Tip:
Highlight text to annotate it
X
Thanks a lot for this kind of introduction and very good
morning to you, ladies and gentlemen.
As we all know well, agriculture is not required by
law to reduce its emissions under the Australian carbon
pricing scheme.
Through the carbon farming initiative, or CFI, farmers
and land managers had options to earn carbon credits by
reducing its emissions or storing
carbon forest and soils.
There are many technologies for [INAUDIBLE] abatement
which are technically feasible.
But for potential market uptake under the CFI, these
technologies also need to be economically viable, policy
compliant, as well as meeting the institutional or social
standards or goals.
Individual CFI project proponents are already doing
these sort of analyses.
But we also need some broader picture for the sector as a
whole to understand the CFI markers better and inform
decision making.
Today, I will present some estimates of potentials for
agriculture and other land-based sectors.
And it's beyond a project level, for
the sector as a whole.
While there's a lot of work to be done in this space, I will
focus on technical potential and economic potential for
livestock abatement.
And livestock is an important sector in the Australia's
emissions landscape.
But before I present these estimates, let me touch on the
CFI market itself, what I mean by technical and economic
potential, and also touch on what roles policies have been
playing or can play in promoting market uptake.
To be eligible for CFI credits, a participant must be
a recognised offset entity, the project must use an
improved methodology, and credits must be approved by a
clean energy regulator.
The clean energy regulator is to ensure that CFI credits
meet the integrity standards.
We'll hear more from our second speaker, [? Sharlene ?]
Thompson, on the CFI architecture issues and
opportunities for farmers and land managers--
also challenges and opportunities for
methodologies.
In relation to the CFI credits, they broadly fall
into two categories--
Kyoto-compliant activities-based credits, and
non-Kyoto compliant activities-based credits.
Examples for a Kyoto-compliant activity would be forest
management, and non-Kyoto would be soil carbon
sequestration.
Kyoto credits will contribute to Australia's internationally
agreed emission abatement target, or emission accounts.
And these can be sold both in the domestic compliance bus
market and voluntary markets, domestic or international.
Non-Kyoto credits can be sold into voluntary markets as well
as can be purchased by the government through the CFI
non-Kyoto carbon fund.
Kyoto credits are expected to fetch higher prices than the
non-Kyoto credits, largely driven by the market
conditions.
Also, the CFI credits markets are expected to be influenced
by the proposed linking of Australian market with the EU
emission trading scheme, as well as any applicable caps on
international [INAUDIBLE] and offsets that can be used by
domestic liable business entities.
Everyone, market participants and decision makers alike,
will be interested in final or realised abatement.
But to have a feel for the realised abatement or actual
market uptake, one needs to know what technology and
strategy, or how much of abatement are technically and
economically viable.
Technical abatement potential means abatement that may be
achieved by implementing technologies or strategies
purely based on their biophysical suitability,
applicability, and effectiveness.
For example, soil types or weather conditions can
determine technical potential of certain abatement
technologies such as carbon sequestration.
Economic abatement potential builds on the technical
abatement potential but only considers that amount of
abatement that can be achieved in a cost-effective manner.
As such, economic abatement potential will be smaller,
expected to be smaller, than the
technical abatement potential.
Obviously, the amount of cost-effective abatement
depends on the financial cost and benefits of uptaking
abatement activities.
Often, such measures do not take into account more complex
drivers of investment decisions, such as market
uncertainty.
Finally, realised abatement.
In addition to biophysical and economic constraints, it will
also depend on social and institutional settings, and
adoption decision process.
Non-financial factors, such as lifestyle, personal beliefs,
social values, can affect perceived benefits of new
technology and practises over existing ones, and they are
affecting adoption.
These non-financial or human factors tend to defer across
individuals and making our ability to forecast final
abatement rather challenging.
Continuing on with potential versus realised abatement,
there are three channels, at least three channels, through
which policies can influence final uptake or abatement.
For example, the Australian government, through the
climate changes fund, or CCRP, its successors, feeling there
is such gap, is providing me such funds to improve the
ability and effectiveness of new and existing abatement
technologies and options, which will ultimately
influence market uptake and actual abatement.
I'd also like to suggest that there's a need for portfolio
policies and measures targeting
the individual channels.
As I was suggesting, the climate [? changes ?]
programme, CRP, and its successor filling the research
gap, together with other research initiatives, are
improving the scientific understanding of technical
abatement potential.
Here are some estimates of technical abatement potential
for livestock and abatement strategies.
These have emerged from the climate changes programme as
well as other scientific strategies.
It's a complicated slide, I understand.
There are three aspects-- let me explain--
three aspects to this diagram.
The width reflects the applicability of a particular
technology and strategy and expressed as a proportion of
total livestock meat and emissions.
The height of a bar reflects scientific findings to date on
the range of effectiveness of the technology and strategy.
But there's another dimension, which is the position of the
bar on the horizontal axis.
And that reflects the expected time of deployment of a
particular technology and strategy.
To clarify further, let me consider the
green-stained bar.
It represents outcomes of the CCRP research on capturing and
using methane emitted from animal waste ponds at a
piggery or dairy farm, or a meat-processing plant.
The research has found that up to 98% of captured methane
from a covered animal waste pond can be flared, thereby
reducing methane emissions by that amount.
This is represented, as I mentioned earlier, by the
height of the green bar.
However, this abatement technology is directly
applicable to methane emissions from animal waste
management, using anaerobic lagoons, which are about less
than 3% of total livestock methane
emissions in Australia.
And that is reflected in the width of this green bar.
And the technology is very well proven and ready for
immediate market uptake, and hence considered a short term
technology.
In fact, this technology has been commercially operational
under the CFI, and we'll hear more about this technology and
aspects of its on-farm commercial operation from our
third speaker, [INAUDIBLE], later in this session.
Another technology that holds significant technical
potential involves diatreme [INAUDIBLE]
as represented by the light blue bar in the slide.
This bar represents outcomes of cc a art research
investigating the potential of a range of free types and
dietary supplements involving oils and fats, secondary
components, such as [INAUDIBLE], forests such as
tropical legumes, or crushed wheat, or corns.
Diet can affect the activity of methane-producing
microorganisms the rumen, and, in turn, methane emissions
from ruminant livestock.
And we're going to go through a rest of the bars and
estimates individually, but I'd just like to note that
livestock abatement strategies broadly target methane
emissions from enteric fermentation and animal waste.
If you're interested in further details on this
technology potential of various abatement technologies
and strategies, I would welcome you to read ABARES'
technical report.
It's called Cost and Potentials of Agricultural
Emissions Abatement in Australia.
It's available in our website.
The report also includes estimates of technical
potential of abatement technologies and strategies
targeting nitrous oxide emissions from soils as they
are emerging from the scientific research.
In our cost-effective analysis, that is, our
economic abatement potential analysis, we have also
considered, we have just positive three technologies
for methane emissions reduction in the livestock
sector which are likely to have CFI methodologies in our
judgement by 2020.
Targeted breeding technology is very well proven, but it is
difficult to credit, in our judgement again, given the
challenges in verifying the purpose of creating--
whether they are to reduce emissions or to increase
productivity.
And hence we haven't considered in our analysis.
On the country, anti-methanogenic vaccines and
emerging technology innovated to fight methanogenic bacteria
in the Rumen, we have
considered this in our analysis.
It's expected to be applicable to all ruminant animals except
a portion of the extensive properties.
Nonetheless, the emission reduction potential, the
technical abatement potential, is rather uncertain for a
vaccine at this stage.
To capture a wide range of possibilities, we have assumed
three technical abatement potential--
5% reduction, 15% reduction, and 25% emission
reduction per animal.
Our estimates of economic abatement potential is based
on ABARES' farm size model.
It models about 200, what we call model farms, covering
five different livestock activities.
Using our model, we have estimate an economic variable
we called threshold carbon price, based on the discounted
value of net profits, or net benefits over the project
life, over a particular project life.
It's very well known in economic analyses, called Net
Present Value or NPV.
One way of presenting the economic abatement potential
is what is very well known in the literature called marginal
abatement cost curves, or MAC curves.
The estimated MAC curves are showing the amount of
economically viable abatement in the livestock sector based
on the technologies we have considered.
The amount of abatement are shown in this diagram, and the
vertical axis is measured in terms of million tonnes of
carbon dioxide equivalent.
So methane is converted into carbon dioxide.
And these abatements are plotted
against the carbon price.
And the standard expression is measured in dollars per tonne
of carbon dioxide equivalent, again.
And you can notice some stakes in these graphs.
And there are two graphs here, one corresponds to the year
2020, another one 2030.
And these [INAUDIBLE]
are emerging because, in our analysis, certain abatement
technologies are becoming cost effective for certain farms at
certain carbon prices.
Again, this is a preliminary piece of work.
But some useful insights we can draw from these.
For example, the MAC curves here show a positive level of
abatement at a low carbon price due to the economic
viability of methane destruction
in large-scale piggeries.
Although the economically-viable abatement
at low carbon price appears to be modest, it is expected to
increase over time for given carbon prices.
And that may arise due to increased efficiency of
abatement technologies or strategies, as well as reduced
project implementation and cost, for example, through the
market innovations, including benefits for market
aggregators.
Here, I would like to emphasise the uncertainties
around estimating technical and economic potentials of
abatement technologies and strategies.
The set of marginal abatement cost curves here highlight how
our estimates of economic abatement potential varied
with the assumed technical abatement potential of vaccine
and how it varied over time.
We have assumed three technical abatement potentials
for vaccine--
5%, 15%, and 25% of emission reduction per animal.
The assorted lines represent the economic abatement
potential corresponding to these three assumed technical
abatement potential or vaccine and for 2020.
And the dashed lines represent marginal abatement cost curves
corresponding to the 2030.
And the two green lines in the middle, they are the same as
we saw before.
To conclude, there are many abatement strategies available
to farmers and land managers that, if implemented, will
significantly reduce
Australia's agriculture emissions.
However, this abatement technology must be CFI
eligible to earn CFI credits.
And we also need someone aggregate estimate of
economically-viable abatement potential to understand CFI
markers better.
Our estimates of economically viable abatement presented
here only focused on livestock abatement and selected
technologies.
These estimates seem to suggest substantial reduction
in technology cost will be required for realising
significant livestock abatement opportunities.
Our estimates, as I mentioned, our preliminary.
Importantly, we haven't taken into account any possible
benefits from market innovations, such as
aggregators, or various social and non-financial realities
which may affect the update of abatement technologies and
strategies.
In view of all these, I must caution that our estimates
should not be treated as forecast.
Going forward, we need to continue our efforts in
enhancing the understanding of technologically viable
options, their economic viability, ways to dealing
with non-financial issues, these all our affecting actual
adoption of abatement technologies and strategies.
Obviously, a lot of work ahead of us.
Once again, I would invite you to ABARES' report, available
on our website, and finally, I would like to thank my
colleagues at ABARES for undertaking research for this
report, my DAFF and DCC colleagues, who have
contributed at various stages of the work, and also provided
very useful comments on the report.
Thank you.