Saturday, November 29, 2008

A Carbon Con (Part 2)

In the interests of fairness Ben Keogh did reply to my last posting over at The Land, blatently copied and pasted is his reply:

Dear spotted quoll, The CMAs are paying 800/ha for revegetation for biodiversity and environmental outcomes and taking 50 to 100% of the carbon rights. Under the proposed treatments of forest sinks in the ETS, any loss or harvesting of the trees will be treated as an emission and the landholder (or the CMA) will need to pay back the losses. Unlike a crop where you get paid on harvest under this scenario you will be charged to harvest. It should be up to the landholder if they want to get into carbon trading not have the decision made for them by another body.
I am objecting to a) the price being paid; b) the carbon rights being linked to funding that was provided for environmental outcomes; c) the lack of information provided by the CMAs in regard to liabilities, incomes and other options; d) the CMAs restricting the ability of the private industry to operate by engaging in carbon trading; e) the CMAs and other government agencies undermining the private sector by using data, information and other resources to engage in carbon trading and restricting the access to this information from other users; d) the surreptitious methods of the CMAS to get at the carbon; and finally e) the linking of the carbon rights to PVPs and the way the CMAs have told me directly that if the client does not sign the carbon over under the PVP they will not get the PVP.
The taxpayers do get a return for the activity in better water quality and environmental outcomes (which is what the money was meant to be for in the first place), furthermore whether the landholder or the CMA opt the plantation into the ETS or not the Australian Taxpayer will still benefit as the increase in the national forest extent will be reflected in our national carbon accounts that will reduce our obligations under the Kyoto Protocol, thus saving the federal government (taxpayer) money. I urge you to take the argument you have made to the landholders of Australia and see if they think it is fair to get 9,000 dollars for something worth far more, so what if they get some money for revegetating their land, they take on the work and under the ETS the liability, why should the government funded and landholder funded CMA get such any return at all for something they are obliged to do anyway.
You talk of it as a crop, what happens when Agriculture is covered are the CMAs going to say OK if you plant develop your land for a new crop and it sequesters carbon we will only give you approval for said development if we get half your carbon rights for a pittance. I can give other examples where the CMA has stolen 100% of the carbon rights even though the landholder put in 25% of the project cost. The final design of the ETS is not even out yet and the CMAs have shown their greed and naivety in this matter, this was plain and simple opportunism. I have spoken to a number of the CMAs involved and the project managers of the concept and the best I could get out of them is that the reason for this action was that they see it a s a bonus for the CMA. No consideration of the landholder with whom they are meant to work to better the environment. The intricacies of the carbon sequestration market are too involved to explain in detail in this forum but I have enough experience and understanding to feel that it was necessary to speak out on this issue in the interest of landholders everywhere.
A final note is that I met with the chairs of the CMAs to present an off the shelf product from a not for profit federal government backed organisation for carbon trading and sequestration management that involved CMAs and paid them a fee for service. The CMAs informed me that they were not interested as they believed they could make more money doing it themselves. The Victorian CMAs have investigated the issue and are not pursuing the go it alone approach but are looking for other methods and concentrating on core business. There are also a number of CMAs in NSW who are not involved and have chosen a different path. Whilst I feel for the CMAs and their difficulty in getting funding, there is no need to gouge farmers an use their position of authority and regulation to force unfair deals on landholders. If you wish to discuss this in more detail please contact me outside of this forum.
Ben Keogh Managing Director Australian Carbon Traders

The "final note" does say a lot doesn't it, CMA's shouldn't be involved unless they're with the scheme I'm promoting. It would be reasonable to assume the "off the shelf" product he's promoting would be CarbonSmart a scheme which gives a case study of a landholder getting a whole $80/ha/yr.

Just to let you in on things I was involved with a fairly major NGO that was setting up it's own carbon sequestration scheme and have seen some good analyses of various schemes that have been put forward, they're probably still 'commercial in confidence" so I won't go into details (even if I could find where I've put them). Now one of the big issues (of which there are many) in the whole carbon sequestration thing is how do you actually measure your carbon? You could use the Government models which are quite conservative or you could develop your own using destructive testing which is where you rip up an area of vegetation, roots and all, after taking various measurements take them to the lab where the carbon content is measured, you then use this to calibrate your measurement system.

Your method has to be signed off and accredited by the government, it is a long and expensive process but it does give you more accurate (and higher) measurements than the government modelmeaning you can claim more carbon per hectare than those using other methods and hence get a higher return. How your carbon is measured is only one of the issues for people wanting to get into it, so I do advise anyone interested to do their background reading, do the maths, ask questions and don't rush into anything.

Mind you tree planting's going to do three parts worth of stuff all to reduce greenhouse gasses but there are many other benefits and if someone wants to give you money to grow them then why not?

Poor fellow my valley!

As mentioned previously Sydney Gas has been drilling around the Paynes Crossing area, between Broke and Wollombi for coal seam gas. Of course at the time they were telling people not to worry as they were only "exploring". Now that they've announced finding enough gas to keep Sydney going for the next 150 years I'm presuming we can start worrying now? Apart from the environmental concerns yet again resources are taken from the Hunter to feed Sydney.

And of course if there is that much gas there does that mean the Queensland Hunter Gas Pipeline has just become a massive white elephant?

Valley's $10bn methane gas find
29/11/2008 4:00:00 AM
AN estimated $10 billion worth of coal-seam methane gas or enough gas to supply Sydney for the next 150 years has been found beneath the Hunter.
The discovery of the untapped resource, which has the potential to generate hundreds of jobs, was announced at the Sydney Gas annual general meeting this week.
The find has exceeded the company's expectation and is seen as one of the most significant Australian gas discoveries in recent years.
It follows 12 months of core hole drilling in the region by Sydney Gas and its partner, AGL Energy.
The company believes 708 billion cubic metres of gas, or 25,000 petajoules, are contained in coal within an area from Paynes Crossing to Scone.
It estimates 10,000 petajoules can potentially be extracted from the area. By comparison, Western Australia's North West shelf contains an estimated 33,000 petajoules of extractable gas.
"We've broken the exploration area into 10-kilometre by 10-kilometre grids and we've looked at the geology in each of those grids," Sydney Gas chief executive Andy Lukas said.
"We've estimated how much gas we expect is in the coal, the quality of the gas and whether there are any faults nearby."
Mr Lukas said the company was aiming to supply 50 per cent of gas to the NSW market beyond 2015.
"The 30-year contract to supply Sydney is about 2000 petajoules," he said.
"On that basis we will certainly be able to supply Sydney and have some left over for power stations and export.
"Having a gas resource so close to the Sydney and Newcastle markets provides an excellent opportunity for the company."
Coded maps indicating the "sweet spots", or the areas believed to contain the richest resources, were presented at the meeting.
The company will establish production pilot plants across the region to demonstrate the viability of the resource.
"Provided the permeability is such that the gas will flow, we would normally expect to get about half out," Mr Lukas said.
"Our first aim is to get 500 petajoules of reserves then do it in 500-petajoule steps."
Gas energy is seen within the energy sector as a transition fuel between coal and renewable energy such as solar.
When burnt, gas produces half the emissions coal produces.

Saturday, November 22, 2008

A Carbon Con?

It seems a certain marsupial has been causing a little mischief this week on "The Land" website, have a read of this down to the comments section:

A carbon con?
14/11/2008 4:00:00 AM
Farmers are being warned not to sign over their carbon credits before they understand the true value of the product and the liabilities they may incur by signing contracts.

Ben Keogh, of Australian Carbon Traders, is hot under the collar about a clause in the vegetation agreements put out by several Catchment Management Authorities (CMAs) in NSW and Victoria, which claims for the CMA all or half the carbon credits that arise from the contracted revegetation work.

“One landholder I know of was offered $800 a hectare to revegetate by his CMA, on a site that will return about 550 tonnes of CO2 equivalents during its lifetime,” Mr Keogh said.
“Break that down and the CMA is offering $2.90 a tonne for the carbon – and they are using government money that was put aside for biodiversity and water quality projects.

“They could sell those carbon credits on the open market for up to $30 a tonne.

“When the CMA is proposing paying a fraction of the market price, with no mention of liability if the carbon is lost, and without knowing what they will actually do with the carbon rights, some big questions hang over their intentions.”

Mr Keogh also warned farmers about signing over carbon rights without understanding the implications if agriculture is “covered” under the Federal Carbon Pollution Reduction Scheme (CPRS) at a later date.

Farmers who commit their carbon, or land, for a low price now may find themselves obliged to buy in carbon if agriculture is later included under the CPRS, and the farm has to account for its emissions.

That could lead to farmers having to buy back carbon from those they sold it to earlier in order to balance the CPRS books.

Newest first Oldest first

The Great Carbon Con!
Posted by BigD on 14/11/2008 6:22:28 AM

All on the basis of bogus "science".
Posted by Ted O'Brien. on 14/11/2008 7:36:37 AM

I'd love to know how Ben Keogh does his calculations, if farmers are getting $2.90 per tonne after the CMAs take their share then without the CMAs they'd be getting $5.80/t and if the brokers are selling it for $30/t where does the extra $24.20/t go to? A "con"? Well yes maybe, but it doesn't look like the CMA's are the ones doing it. I've looked at a number of schemes over the years and the advice I give is do you research and calculations thoroughly a lot of schemes are nowhere near as good as they market themselves.
Posted by Spottedquoll on 15/11/2008 5:00:41 PM

Dear Spottedquoll, The calcualtions are based on what the CMA is paying for revegetation in return for the carbon rights. The agreements have no mention of cosats or liabilities, access requirements or transaction costs, etc. Brokers usally get 5 to 10c per credit. The extra money would go to the sellers of the carbon or the owners of the Carbon rights, in this case the CMAs. If you read the article what I am urging landholders to do is to ensure they have done their homework and ensure they know what they are signing up for. What I object to is the CMAs tying carbon rights to PVP and reveg activities without fully recognising the input of landholders and operating by stealth. I agree entirely that there are a lot of schemes out there that are nowhere near as good as they seem and this is another one.
Posted by ben keogh on 18/11/2008 3:27:11 PM

Thanks for that Ben, So what you're saying is the CMAs are paying $2.90 per tonne for their (potential) share of the carbon up front and the landholder still has 275 tonnes to sell on the open market? So over time the landholder could still get $9000/Ha (from his sales plus the CMA "pre-purchase")? And this is only one particular case I'm aware of CMA payments for some revegetation projects going far higher than $800/Ha. The other point is is should taxpayers money be used to finance (or part finance) a crop (which essentially it will be) and taxpayers not get any return for it?
Posted by Spottedquoll on 19/11/2008 7:46:48 PM

Note that the CMA's "could" sell the carbon at $30 per tonne, no doubt that does depend on whether anyone wants to buy it at $30/tonne. Hell they "could" sell it at $50/t, $100/t etc it all depends on what the going market rate is, something Mr Keogh doesn't mention.

This $30 a tonne sounds great but honestly how much does the grower actually get? You can't just go out and sell the rights to your carbon, it's quite a long process to get it all set up and accredited you need to insure that the carbon will be in place for the next 130 or so years, you need to have a system in place to measure the carbon you have and you need to have some sort of insurance against flood, fire or anything else which will reduce the carbon you've guaranteed you've locked up. This insurance is generally in the form of putting aside a proportion of your carbon for just such a contingency, I believe that it's around 30 percent. It's a bit of a pain for the individual to do it so it's best for a company or co op to put a scheme together and pool carbon from a wide area administer the scheme split the profits (no doubt there's many more models than that but I really couldn't be bothered checking into all of them or going through the numerous documents I've gotten on the subject over the past few years - some of which may still be "commercial in confidence").

Now Ben Keogh is the manager of Australian Carbon Traders and has worked with Landcare Australia Limited to set up their CarbonSMART Scheme. According to their site CarbonSMART basically pools the carbon in their scheme, sells it and pays landholders 60% of the sale price.

So how much is this 60%? According to their case study the landholder "could" recieve $80 per hectare per year, which is, well, a pretty low return, it may just cover the cost of maintenance but I doubt it would cover the cost of establishment.

I suppose in this case I'd be more than happy to take $800 per hectare to revegetate it then split the profits rather than pay for it myself then get $80 per hectare for it. It all tends to make Ben Keoghs objections quite interesting doesn't it?