes of offsets.

Senator NASH —What is the length of the project?

Mr Grant —The trees typically have a growth period of 300 years plus. The sequestration growth phase is typically 30 to 50 years and then it reaches carrying capacity in the landscape.

Senator COLBECK —I was going to come to that. It is a case of right species, right place.

Mr Grant —Yes, very much so.

Senator COLBECK —Type of planting is something I am interested in. You get various maturity dates for carbon uptake depending on species and depending on the environment and landscape. My understanding is that in some of those landscapes in WA you can be talking about a 15-year cycle as the period of uptake before you get a flattening off on the curve. Other forests can be 60 years and others are probably higher, but it depends on the species and the overall planting types.

Mr Grant —Absolutely. A lot of our intellectual property is around knowing what species to plant and what they will yield, understanding that because it is an industry in its infancy there is very little data on where people made decisions 20, 30 or 40 years ago to plant carbon forests. Therefore, the measurement data is rich in the high rainfall areas because there is a tradition of forestry, but in the bulk of the Australian landscape, which is low to medium rainfall, there is a paucity of data. So companies like Greenfleet and us are pioneering companies in this market. You can count on your hand how many companies really know with precision the yield data. With the species of eucalypt that we grow, mallee eucalypt, if you plant the wrong species in the same paddock you can get a yield of a quarter of what a high-performing species would give. But you also have to be mindful of longevity because you have to meet permanence obligations and ensure that the forest is long living. So you cannot afford to plant species that might only live to 15 to 20 years and then die. You have to be confident that the species is long lived and can handle the normal, natural climate variation that it would experience in its growing cycle.

Senator COLBECK —In the context of permanence, an issue that has been raised with us today as a matter of concern is the figure of 100 years. Is there, in your view, scope to have varying scales of permanence as part of the process?

Mr Grant —It is a problematic issue in that, from an investment perspective, after the growth period you have a long maintenance obligation with no income off it. Whether that is 100 or 50 years is rather semantic post the growth period. So, for argument’s sake, say you have a 50-year growth period. You then have a 50-year permanence obligation. So whether it is 50 or 100 is neither here nor there. My personal view is that in 50 years time we will attribute other values to these forests and society will be sitting around here saying what a prescient move it was to make this investment, and fortuitous. I personally do not fear the downside of it. I think the intrinsic value of forests and the role that they play in society and their broader benefit will be better priced, better measured and better reflected in accounts.

Mr Porter —Can I add, from Greenfleet’s perspective, a slightly different view? I guess the most important thing to us is that we are a charity and we require individuals to feel comfortable with the permanence and the effectiveness of the sequestration associated with it. So we are certainly coming from the perspective of being happy with the 100 years.

Senator COLBECK —Mr Grant, I just want to go back to the submission in relation to the reliance on the NRM plans. I wanted to get you to expand on that. What is the rationale behind your concern about that?

Mr Grant —My argument is simple. It is that we already have to be local. For example, to enjoy the tax deductibility of a project under the tax act you have to demonstrate that you have met local, state and federal NRM guidelines and specifications. To get project approval it varies from state to state. It is either local government or state government. For example, in New South Wales they have the Plantations and Reafforestation Act, so you have to demonstrate that you are not threatening any endangered species and you have to undertake a cultural landscape evaluation. There is a very rigorous set of protocols and procedures you have to go through to gain project approval. I am not sure of the efficacy of a federal government adding an additional layer of approval above and beyond what already exists. That is part A. Part B is that NRM bodies in their own right want to be a participant in the carbon market. So I think there is a fundamental conflict of interest in an NRM body as my competitor regulating what I do and what I do not do.

Senator MILNE —My question goes specifically to the question Senator Colbeck just asked. People have drawn to our attention that you can have a negative list or a positive list, but essentially it depends on the catchment in that something that would be negative in one catchment may not be negative in other and so on—so not one size will fit all. People have put to us that, by getting some sort of uniformity across the country in terms of NRM, catchment planning and so on would assist in avoiding some of the perverse outcomes that are anticipated. I just heard you talk about the appropriateness or otherwise of competing against a regulator. I just do not know how you would get the same across the country otherwise.

Mr Grant —I was the Chair of the Port Phillip and Westernport Catchment Management Authority in Victoria for three years. As a business I approached other catchment management authorities on partnering on the basis that you would get matching funds and it would be able to drive their investment a lot further. I think a more powerful approach is catchment management authorities looking at incentivising investors and companies to go to places in the catchment where there is a higher order outcome rather than always using additional regulation as the only means by which you can get a superior result. I think it is more powerful. If you sit down with a landholder and say, ‘You are not allowed to plant crop A in this paddock,’ the landholder is going to take umbrage. They feel they have a right to use their land as they see fit.

The other thing I find problematic is that the paddock is the unit of regulation when really from a whole of catchment point of view it is better to take some paddocks in toto out of production and they could have better landscape functions. I do not think from my personal experience that catchment management authorities are well positioned to become the regulators. It is just not what their skill set is. They are facilitators, knowledge managers and change agents for positive environmental and catchment health outcomes, and I think they should continue that role.

CHAIR —Thank you for your evidence today.

 [3.34 pm]