Soil carbon named in Morrison Government’s top five priority low emissions technologies 

The First Low Emissions Technology Statement 2020 (LETS) was released on 22 September 2020. As part of Australia’s Technology Investment Roadmap, these low emissions technology statements will be tabled annually in Parliament. 

The LETS identifies five priority low emissions technologies:

1. clean hydrogen;
2. energy storage;
3. low carbon materials (steel and aluminium);
4. carbon capture and storage (CCS); and 
5. soil carbon.

While much of the Government’s focus and funding has been on hydrogen and CCS technologies, the inclusion of soil carbon in the top five priorities suggests an increased importance for carbon farming as part of Australia’s plan to reduce carbon emissions. 

We look at the proposals in the LETS for reducing the costs of soil carbon measurement, in order to remove barriers for land managers undertaking soil carbon sequestration projects. 

Soil carbon projects 

Soil carbon is the amount of decomposing plant matter and microbes in soil. Soil carbon projects remove carbon from the atmosphere by increasing the amount of carbon added to the soil and by slowing the rate of loss of carbon from the soil. 

To earn Australian carbon credit units (ACCUs) from a soil carbon project, it must be registered with the Emissions Reduction Fund (ERF). Requirements for this include that the project proponent has the legal right to claim the ACCUs, has obtained all interest holder consents, and is able to show that the project will introduce at least one new or materially different land management activity that is likely to result in an increase in soil carbon levels. As a sequestration activity, a soil carbon project is subject to a ‘permanence period’, requiring the soil carbon to be maintained ‘permanently’ for either a 25 or 100 year period. ACCUs may be required to be relinquished where there is a complete or partial reversal of sequestration before the permanence period ends. There are two approved methods for soil carbon projects under the ERF: 

• the measured soil carbon method, which is based on the direct measurement of changes in soil carbon stock over time;¹ and 
• the model-based soil carbon method, which uses default values to estimate the sequestration of carbon in soil.²

The Report of the Expert Panel examining additional sources of low cost abatement(King Review) identified that as at February 2020 there were 45 registered projects under the direct measurement method, but no uptake for the model-based method. Stakeholders reported that: 

• uptake of the direct measurement was obstructed by high measurement costs; and 
• rejection of the model-based method was due to the conservative nature of the model and the method’s eligibility restrictions. 

The King Review recommended establishing a scheme to subsidise the costs of directly measuring the abatement associated with certain types of project activities, particularly the sequestration of carbon in agricultural soils. 

LETS stretch goal 

To address these issues, the LETS sets a stretch goal for soil carbon measurement of $3 per hectare per year, in order to remove barriers to participation in the ERF and transform the economics of soil carbon projects for Australian farmers. 

This is a significant reduction on the current soil carbon measurements for ERF projects of around $30 per hectare per year.³

How will this stretch goal be achieved? 

A criticism of the LETS has been that the stretch goals for future technology costs don’t include time frames or detailed plans to achieve these. 

To meet the soil carbon measurement goal, the LETS advocates a “competitive challenge-based approach”, where industry and researchers put forward proposals for meeting the stretch goal. Listed as proposed options are:

• the expanded use of remote and proximal sensing technologies;
• improved national soil carbon datasets; and 
• the development of the next generation of soil carbon computer models. 

The LETS notes that the Government is also:

• progressing the reforms recommended by the King Review to incentivise projects and encourage greater participation in the ERF; and
• developing the National Soil Strategy.    

Proposed changes to ERF audit framework

Following the King Review, the Clean Energy Regulator (CER) has been consulting on proposed changes to streamline the ERF audit framework. These changes to the audit framework aim to reduce financial costs and administrative red tape for the carbon abatement industry, particularly for small scale projects, while still maintaining the integrity of the scheme.

The proposed changes under consideration include:

• Audit schedule adjustments: proposals have been made to allow proponents to:

1. more easily align the timing of audits across projects of the same method type; and 
2. apply to increase the reporting period for the initial audit report.

• Documentation: giving proponents increased accessibility to documentation submitted through the Client Portal. 
• Audit threshold adjustments: the current audit thresholds (based solely on annual average abatement amount) are applied to all projects across all methods under the ERF, irrespective of the relative complexity and risk inherent in individual methods. Proposals have been made for:

1. a risk-based approach to setting audit thresholds, which means that different audit thresholds and numbers of audits would apply to different methods types; and 
2. changes to the minimum audit requirement, including for a threshold below which no audits would be required, with the CER using GIS capability and external validation tools to ensure scheme compliance and integrity. 

• Audit scope requirements: proposals have been made for a risk-based approach, which establishes audit scope requirements specific to each method type. 

The CER has sought feedback on these proposed changes. There will be further rounds of consultation before any amendments are made to the Carbon Credits (Carbon Farming Initiative) Rule 2015, Carbon Credits (Carbon Farming Initiative) (Audit Thresholds) Instrument 2015 and the National Greenhouse and Energy Reporting (Audit) Determination 2009. 

More information about the proposed changes to the audit framework are available here.

For further information and discussion, please contact our Resources and Energy team.

¹ Carbon Credits (Carbon Farming Initiative— Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018

²Carbon Credits (Carbon Farming Initiative—Estimating Sequestration of Carbon in Soil Using Default Values) Methodology Determination 2015 

³ Reported at page 24 of the LETS, based on CSIRO estimates for land area of 300 hectares. CSIRO estimates that the current measurement costs would be lower for larger areas.