Innovatia

The decarbonisation of electricity and the electrification of industry and transport can ac- count for about two-thirds of the reductions to net zero global emissions, while land use, ag- riculture and food transformation can deliver most of the rest. A recent research project from the US Acad- emy of Sciences suggested potential for 10 gigatonnes sequestration per annum glob- ally and one gigatonne from US landscapes over the period to mid-century during which the world needs to achieve zero net emissions. Australia should have sequestration potential comparable to that of the United States, and the low agricultural value of most Australian land reduces the opportunity cost of manage- ment for carbon sequestration. It is of national economic consequence that we undertake the research to define the scale of the opportunity and the means of unlocking it. Australia has two carbon-capture advantages over other nations. The first is our exceptional- ly large endowment of woodlands, forests and other land relative to population. The second is our expertise in land-based industries – from agricultural and forestry science, through agri- cultural and resource economics to public and private knowledge and institutional arrange- ments supporting commercial success. The innovative process of transplanting Euro- pean-style agriculture to a strange and unpropi- tious physical environment required extensive research, innovation and education from the outset. In 2008, I brought into the mainstream discussion some early work by the CSIRO and state departments on the immense mitigation potential of changes in land use. Nurturing veg- etation on dry, degraded mulga country where

rainfall was spasmodic in Queensland and New South Wales could be transformative. The 2011 Review took the land use mitiga- tion story further, advocating inclusion of ag- ricultural offsets into the emissions trading scheme through what became the Carbon Farming Initiative (CFI). These arrangements were carried into the government’s Emissions Reduction Fund (ERF) – a clunky, truncated and less adequately funded version of the CFI. It required resources from general revenue, rather than from sales of emissions permits. Nevertheless, Abbott’s ERF kept alive the sale of offsets as a way of providing incentives for farm sequestration. The arrangements devel- oped by the Clean Energy Regulator showed how an offsets scheme related to land use could work, and that there was strong private response to incentives. The Carbon Farming Initiative (CFI) allowed farmers and land managers to earn Australian Carbon Credit Units (ACCUs). Each ACCU repre- sents one tonne of carbon dioxide equivalent stored or avoided by reducing greenhouse-gas emissions. The ACCUs could be sold to clear obligations under the carbon-pricing rules. In July 2014, the carbon price was repealed. On October 31, 2014, the new Coalition govern- ment’s climate strategy, the Direct Action Plan, was passed, which established the Emissions Reduction Fund (ERF). The shift was made from a carbon price to government-purchased abatement, and an expanded CFI, moving eligi- ble projects beyond the land sector to include energy and transport. In the ERF, $2.55 bil- lion was made available for direct purchasing of abatement under the reverse auctions, of which $226 million remained in May 2019. The

government’s Climate Solutions Fund was an- nounced on February 25, 2019 to appropriate an additional $2 billion from 2020–21 onwards to fund auctions to 2030.

“Funding and research into Australian agriculture and the need to reduce emissions has not been prioritised.”

Preventing emission reduction displacement To ensure these emissions reductions are not displaced significantly by a rise in emissions elsewhere in the economy, a safeguard mech- anism requires Australia’s largest emitters to keep net emissions below baseline (historical) levels. The voluntary crediting and purchasing mechanism applies to around 140 businesses that have direct emissions of more than 100,000 tonnes of carbon dioxide equivalent a year. Projects that meet the requirements under the various methodologies can generate ACCUs for emissions reductions and sell their ACCUs on the voluntary market, or bid to sell them to the government in biannual auctions run by the Clean Energy Regulator. Over the life of the scheme, the average price per ACCU contracted has been $11.92, with individual auction aver- ages ranging between $10.23 (April 2016) and $13.95 (April 2015). There is a way forward that does not violate the current government’s electoral commit- ments. The first step would be to make the

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