Australian agriculture is having the wrong debate about emissions trading, according to Dave Miller of the Iowa Farm Bureau, in the US.
There’s an assumption that individual farms somehow will be “covered” under the proposed Australian Carbon Pollution Reduction Scheme (CPRS).
But that’s unlikely to happen, Mr Miller told the Australian Farm Institute’s Agriculture's Greenhouse and Emissions Trading conference in Maroochydore this week.
Instead, as in the US, Mr Miller argues that the only businesses likely to be covered under the Australian scheme will be those producing more than 25,000 tonnes of carbon dioxide equivalents (CO2-e).
(Although 25,000 t CO2-e has been proposed as the cut-off point for Australian businesses, Government has yet to announce its policy on the matter.)
Lowering that target, especially to the farm level, introduces enormous complexity, Mr Miller warns.
In the US, 85 per cent of national emissions are accounted for by covering the roughly 30,000 businesses that produce 25,000 tonnes or more of CO2-e.
“If we go to 10,000 tonnes, we have 1.3 million reporting entities,” he said.
“The government has made it very clear: why go from 30,000 entities to 1.3 million to account for another 2pc of emissions? It makes no sense.”
That's likely to include most farmers.
“So for everyone under 25,000 tonnes of emissions, the question is, how do you participate in the system?” he asks.
Mr Miller’s advice is for Australian agriculture to interface with the CPRS through a voluntary “rules-based trading system” of emissions offsets and complementary measures, using similar market principles to those on the world’s stock exchanges.
It is also the basis of the Chicago Climate Exchange (CCX), which operates a voluntary soil carbon trading scheme in the United States.
Mr Miller’s other hat is as chief scientist for AgraGate, which aggregates about six million carbon credits for the CCX each year.
“Rules are written by the trading members so that neither side is advantaged or disadvantaged,” Mr Miller said.
“The Chicago Climate Exchange is only voluntary to join, but once you’ve joined, you’re bound by the rules.
“The other framework for trading is a regulatory, government-mandated system, where it is the threat of regulation that becomes the incentive for compliance.”
The framework drawn up under the Kyoto Protocol falls under the latter category, and in Mr Miller’s view it doesn’t represent all parties fairly.
“You’re struggling mightily with a set of rules that were drawn up without taking into account the interests of major sectors,” he told the conference.
He lists several key issues that a voluntary system needs to resolve, starting with accountability and verification.
Don’t get too tied up with a comprehensive audit system, Mr Miller warned, because it could become overwhelmingly expensive.
He instead advocated a “check the box” self-verification system, one supported by spot audits.
Fungibility—the ability for emissions credits to be readily traded between voluntary and regulatory trading schemes—is another imperative, but not permanence.
“No biological system is permanent. They are ever changing, and therefore the whole concept of permanence is not appropriate for agriculture," Mr Miller said.
The CCX model runs under all these principles, paying carbon credits to farmers who use certain practices across certain land zones.
No-till is rewarded in the mid-west, rotational grazing in the rangelands, on the assumption that these practices will result in a certain amount of carbon being sequestered on certain land types.
Payments are low, in the order of US$1-$7 a tonne, to reflect the uncertainties of the CCX system.
But if the US adopts a regulated cap-and-trade framework, Mr Miller said, the CCX will tweak up its accountability and verification, and start paying more for offsets, in order to better interface with the system.
While few people have made much money from the CCX scheme to date, “the voluntary market has allowed us to ‘learn by doing’,” Mr Miller said.
That’s not something that Australia can currently lay claim to.
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