SPACIAL SCIENCES INSTITUTE PRESENTATION Melbourne 17 September 2008

1. SPACIAL SCIENCES INSTITUTE PRESENTATION Melbourne 17 September 2008

2. A CARBON MARKET • Australia’s Carbon Market will commence in 2010; • There will be easing of entry for some eventual participants; • Farming entry is postponed until 2015; • Petrol is offset for 3 years; • Everyone else – fasten your safety belts!

3. WHAT’S THE HURRY? • Australia’s emissions are continuously rising; • The Kyoto honeymoon is over; and • There has been a massive turnaround in public opinion.

4. AUSTRALIA’S EMISSIONS ARE RISING DESPITE: • the end of land clearing • industries moving offshore • permanent drought; and • rising petrol price

5. EU-15 projected progress towards Kyoto Commitments

6. THE HONEYMOON IS OVER • Australia received preference at Kyoto • 2008 – 2012 target is 108% of 1990 emissions • 2013 – 2017 target likely to be less than 90% of 1990 level

7. MASSIVE TURNAROUND IN PUBLIC OPINION Because of: • Permanent drought; • Rising sea levels; • Unprecedented storm damage; and • General uncertainty and fear of the unknown.

8. “Millions at Risk”

9. HOW THE MARKET OPERATES • Controlled market • Permits to be bankable • Rules of supply and demand • Effects all goods and services • Present focus on energy prices • Estimated prices $40 - $180 / tonne The reality is a little different

10. THE IMPACT OF PRICE ON COSTS

11. 3 Types of Impact Direct Impacts Indirect Impact Market Effects The energy purchased- gas, petrol, coal rises in price Materials produced with energy rise in price Alternate uses for materials drives higher prices

12. Direct Impact Electricity (at $40 a tonne) Victorian from Brown Coal: up 6c kwh Tasmanian and Snowy: no change On a base price of 2c kwh possibly 3x at base

13. Direct Impact Gas at $40 a tonne Victoria probably about 25%

14. Direct Impact Liquids (at $40 a tonne) Petrol up 10c per litre Diesel up 11c a litre LPG up 6c a litre

15. Indirect Impact Construction Steel up 20% Concrete up 12% Plastics HDPE up about 13c kg 6% Glass Up 15% Aluminium Up 30% (maybe)

16. Market Impact Trees “soak up” carbon CO2 Plantations planted after 1990 can claim emission permits What will a company in Timber pulp or paper do if returns from selling credits at $40 each delivers an estimate annual return (per hectare) of $2,000 from fast growing eucalyptus perhaps $200 from sale as timber or pulp Therefore Timber Pulp and Paper (packaging, newsprint) will rise from market effects

17. OPTING IN – OPTING OUT • Tree growers can opt in to Carbon Trading • Tree growers can opt out and sell timber products • Opting in – long term obligations • Opting in – higher prices but uncertain duration • Opting out – market forces to drive prices up • Opting out – alternatives will become competitive

18. THE SIGNIFICANCE OF EMBODIED ENERGY

19. Heating Construction HWS Materials Cooling Appliances Maintenance Lights Electricity Gas Solid Fuel GreenhouseGases Embodied Energy Operating Energy

20. Indirect Energy Direct Energy Building equipment Energy for Brick Kiln Extracting raw material Transporting to factory Refining fuel Running the business Building offices Embodied Energy - How much energy in a brick?

21. What is Embodied Energy “The energy, the cost of which (however small) eventually finds its way into the cost of a material or a thing that is made with materials, constitute collectively the embodied energy in that material or thing.” Ross Blair 2008

22. Embodied Energy & Greenhouse Gases • Embodied energy is energy from all sources • Greenhouse emissions vary by source • Greenhouse gases (CO2 only) vary from 60 kg/MJ to 150kg/MJ • Embodied Energy = 37 years Operational Energy

26. Petrol 15,000km $3,353

27. Hidden Factor - refurbishment

28. Some Buildings will be Lemons Either use too much energy or too energy intensive to refurbish

29. CARBON SINKS CARBON FARMING

30. CARBON OFFSETS • Emission Permit certifies 1 tonne – CO2 in Carbon Sink • One tonne CO2 to be retained – 100 years? • Carbon Sink = Kyoto Forest, Geosequestration, Land Use Change • Needs legal registration of a ‘right’ • Issues of fraud, mistake and verification • Australia’s Carbon Trading advantage

31. FORESTRY RIGHTS ACT 1996 – FOREST PROPERTY RIGHTS • Enables separate ownership of Land and Forest Products • Requires a Forest Property Agreement • Forest Property Agreement is noted on Certificate of Title • Creates ‘shared’ occupancy – occupiers’ liability issues • Adds a further dimension to space • Enables separate trading and mortgaging of forest products

32. FORESTRY RIGHTS ACT 1996 – CARBON SEQUESTRATION RIGHTS • Necessary as legal foundation for Emission Permits • Enable separate ownership of land/forest property/carbon sequestration rights • Owner – right to commercially exploit carbon sequestered in trees • Need to retain growing trees – 100 years? • Four assets • Land • Forest Property Rights • Carbon Sequestration Rights • Emission Permits

33. FORESTRY RIGHTS ACT 1996 – ENVIRONMENTAL OUTCOME RIGHTS? • Bio-diversity Habitat Many other environmental outcomes • Gives right to retain/improve a status quo • Gives right to maintain/improve environmental quality in the status quo • Separately tradable environmental permits

34. CARBON OFFSETS SUMMARY • Carbon farming will be bug business • Carbon Offsets will be necessary to balance emissions for developments • Verification and measurement • Trading and mortgaging of rights • Thinking into the future