Submission Template Emissions Reduction Fund draft determination

Carbon Credits (Carbon Farming Initiative- Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2017

OverviewThis submission template should be used to provide comments on a draft Emissions Reduction Fund determination

Contact DetailsName of Organisation: Carbon Link LimitedName of Author: Dr Thakur Bhattarai and Dr Terry McCoskerPhone Number: 07 49395149 (off), 0413600088 (mob)Email: thakur@carbonlink.com.auWebsite: www.carbonlink.com.auDate: 29 September 2017

Confidentiality All submissions will be treated as public documents, unless the author of the submission has requested that the submission not be published on the grounds that its publication could reasonably be expected to substantially prejudice the commercial interests of the author or another person. Public submissions will be published in full on the Department of the Environment’s website, including any personal information of authors and/or other third parties contained in the submission. Confidential submissions will not be published but will be provided to the:

Department of the Environment and Energy; Emissions Reduction Assurance Committee; and Clean Energy Regulator.

If any part of the submission should be treated as confidential then please provide two versions of the submission, one with the confidential information removed for publication.A request made under the Freedom of Information Act 1982 for access to a submission marked confidential will be determined in accordance with that Act.

Do you want this submission to be treated as confidential? Yes × No

Submission InstructionsSubmissions should be made by close of business on the day the public consultation period closes for the determination. This date will be specified on the website. The Department reserves the right not to consider late submissions. Where possible, submissions should be lodged electronically, preferably in Microsoft Word or other text based formats, via the email address – EmissionsReductionSubmissions@environment.gov.auSubmissions may alternatively be sent to the postal address below to arrive by the due date.

ERF Governance, ERF DivisionDepartment of the Environment GPO Box 787 CANBERRA ACT 2601

Name of draft determination: Carbon Credits (Carbon Farming Initiative- Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2017

Part A – Overall comments and potential adverse impacts

General/overall comments

Carbon Link was born out of the need to support farmers to earn income by improving their soil organic carbon and has been working for over a decade in the soil C space. In the last 12 months, Carbon Link implemented ERF projects and completed the baseline sampling round over 15,000 ha under the current soil C in grazing system method. We, therefore, have more hands on experience than anyone attempting to implement soil carbon projects.

Overall, Carbon Link Limited welcomes the ERF draft methodology determination 2017, “Measurement of Soil Carbon Sequestration in Agricultural Systems”. This method appears to be an improved version of the existing grazing land method, which has addressed some of the major issues on timing, flexibility in the new activities, sampling design and stratifications as well as it allows sensor technology as an alternative option of the LECO method.

However, it is also critical to ensure that they make commercial sense. For the soil C projects to be commercially viable for land managers/farmers, the cumulative discounts applied in the equations is the single biggest issue which will prevent uptake. Why would any sensible business person spend money on three measurement rounds and implement capital intensive change, to wait at least 10 years to see any positive cashflow. Farmers are patient but not that patient.

Some other remaining issues include The added cost to farmers of having get an independent report, while waiting 10 years for

income. equivalent soil mass/ten percentile, applications of compost/amendments, and building spectroscopic modelling,

As one of the key organisations/participants of the Soil Carbon Practitioners Industry Working Group (SCPIWG), Carbon Link has also contributed in the responses prepared by the SCPIWG and agrees to be named as a participant in that submission. In addition, we would like to provide comments and suggestions in a number of parts/sections below.

In summary, under the draft methodology more than 80% of potential ACCUs cannot be traded until the end of second sampling round (~10 years), resulting in significant impact on the commercial viability of a project. The key examples of these discounts are: risk of over crediting (50%), buffer and permanence (25%), and variance (~10% at critical 5 year sampling round and then variable depending on sequestration rate). We agree with a variance calculation and permanence. Our consultation with farmers on this draft methodology shows that few land managers/farmers would take the soil C method up, particularly because they are already in a capital intensive, low cashflow business.

This arbitrary discount will result in a significant loss of potential abatement for Australia. In order for any abatement to come from this methodology, most if not all the arbitrary discount will need to be removed by year 5. We fully support the concept of running it down over a 5 year period eg 50% discount for projects remeasured after 1 year, 40% after 2, 30% after 3, 20% after 4 years and a maximum 10% in year 5 and zero thereafter.

If the land management strategy has to be reviewed/approved by an independent person, you have just added another $5,000 to $10,000 to the cost structure of doing a project. We recommend to keep the land management strategy in the recommendation sections of the Supplements rather than in the requirement. It is the auditors role to ensure that new eligible activities that increase soil organic C, are

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fully documented.

We draw your attention to other specific issues in the equations and calculations, and a few minor issues in the spectroscopic modelling which are mentioned in those specific sections.

It would appear that the new methodology is still designed to stifle innovation, decrease uptake and thus almost eliminate the amount of learning that can happen in this space on real scale over the next 5 to 10 years. This is a pity as it will see one of the great opportunities to transform agriculture, slip by Australia.

Do you consider this determination may have any adverse environmental, economic or social impacts? If yes, are there any existing or new measures that could be adopted to mitigate those impacts?

There are many benefits of increasing soil organic carbon level in the soils but we have not observed and seen any adverse environmental and socio-economic impacts with this determination.

The methodology’s biggest potential impact is destroying the very young measurement and sequestration industry before it gets started.

If it is delivered to landholders in a form which encourages innovation and accurate data collection, we will all be in a better place in 5 years time and we believe the uptake can be substantial.

Part B- Questions on general elements of the draft method

The draft method includes the use of a subsidiary document, the Supplement, which together with the draft legislative instrument, outlines to project proponents the requirements and suggested approaches to implementing the draft method.

Are the draft legislative instruments and the Supplement clear and readable? Could the Explanatory Statement or Supplement be expanded or refined to further clarify anything?

You can still see many typos and errors in the current method, ‘sequestering carbon in soil in grazing system’, and similar errors in this draft method. We have supplied the details errors in the SCPIWG responses in details, they need to be corrected.

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The draft method allows for eligible projects registered under the existing grazing systems method to transfer to the new method.

If you have a project registered under the existing grazing systems method, are you likely to transfer your project to this method? Please provide reasons for why you would or would not transfer.

There is huge measurement cost involved in the existing measurement systems. We believe that all of the registered projects under the existing grazing systems method are likely to transfer to the new method because of improved accuracy for subsequent sampling rounds.

The draft method is seeking to overcome some of the barriers to implementation of the existing grazing systems method. Stakeholders identified the narrow range of eligible activities and high costs of dry combustion (LECO) as significant barriers to implementing the existing method. To help overcome these barriers, the draft method provides a new measurement option (sensor technology) and increases the range of eligible activities.

a) Is the new draft method likely to increase uptake of soil carbon projects? Please provide reasons for why/why not.

b) What are your expectations of reduced costs, if any, from the proposed new method?

c) If you are a current or potential project proponent, are you likely to use the new measurement option (sensor technology), and if so, is this likely to change your approach to sampling? Alternatively, would you like to suggest an alternative measurement option that is reliable, uses existing technology and would produce verifiable results?

Our experience on using the SCANS technology on our project cores is that it is firstly 20% more cost effective compared to the LECO method. However the bigger advantage to farmers using the

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technology will be that variances can be reduced. This obviously affects the economics of a project, more than the cost structure. We therefore see it underpinning our business, if we have a business case. A business case can only be sustained in the landholder market if the 50% arbitrary discount is removed.

We expect that there will be a scale at which the old techniques are still appropriate and a larger scale where unequal area stratification and scanning has it role.

Specific questions relating to the draft’s method’s approach to the permanence period

Projects that elect a 100 year permanence period are required to maintain carbon stocks for the permanence period. Where a 100 year permanence period is elected, projects must continue to measure and report, at intervals of no more than 5 years, for the 75 years over which soil carbon stocks need to be maintained after the 25 year crediting period has ended. This is to provide the Government with confidence that sequestered carbon has not subsequently been lost.

a) If the frequency of reporting during the permanence period was changed from what is currently required to at least every 10 years or at least every 25 years as well as at the end of the project, would this influence your decision to elect a 100 year permanence period?

b) Considering your response to the above question, what approach could be used to give the Regulator confidence that carbon sequestration has been maintained through the 100 year permanence period, should ongoing monitoring and reporting frequency requirements be relaxed? Please provide an explanation for your response.

a) It may help a bit but the primary reasons that 100 years will not be taken up include:a. Farmers cannot and will not plan for great grandchildren. In succession planning, that is

called “ruling from the grave”.b. Banks will not provide IHC on 100 years

b) Satellite monitoring by the Regulator

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Specific questions relating to the draft method’s requirement for a Land Management Strategy

The requirement for a land management strategy has been included to control risks both to the landholder and the Government. Risks to the landholder include unrealistic expectations of the degree and scale to which they may be able to influence soil carbon and a lack of understanding of how a soil carbon project may or may not align with broader business objectives. The land management strategy is also intended to ensure landholders are well aware of their obligations in undertaking an ERF soil carbon project, to help manage the risk to Government of project non-compliance.

a) Is the requirement for a Land Management Strategy prepared or reviewed by an independent person an effective means for controlling risks to landholders and the Commonwealth? Please provide any supporting information relevant to your response.

b) Will the land management strategy and the requirement for an independent person to prepare, review or revise the strategy impact on the viability of projects? Please provide any supporting information relevant to your response.

c) Is the independent person appropriately defined for achieving the purposes of controlling risks to landholders and government? Please provide an explanation for your response.

d) Are there alternative safeguards you would like to propose?

Carbon Link has been working with landholders and farmers for many years. In setting up projects clients are taken through a discovery process which collects all basic data, outline the potential business cases, explain how a project operates and what the obligations are for all parties. This normally takes at least 6 months. It would not be prudent business for Carbon Link, or any other project proponent, to not do due diligence on a potential project. We have turned away over 50% of the applicants to date because we did not believe they had the skills or the business case to make it work.

Farmers have long experience, and those entering soil carbon projects have in our experience been keen to prepare a land management plan in association with Carbon Link and their consultant, if they have one. If the draft method makes it compulsory for the land managers to review the management strategy by an independent person, it may further limit project uptake due to cost and farmers perception that this is “just another set of grubby fingers” in the ever shrinking pie.

To prepare and have such reports reviewed will add between $5,000 and $10,000 to each project start up cost.

We recommend the provision for independent review, be deleted.

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Specific questions relating to the draft method’s approach to removing land from the project area (s 9)

Section 9 of the draft method specifies criteria for varying the area of a project. The criterion placed on the removal of CEAs is to ensure only genuine abatement is credited and to limit opportunities to increase net project abatement by removing underperforming CEAs. The criterion on the removal of CEAs seeks to allow for genuine circumstances where a project proponent may need to remove an area from the project.

a) Are the proposed controls on the removal of parts of or whole CEAs sufficient to ensure that areas are not able to be removed for the purpose of increasing carbon credits? Please provide an explanation for your response.

b) Do the proposed controls place barriers to projects removing areas where necessary for genuine reasons? Please provide an explanation for your response.

c) Are alternative controls possible that would lead to the same desired outcomes?

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Specific question relating to the allowance of 50 per cent of credits from early sampling

The draft method uses a regression approach to attribute changes in soil carbon stocks to implementation of new management practices. This approach requires a minimum of three sampling rounds, (including baseline) to have been completed before a regression line can be fitted. The draft method allows project proponents to receive an advance of 50 per cent of credits to be issued following two rounds of sampling (including baseline).

a) Does the 50 per cent allowance sufficiently control for the risk that credits are provided for changes in soil carbon stocks which are not due to changes in management actions and therefore are unlikely to be additional, permanent changes? Please provide an explanation for your response.

b) What are the consequences of the 50 per cent allowance for project viability?a) It will certainly control the risks. As there will be no projects, there will be no risks. The flip side of

that response from landholders is that Australia will watch the global soil carbon opportunities go past.

b) We have stated it many times in many forum, this is a show stopper. Simply put yourself in a farmers position. Lets assume they have a $100,000 baseline cost. Then double that to get to T1 before funding the reporting, auditing and “reviewing”. Then add the changes they have had to make in their business to pass the newness test and improve land function, usually also in the order of at least $100,000. Then tell them they do not deserve 50% of their income after waiting 5 years for it.

The following comments are from two current project proponents.

“It troubles me greatly to read the Department of Environment is looking to reduce the amount of soil carbon we will be able to sell in the short term. Please understand that the early stages of the project incur the highest costs and this decision may therefore make future projects unviable. As  land managers, we take the improvement of soil structure and health very seriously, so the ability to fast track these improvements through sampling, measuring and re balancing our soils came as a very exciting option via the ability to sell the soil carbon we are sequestering.”

“To be clear, we don’t have the ability to sell something we don’t produce so our project is self-regulating providing measurement is accurate. Therefore this is the area requiring the support of robust methodologies not the physical limiting of what can be sold.” “We are always willing to show any interested parties how we manage our fragile environment, so we extend this invitation to you to see what we do and how we do it, not just for our benefit but the benefit of the wider community.” Andrew Lawrie, “Moora Plains

“For us as food producers and land custodians, “Soil Carbon Sequestration” is so much more than an exciting contribution to the answer to “Climate Change”!  Through innovative grazing practices, we are working with the rhythm of nature to lead others to reverse global warming while demonstrating, not “Sustainable” but “Regenerative” agriculture to feed the exploding food requirements of the world. For those of us who care for the environment with regenerative agriculture, soil is our passion, and the more carbon we can sequester the healthier our soil becomes.  More carbon means more water-holding capacity, which means there is more water and nutrients available to plants, which means in turn more food produced."

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“We can passionately go on sequestering carbon in relative silence, or we can lead others in mass to help the whole world’s population and our earth’s environmental health, through common sense incentives.  Soil carbon is the most secure method of sequestration and has major “win-win” benefits for everyone!” Grant Burnham, “Boonie Doone”

“I am undertaking a soil carbon project so to build up carbon in my soils to improve their structure and fertility which will have these benefits:

Increase biodiversity of plants. Takes carbon dioxide from the atmosphere and stores it in the soil as carbon,

therefore reducing CO2, (an atmospheric warming gas) and helping to alleviate the problem of global warming that many people are concerned about.

Improve the soil water retention ability which will improve the health of the water systems on our property by reducing erosion and runoff, which improves the quality of the water flowing in the Great Barrier Reef. The increase in soil carbon also ties up minerals in the soil.

Improve animal health and productivity by creating more a fertile environment which will lessen the methane emissions from the animals (cattle) by them having better feed quality all the time.

Improve my health and wellbeing by hopefully having a more profitable (depending on the markets) and sustainable enterprise.

To create these positive outcomes for the soil, air, water, animals and myself requires a large capital outlay in the new fencing, water infrastructure, baselining the carbon on the property and reporting to the E.R.F.

To encourage people to implement these practices, which are an integral part of the Federal Governments Emissions Reduction Scheme, any monetary benefit to be gained from carbon storage credits would need to be accessed as quickly as possible to help alleviate the financial burden undertaken in the short term to create the long-term benefits for everyone. Without early incentives it will be very hard to get finance for these projects as banks will want to see reasonably early returns for the outlay, as will producers.

Carbon Link will be the managers of my carbon project and will guide me in implementing numerous ways of getting more carbon stored in the soils, which is the aim of the whole process which will benefit all peoples. Carbon Link will be our risk manager who will benefit if we benefit while greatly minimizing the risk of failure. Their expertise in the fields of improving soil health through carbon storage, and with managing the reporting side of the project has given me the confidence to proceed with the project.

The soil Carbon projects should be shouted from the rooftops as a practical, beneficial to all way of getting the outcomes for the environment that everyone desires. Policies that encourage the implementation of these projects should be pursued, while anything that might discourage implementation should be rejected.” Graham Wilson, “Minmore”

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Part C- Specific questions on technical elements of the method

Specific questions relating to the draft method’s regression approach to measuring changes in soil carbon

The draft method uses a point in time baseline and regression approach to attribute changes in soil carbon stocks to implementation of new management practices.

Is the point in time baseline and regression approach conservative and likely to measure real changes in soil carbon stocks that are attributable to the implementation of new management activities? Please provide any supporting information including references to reports and peer reviewed scientific literature and demonstration of its application over a range of geographic locations.

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Research has shown that in many situations human activity makes a relatively small contribution, compared to climate and soil properties, to changes in soil carbon. Because of this, the draft method sets a 60% probability of exceedance to the regression approach that is used to estimate net abatement. This is designed to minimise the risk of over-crediting.

a) In light of recent scientific literature (http://www.publish.csiro.au/sr/SR15008) highlighting the relatively small contribution of management activity to changes in soil carbon stocks, is the estimation of the net abatement amount using this approach conservative or are additional controls warranted? For example should a higher probability of exceedance (e.g. 80%) be used to estimate soil carbon stock change in early sampling rounds? If not, why not?

c) Is the advance of 50 per cent of credits issued following two rounds of sampling (including baseline) appropriately conservative in reducing the risk that credits are provided for changes in soil carbon stocks which are not due to changes in management actions and therefore are unlikely to be additional, permanent changes?

a) Such an assertion is does not even pass the pub test. CSIRO data also shows the original soil carbon levels found in Australia by Strezlecki, were very high. If the assertion had any credibility we could assume that the rundown in soil carbon in Australian soils over the last 150 to 200 years was caused by a climate that was somehow different than previous and that the practices and management of white settlement had no influence. What a landholder does, when they do it and how well or badly they do it, has the major impact on soil health and carbon. Another penalty here is just another nail in the coffin.

The data below from Dr David Johnson at the New Mexico State University, Institute for sustainable Agriculture, clearly shows what is possible with a paradigm shift and management change, compared to the commonly quoted literature.

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Specific questions relating to the draft method’s approach to ensure integrity in sampling and analysis

There is a range of proposed controls in the draft method to ensure that sampling and analysis provide for accurate estimates of soil carbon content. These controls are designed to ensure sampling integrity while allowing for flexibility, where possible, and avoiding unnecessary costs. These controls include the use of blind duplicates, which involves providing a duplicate sample to a laboratory that is unaware of which sample it is a duplicate of, to assess the precision of the laboratory.

a) Are there sufficient quality assurance controls around sampling and testing? Please provide an explanation for your response.

b) How important is the analysis of blind duplicates in all laboratory tests to determine the error associated with the laboratory analysis. Please explain your response and provide any supporting evidence including reference to peer reviewed scientific literature.

c) Are there other suitable controls that would lead to accurate estimates?

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A correction factor is required to be applied to results obtained using the Walkley-Black sample analysis method, which introduces further uncertainty into soil organic carbon estimates.

a) Do you think it is appropriate to allow for both Walkley-Black and dry combustion methods for sample analysis in ERF projects? Please explain your response and provide any supporting evidence including reference to peer reviewed scientific literature.

b) If you are an existing or potential project proponent, are you considering using the Walkley-Black method?

a) Yes. If dry combustion leads to greater sample size then it should logically have an advantage over minute sample size.

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Part D- Specific comments – please insert your specific comments below, listed against the part of the draft determination to which they applyDetermination reference: [insert name of relevant part of determination]

Comments

Draft Supplement Comments

Part C 2, Xii why limit to 60 days again?  I think we discussed not to apply any limitPart D 2.1 Fig 3 why grind (step 6).Is it only for mid IR??

3.1 ii & iv gives same meaning, better to amend?

3.1 first mention of NIR here, before this it’s been IR, so better to start together??

3.2.1 iii - is wavelength resolution (ie FWHM) iv - is reporting interval, eg pixel resolution a and b values are wavelength resolution not pixel resolution(viii): be clear between ‘referencing’ the instrument to a white (Spectralon) standard and ‘calibrating’ in terms of PLSR or other models.  Spectrometer be calibrated every 10 min or once every 30 measurements: Is this practical?

x  So any instrument should be checked in terms of- Wavelength calibration? - Photometric noise (the noise on the spectrum of

repeated measures of a reference target mentioned in this section)?

- Predicted values of a series of check cells (of dry soil)?

Page 17  General comment – throughout there are reference to Viscarra Rossel papers, which is good. Citing a few original’ references would add value greatly.

3.2.2 (vi)   just take two spectra of every position.  What is an outlier in one model may not be in another model, so if the model is redone in the future – you won’t have access to soil core to redo spectra.  I think this requirement is impractical.    Anyway, its only of value if there was a problem with collecting the actual spectra (eg you put your finger in the way) – more likely the spectra/sample is just odd and doesn’t fit the model, so repeating acquisition won’t help

Page 193.2.3.1 two cases:

(a) if you are building a new model from scratch then 40 samples, won’t be too small?(b) if you have an existing database, then 20% of total

number may be overkill, especially as the database grows.

ii (a) define range as either spectra (eg NH value) or reference C level

3.2.3.2    after doing calibration and validation, the model is be rebuilt using all available samples (using settings identified in calibration run)

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3.2.4 iii, can you take reference material as a plug from the soil core at the point where spectra acquired, of diameter of illuminated spot and a depth of 5-1 mm to represent the optically sampled volume?

3.2.4.1 ii   blind duplicates NATA/ASPAC requirement to certify lab

3.2.5.3 first para – use original sources, e. g Roger for EPONeed to check middle paper – I do not think Barnes et al and Savit and Golaty are appropriate references here

3.2.5.5 Recommendation i)  other methods should be allowed, eg neural networks 3.2.5.6 Recommendation: Of course an outlier is specific to the model,,,ie what is an outlier for one model may not be in the next

3.2.5.10 I   this requirement is not typical…. Isn’t R2 and RMSECV sufficient?

Need to report regression coefficients of model?

3.2.5.10 Recommendation: sRMSE?? Not defined earlier

3.2.5.12: i  1% w/v dry weight soil?

iv I don’t follow this

3.2.6 iv    the same spectra model must be used in subsequent rounds…..nice in theory but in 10, 25 or 100 years time does it exist?, or the original instrument exists. Need to make flexible and practical

3.2.6 Figure 6: Flow diagram of procedure: Can we separate process for measurement t0 and t1 in to two different diagrams?

Part F, g  overkill with reporting of quartiles etc,

P 46  rRMSE = RMSE/mean  ???????? /SD maybe?

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