Carbon Farming Update

2013 to now - carbon improvement opportunities

Carbon farming has made a big entrance to the Australian agricultural industry in the past decade, with more than $2 billion tied up in projects across the country.

While it has been controversial, the carbon industry has developed a lot since its creation ten years ago, with ongoing reforms and dozens of new methods created to capture carbon. The industry’s peak body, the Carbon Market Institute, estimates $2.09 billion is tied up in more than 1100 projects across the country.

With emissions targets being set by agriculture and other industries, demand for carbon capture is likely to stay around for a while.

The Carbon Farming Timeline to date

To understand the current AgCarbon environment, it is important to understand how the system has developed. The following provides an overview of the establishment of the AgCarbon market and regulatory system.

2013 Abbott government dumps carbon tax

A change of government in 2013 meant a change of climate policy, with the Tony Abbott-led Coalition Government dumping the carbon tax and introducing the Emissions Reduction Fund (ERF).

The government also set up the “safeguard mechanism”, which sets a baseline for big emitters and requires them to offset if they not meet their target.

The $2.55 billion fund was set up with three key components;

1. A voluntary scheme where capturing carbon using an approve methodology could earn Australian Carbon Credit Units (ACCUs). ACCUs represent one tonne of CO2 equivalent.

2. A process for the government to purchase credits.

3. The ‘safeguard mechanism’ where companies exceeding a threshold of emissions were forced to offset with ACCUs.

2014 Large buy ups in the mulga lands start

With the government framework in place, carbon developers started buying and contracting large tracts of land in the mulga lands Western Queensland and New South Wales.

Projects were started across the country, but there was a major concentration in the mulga with developers using two main methodologies. ‘Avoided deforestation’ where landholders could choose not use a clearing permit to regenerate a forest and ‘human-induced regeneration’ where a change of management regenerated a forest – in this case it meant de-stocking.

The onset of carbon farming in the area was controversial, with many of the locals complaining about absentee landholders, properties being left in poor repair and people leaving the region. Others saw it as a reliable income during some uncertain years.

2015 Paris Agreement reached

The COP21 summit in Paris saw 196 countries agree to work together to drastically limit human induced climate change. The goal was to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.

The Paris agreement endorsed carbon trading as an integral part of reducing warming and accounting mechanism was set up to ensure credits were not counted twice in carbon inventories.

2015 Agriculture-based methodologies start

While the areas of Western Qld and NSW had been operating for a number of years using vegetation-based carbon farming methods – agricultural systems started to become a part of carbon capture in 2015.

The Clean Energy Regulator released a soil carbon method, where a baseline measurement was taken, management changes occurred and a second measurement was taken to determine if carbon credits could be awarded.

Soil carbon is a big part of the current carbon farming push, but the relatively under-studied field has the science community divided. Some have doubts whether soil can hold carbon for the long-term and most say more data is needed for an answer to that question.

Either way, landholders have been warned to be careful when trading soil carbon credits because the carbon needs to stay in the ground to fulfil contracts.

A herd reduction methodology has also been created where producers can reduce herd emissions and claim credits for the efficiencies.

2019 Three major cattle companies receive herd reduction credits

After four years of companies being able to claim ACCUs for making their herds more efficient, three major players in the northern pastoral industry have received credits for reducing methane emissions. According to the ERF register, Paraway Pastoral Company, Australian Agricultural Company and Consolidated Pastoral Company have all received credits using the herd reduction method.

Paraway was the first and had attempted to lead a project which aggregated smaller landholders together as one project, with the aim of reducing audit costs and allowing smaller producers to claim credits. But it was unable to receive the funding it was aiming for.

Scale has been highlighted as a big issue for the herd reduction method, with costs to measure emissions needing a large number of credits for it to become viable.

2022 Albanese Government announced ERF review, increases climate ambition

Former energy minister Angus Taylor announced changes to the ERF in 2022. He allowed companies to make an exit payment from government contracts and sell credits on the open market – which plummeted ACCU prices overnight.

Further pressure was put on the carbon market when Professor Andrew MacIntosh, who is the former chair of the government-appointed watchdog that oversees the Emissions Reduction Fund’s methods, claimed the majority of Australian credits were acquired using dodgy methods.

The complaints became an election issue, with the newlyelected Labor Government announcing a review of the methods highlighted by Professor MacIntosh. Former chiefscientist Professor Ian Chubb headed up the review.

2023 Chubb-review handed down with more reforms to come

After much anticipation, the Chubb-review was handed down in January 2023 and ultimately gave the carbon farming methods of concern, a clean bill of health.

The Federal Government supported the review in-principal and plans to pass it through parliament.

A new methodology allowing producers to run multiple projects in one spot, called the integrated farm methodology is expected to be ready later this year. The new integrated farm method will likely allow several projects to run in one area – for example producers could have soil carbon, vegetation and herd reduction projects all running as one.

Two strategies for cattle producers to manage carbon and improve productivity

The two strategies with most application in cattle are firstly, increasing soil carbon and secondly, reducing methane emissions.

Increasing soil carbon – a soil carbon project

A soil carbon project involves removing carbon from the atmosphere and storing it in soil primarily by increasing the amount of decomposing plant material and microbes in the soil. This is done by setting up specific project management activities and management actions that change agricultural soil conditions to improve crop and pasture growth.

The stored carbon is called ‘carbon stock’. Some project activities add extra carbon to the soil through increased growth, and therefore a greater volume of pasture and other plant-based matter, called ‘biomass’, in paddocks. Other activities reduce the rate at which carbon is removed from an area, and therefore the rate at which soil carbon is decreased—for example, projects that retain stubble. The resulting net reduction in greenhouse gas emissions is termed the ‘net abatement’.

Soils with higher organic matter are more productive, cycle more nutrients and hold more water, making them far more resilient in future climates. It is also therefore in our own interests to maximise soil organic matter in our pastures, which then has the co-benefit of a drawing more carbon dioxide out of the atmosphere. Fortunately, good pasture fertility, good species composition and good grazing management all contribute to maximising organic matter in our pasture systems.

As a sequestration activity, that is, an activity that stores carbon in vegetation or soil, a soil carbon project is subject to a ‘permanence obligation’. This means the modelled soil carbon must be maintained ‘permanently’ (currently either 25 or 100 years). If a fire or other disturbance occurs in the area during the project, or project activities stop, causing a decline in the amount of carbon stock, the land and its soil must be managed to allow the carbon stock to return to previously reported values.

Soil carbon is mainly correlated with rainfall in Australia, which means you may have plenty today, after our current la Nina, but if we go into a dry period the soil carbon you sold is no longer there.

Reducing methane emissions

It should be recognised that methane is the largest form of energy loss from livestock production systems, and it should be in our own productive interest to minimise this loss. In a typical livestock production system, methane from rumen fermentation makes up more than 75pc of all the emissions.

The recent COP26 meeting in Glasgow has now increased short-term ambition, with the new Global Methane Pledge aiming to reduce methane by 30 percent by 2030. While governments have been tardy in their responses, we have seen many multinational agri-business companies set targets for their supply chain starting in 2030.

Activities that can reduce methane emissions

Efficiency – there are simple things that livestock producers can do to improve the amount of methane per unit product, including reducing unproductive animal numbers, improving herd health, improved weaning rates and reproductive efficiency. All of these can reduce the methane produced by at least 10pc.

Better use of legumes in our pastures is also critical to reduce our reliance on imported protein or synthetic nitrogen fertilisers, but also recognising that some of these legumes (e.g. Vetch, Lotus, Sulla, Leucaena, Desmanthus) have a direct effect on reducing methane in the rumen by up to 15pc.

Oils and tannins – significant research has also been conducted on diet supplements that reduce methane, including oils (e.g. cold pressed canola meal), tannins (in some forage legumes), and some commercial products on the market that are based on essential oils (e.g. MOOTRAL and AGOLIN). These supplements can reduce methane by as much as 20pc. However, the challenge in livestock systems would be how to practically supplement grazing animals. This is an area of active research right now, but could include pelleting of the active ingredient with a high quality forage, water delivery or a slow release bolus technology.

Breeding – there is obviously also potential to breed animals that produce less methane (residual methane production). While these gains are initially slow, perhaps only achieving 1pc less methane per year, this could mean 10pc less methane in a decade as a permanent reduction in methane.

Methane oxidation – just when we think that all the options are inside the animal, the zero emissions livestock production (ZELP) company has produced I wearable device that hangs around the animal’s neck that can break down up to 50pc of the methane as the animal breathes out.

Next 1 to 5 years – strategies that are emerging from research in the next 1 to 5 years, would include a methane vaccine (achieving around 20pc less methane) and at least two methane inhibitor products (Asaparagopsis/ Seaweed and Bovaer®/3-NOP), both of which have shown to reduce methane by as much as 80pc in confinement studies. While the methane vaccine is a logical solution for more extensive grazing conditions, the use of methane inhibitors is still limited by practical delivery methods under grazing.

Early life programming – ultimately where the research should aim is a technology called early life programming, based on the concept that human gut microflora are a product of our upbringing, and the same appears to be possible in the rumen. A recent study showed that cows and their calves supplemented with a methane inhibitor during weaning, produced around 20pc less methane for the next 60 days without the supplement. This raises the prospect of intervening once in a generation with subsequent animals being low in methane production.

Future Carbon Opportunities in Wagyu

There is no doubt now that all sectors of the economy will need to demonstrate carbon neutrality by 2050. Clearly in the short term, the livestock industries will make heavy use of our own carbon offsets in trees and soil, but by definition this has a limited contribution to long term given there is a maximum limit of carbon that can be stored in soils and the area planted to trees.

While initially perceived as a threat to the livestock industries, the more proactive response by research has started delivering tangible solutions that mean that carbon neutral livestock production is quite possible within the next decade.

Methane reducing feed additives, namely seaweed asparagopsis and 3NOP or Bovaer, present many opportunities to the Wagyu industry. Feedlots are the easiest place to use the products, with several trials underway and research dollars being pumped into them.

There are still many questions to answer about palatability, safety and consumer acceptance. Cost is the other issue, which ranges between $0.4 and $2 per head at this stage. Companies behind the products have submissions in to make them eligible for carbon credits, which may offset the upfront cost.

Ultimately, having ERF methodologies for feed additives that recognise reduced methane emissions in cattle can most greatly benefit the Wagyu Sector, with Wagyu cattle spending significant time exposed to supplementary feeding or feedlotting throughout their lives.

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