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The Greenhouse Effect |
Carbon Sinks |
The Kyoto Protocol |
| What is the UNFCCC? | ||
| What is the 1997 Kyoto Protocol? | ||
| Which greenhouses gases are involved? | ||
| Read the Kyoto Protocol | ||
| What is bioenenergy? (IEA FAQ) | Read the Bonn agreement | |
| Read IPCC LULUCF Summary Report | ||
What is the BFG Program? |
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| What are 'carbon credits'? | ||
| Do the projects include farm forestry ventures? | ||
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The trapping and build-up of heat in the lower atmosphere near the planet's surface. Some of the heat flowing back towards space from the Earth's surface is absorbed by water vapour, carbon dioxide (CO2), methane (CH4), and other gases in the atmosphere. If the atmospheric concentrations of these gases rise, then theory predicts that the average temperature of the lower atmosphere will gradually increase. The greenhouse effect in part explains the temperature differences of Mars, Venus and Earth.
A increase in the natural greenhouse effect, brought about by human activities, whereby greenhouse gases such as carbon dioxide (CO2), methane (CH4), chlorofluorocarbons and nitrous oxide (N20) are being released into the atmosphere at a far greater rate than would occur through natural processes and thus their concentration in the atmosphere is increasing.
Forests remove carbon dioxide (CO2) from the atmosphere and store (or sink) carbon in plant material and soil. This natural process is part of the carbon cycle and is known as sequestration. Half a tree's mass is carbon, so large amounts of carbon are stored in forests.
Depending on the particular forest, the amount of carbon stored in it may be; increasing - making the forest a carbon sink, decreasing - a carbon source, or in carbon balance - a carbon store.
Forests can absorb CO2 from the atmosphere and thereby assist us temporarily to stabilise greenhouse gases in the atmosphere. However, half of the world's forests have already been cleared and those that remain have largely been degraded. We have therefore reduced the capacity of the world's forests to slow climate change.
The concentration of CO2 in the atmosphere is increasing. Humans are continuing to release large amounts of carbon dioxide, largely from burning fossil fuels (oil, gas and coal) and from activities such as clearing forests. Each year, human activities are thought to add an extra 7 million tonnes of CO2 to the atmosphere.
Because CO2 traps heat in the atmosphere, increasing concentrations of CO2 is leading to global climate change. Many scientists predict that climate change will result in more extreme weather patterns - more cyclones, floods and droughts. With such changes in our climate, rising sea levels will threaten coastal environments, it will be harder to grow food successfully, and the rate of species extinction will increase.
To reduce the impacts of climate change, it is necessary to stabilise atmospheric CO2 concentrations. In the 250 years since the industrial revolution, the amount of CO2 in the atmosphere has increased by 30%. To stabilise CO2 at current levels, we need to reduce emissions by 50% - 70% now. To stabilise CO2 at twice pre-industrial levels, emissions need to be reduced by 30% now. Forest carbon sinks can help us to do this through the natural absorption and storage of carbon dioxide.
An international agreement, the UN Framework Convention on Climate Change (UNFCCC) was ratified in 1994. The UNFCCC aims to stabilise atmospheric greenhouse gas concentrations to prevent human induced climate change. The Kyoto Protocol, is a protocol of the UNFCCC. The Kyoto Protocol pursues action to combat global warming by managing greenhouse gas sources and sinks. It has not been ratified, and decisions about how it will be implemented are still being negotiated.
Under the Kyoto Protocol, developed countries have set emissions reduction targets that are an average of 5% below 1990 levels. There are a number of mechanisms in the Protocol, including carbon trading, that can help some countries reach their emissions reduction target.
As part of what is called the 'global carbon cycle', carbon is exchanged naturally between the land, the atmosphere and the oceans. Forests sinks play a very important role in this natural ecological cycle and can combat global warming by removing CO2 from the atmosphere and storing the carbon. But, forest sinks can only offset a relatively small proportion of total greenhouse gas emissions. We cannot combat global warming with forest sinks alone. We also must reduce our industrial emissions.
As a matter of necessity, we fundamentally need to change the way that we choose to produce and use energy as well as massively reduce our levels of fossil fuel consumption. These changes will be difficult and will take many years. Forest sinks start working immediately, providing the time needed for slower industrial change. We need to use this time effectively - industrial change needs to start now.
The most permanent carbon storage is within fossil fuels that remain unextracted and unburnt in the ground. In contrast, the security of carbon stored in forests is uncertain. Carbon may be released easily and accidentally from forests back to the atmosphere, for example, by logging or fire.
Bush for Greenhouse is an innovative revegetation program funded by the Commonwealth Government as a means of increasing Australia’s ability to take up greenhouse gases from the atmosphere. The project aims to build new partnerships between industry and landholders to achieve greenhouse and other environmental objectives. The program has two main approaches to achieving the goal - providing a brokering and investment facility; and developing technical and research support.
The brokering and investment facility will provide information and assistance to prospective investors or sellers and will be able to facilitate the transfer of carbon sequestration credits created under the program. The research facility will work to deliver standard data collection and analysis tools that can be used by those in the program to ensure that they are achieving their goals.
The BFG broking ability allows it to facilitate liaison between those purchasing carbon sequestration rights and those sequestering carbon on their behalf. The program secures corporate investment in on-ground projects and the CRC for Greenhouse Accounting assists with technical aspects of the actual revegetation project to ensure that it achieves its intended goal. BFG will also attempt to ensure that all plantings are consistent with the requirements and definitions in the Kyoto Protocol for carbon sinks.
There have been some trades already in Australia that indicate an expected price for carbon sequestration. In June 1998, the Australian Financial Review reported that Pacific Power had contracted State Forests of New South Wales to sequester 2400 tonnes of carbon (2400 c/t) in a 12 month period. The price paid for this was around $14.60/t, which is within the Australian Greenhouse Office estimate of $10-$50t.While these prices are low compared to traditional agricultural products, the sale of carbon credits will provide an alternative source of income for those farmers wishing to diversify their income base, especially in times of drought and uncertainty in other commodity prices.
Bush for Greenhouse is managed by the Australian Greenhouse Office.
A trading scheme of so-called ‘carbon credits’ is one option supported by the CRC for Greenhouse Accounting to help Australia meet agreed standards for greenhouse gas emissions as set out in the 1997 Kyoto Protocol. Australia has set a target for greenhouse gas emissions of no more than 8% above 1990 levels in the first commitment period, 2008 - 2012. To reach this target, there is a national need to reduce greenhouse gas emission levels by increasing energy use efficiency and developing alternative methods and fuels that produce less of these gases.
If the Kyoto Protocol is ratified by the agreed number of Annex B countries and becomes binding, emissions trading will become a reality and the concept of carbon credits will come into play. Industries will be required to make changes to their emissions profile to ensure that the country as a whole meets its target under the international agreement. Emission permits will be issued by the government from the stock of its Assigned Amount Units allocated to each country under the Kyoto Protocol. These emission permits will effectively be a licence to emit one tonne of carbon dioxide equivalent and will be needed if a company intends to emit greenhouse gases. If the emitter emits more carbon dioxide equivalents than it has allocation units, it will have to acquit those emissions in some other way.
The KyotoProtocol allows for this to happen in several ways. The emitter can invest in Clean Development Mechanisms in a developing country, in a Joint Implementation with another country that has ratified the agreement or domestically in a variety of ways. Domestic acquittal can occur if the company purchases emission credits from another company that has emitted less than their allocated permits and is thus in credit. Nations in need of credits may also buy sequestration credits from growers sequestering carbon in trees through programs such as the federally-funded Bush for Greenhouse.
The price of carbon credits is yet to be determined and, as with any other market, it will take some time to establish and stabilise. The price is likely to fluctuate or change dramatically depending on the strategy adopted for their sale. If full international trading takes place, the price of carbon sequestration credits is likely to be much lower than if the market is entirely domestic.
The Bush for Greenhouse (BFG) program encourages the planting of new vegetation, revegetation of cleared regions and the maintenance of these plantings in the long term to store carbon. Bush for Greenhouse is broad enough for all landholders who wish to become involved in Bush for Greenhouse may do so.
The BFG has been set up by the Commonwealth Government with the aim of increasing Australia’s carbon sinks through encouraging corporate investment in revegetation of cleared land for environmental purposes. One of the ways in which it does this is by brokering carbon trading between private landholders and organisations required to abate some of their greenhouse gas emissions through the purchase of carbon sequestration credits.
One of the possible implications of this is that landholders are able to get paid to revegetate their land or at least have the costs of revegetation paid for by industries required to abate production emissions. As trees grow, they absorb carbon dioxide (CO2) from the atmosphere and release oxygen (O2). As a result, replanting trees removes carbon from the atmosphere and creates a pool in which carbon can be stored. By creating carbon pools, the landholder can sell the carbon sequestered as a sequestration credit to those industries that require them as part of their abatement program.
The Bush for Greenhouse broking ability allows it to facilitate liaison between those buying carbon sequestration rights and those sequestering carbon on their behalf. The program secures corporate investment in on-ground projects and the CRC for Greenhouse Accounting assists with technical aspects of the actual revegetation project to ensure that it achieves its intended goal. BFG will also attempt to ensure that all plantings are consistent with the requirements and definitions in the Kyoto Protocol for carbon sinks.
The price of carbon credits is yet to be determined and, as with any other market, it will take some time to establish and stabilise. The price is likely to fluctuate or change dramatically depending on the strategy adopted for their sale. If full international trading takes place, the price of carbon sequestration credits is likely to be much lower than if the market is entirely domestic.
There have been some trades already in Australia that indicate an expected price for carbon sequestration. In June 1998, the Australian Financial Review reported that Pacific Power had contracted State Forests of New South Wales to sequester 2400 tonnes of carbon (2400 c/t) in a 12 month period. The price paid for this was around $14.60/t, which is within the Australian Greenhouse Office estimate of $10-$50t. While these prices are low compared to traditional agricultural products, the sale of carbon credits will provide an alternative source of income for those farmers wishing to diversify their income base, especially in times of drought and uncertainty in other commodity prices.
The benefits of planting trees extend far beyond the initial financial gain from selling carbon credits. Planting trees is likely to increase farmland productivity such that landholders are likely to see an overall increase in farm output as a positive externality to the initial financial arrangement. Many landholders are already involved in programs such as Bushcare and Landcare which share these same core principles.
Tree planting can dramatically reduce the effects of salinity and erosion. Trees take up water and lower the water table on land affected by dryland salinity. This has long been recognised as a method of reclaiming such land. Trees also reduce erosion by decreasing and slowing water runoff. Their roots hold the soil together, further reducing erosion and return organic matter to the soil increasing soil fertility.
Bush for Greenhouse focuses on mixed species plantings and repairing fragmented and damaged ecosystems to improve biodiversity. It aims to reduce and reverse land degradation and directly involve industry in important land management projects.
The role of the landholder in the establishment and maintenance of revegetation projects is unclear under the Kyoto Ptorocol at this stage. The Greenhouse Challenge Vegetation Sinks Workbook (available from the Australian Greenhouse Office) advises that there are several things that should be provided by the owner of the sink. These include baseline measurements of sequestration rates based on the procedures in the workbook, expected sequestration rate, exact area and type of project, previous land use history, fire history and so on.
It is still unclear whether the landholder is required to carry out measurements or whether the onus will be on the buyer of the sequestration rights to provide such information. It appears that initial information required will have to be provided by the landholder and it is reasonable to expect that the landholder may be required to provide information on the size and sequestration rates in their project as this information would be essential to the selling process. There are organisations that will undertake such a survey of vegetation for the landholder. It is also possible for the landholder to approach a company and offer their land as a site for revegetation activities under the Bush for Greenhouse program with the undertaking that the company would pay all costs incurred. One of the roles of Bush for Greenhouse is to provide a facility that could help coordinate and organise such deals.
Back in 1998, CO2 Sinks Pty Ltd suggested that the details that should be provided by the grower include:
There are programs such as farm forestry and State Forests of New South Wales programs aimed at selling carbon sequestered by forestry ventures on private land but these are outside the scope and goals of Bush for Greenhouse.
While farm forestry aims to eventually harvest timber from the trees planted, Bush for Greenhouse aims to maintain any plantings in the future without harvest to ensure the goal of reducing and reversing greenhouse emissions and environmental degradation through seeing that revegetation is continued.
Laws of the State in which the landholder operates will apply to those involved in the program.The Bush for Greenhouse program will not affect the use of land other than that it is being used to grow Kyoto forests. However, there is a possibility that this may change in the future as worries about carbon leakage become more prominent.
For example, if a company invests in revegetating an area that the farmer has previously used as a grazing or cropping area and the farmer clears more land to replace the land no longer in use, there is a clear conflict of interests that may be considered counterproductive to the program. Information for prospective companies wishing to get involved in the BFG program advises that investment in projects that may lead to leakage should be scrutinised carefully and if likely, avoided.
The rules for landholder participation in the program are yet to be finalised but it is likely that the landholder will be obliged to remain in the program for an agreed period. The aim of Bush for Greenhouse is to maintain carbon sequestration forests in the long term so it is likely that the land revegetated under such an agreement will not be able to be cleared again, at least in the foreseeable future. It may be possible for the land to be used for grazing or other purposes that will not affect its ability to sequester carbon or other environmental goals.
Any change in the land use of the site would have to be approved and reported to approved central register of carbon sinks. This register is not as yet operational but will be an integral part of the eventual scheme to ensure international accountability and compliance.
As with any other crop, there is the possibility of crop failure and the uncertainty of market prices. It is unclear at this stage who will accept responsibility for a lost crop but it appears that the onus will be on the broker to ensure that there are sufficient stocks to deal with loss as a result of fire, windthrow, insect attack etc.
With such a new and innovative trading scheme, there are few examples on which to base predictions. This means that there is really very little knowledge about how the system will work in practice. The US Environmental Protection's Acid Rain Program which established trading in sulphur dioxide is one example of a working emissions trading system that is being closely examined as it has been very successful.
It is possible that the price of credits will vary dramatically depending on whether or not carbon trading is entirely domestic or open to the international market. International trading is provided for in the Kyoto Protocol and will be possible once the agreements are ratified and a working emissions trading system is in place.
It is likely that as with any other market, the price of carbon credits will fluctuate. This is something investors in the sector have to understand and be prepared to deal with. It appears likely that, as with other crops, there will be insurance available for the investor.
The Bush for Greenhouse program encourages plantings of mixed species natives. Trees are the focus of the program as they store carbon longer than other more ephemeral plants (such as crops and grasses)and therefore aid the project goal of carbon as long as possible. This does not mean that woody understorey species will not be able to be planted and accounted for, indeed, if the goal of revegetating and regenerating degraded land is to be met, understorey species will also need to be planted or encouraged to regrow to return the ecosystem to the way it was before clearing or degradation. Part of the Bush for Greenhouse program is the development of an information and advisory service that will be able to answer questions on things such as the type of trees that should be planted in certain areas and so on.
Mixed planting of native species ensures that the revegetation projects will also be a first step to regenerating the natural ecosystems that were present prior to clearing. Other programs, such as farm forestry, aim to plant trees for the purpose of future harvesting of their timber and are not part of the Bush for Greenhouse program. With other programs, there is a minimum area that must be planted and maintained. Bush for Greenhouse has not yet decided if this type of restriction will apply to landholders under the program. For trading purposes, it may be necessary to have a larger area to be more attractive to bigger investors.
If ratified, the Kyoto Protocol will begin its first commitment period in 2008 and end it by 2012. It is within this period that countries must actively seek to meet the goals agreed to at the 1997 Conference of the Parties 3, held in Kyoto, Japan. During this time, organisations that have to change their practices in regard to greenhouse gases will need to buy carbon sequestration credits or face making significant production choices to meet their required emissions targets.
The Protocol allows for partial abatement of greenhouse gas emissions through the purchase of sequestration credits during the commitment period. Therefore, it is not actually until 2008 that credits will be recognised by the Protocol. While any initial market may well be very different from an ultimate internationally operating market, it will allow investors the chance to assess the feasibility and limitations of the system and hopefully ensure a smooth transition when the commitment period begins.
There are several private companies already moving towards brokering of physical carbon credits in a bid to position themselves in the market early. These companies will provide valuable exploratory price and other information. They may also be a useful source of information for landholders wishing to get involved in a range of different activities outside the scope of the Bush for Greenhouse program.
Acknowledgements
Answers to the FAQs above were initially prepared for
the CRC in 2000
by ANU Summer scholars, Nick Baker and Carrie Deutsch.
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