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Carbonated Cows in Central Queensland

Carbonated Cows in Central Queensland. Carbon and cattle tradeoffs. CQ Carbon Network Meeting 11 th May 2010. “Before I say yes to a date… tell me, do you contribute to global warming very often?”. Outline. Projects Mock carbon auctions Economics of agroforestry and carbon Results

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Carbonated Cows in Central Queensland

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  1. Carbonated Cows in Central Queensland Carbon and cattle tradeoffs CQ Carbon Network Meeting 11th May 2010 “Before I say yes to a date… tell me, do you contribute to global warming very often?”

  2. Outline • Projects • Mock carbon auctions • Economics of agroforestry and carbon • Results • Implications

  3. The carbon challenge • Agriculture generates 16% of Australia’s GHG emissions • Managed correctly it could also provide a carbon sink • One option is the management of regrowth • In Qld managed regrowth could provide up to 38 Mt CO2-e/yr • Carbon accounting framework unclear

  4. Project Background • 90% of the Fitzroy Basin is grazing land • Over 3000 grazing businesses • 3 million cattle • Potential for negative impacts from an ETS, but also possibly opportunities • Fitzroy Basin Association (FBA) identified this issue as a priority

  5. Aims and Objectives • Understand the economic implications for central Queensland graziers of participating in a carbon trading scheme, and • Measure the likely participation of graziers in an emissions trading scheme under various market design and reporting frameworks • Investigate financial implications of adopting agroforestry systems in central Queensland under different carbon frameworks

  6. Methodology – Desktop study • 1000 hectare cattle enterprise compared to: • Complete destock, trade carbon • 40% destock, plus trade some carbon

  7. Results – Desktop study *No requirement to account for on-farm emissions

  8. Methodology – Experimental Auctions • 6 workshops across central Queensland • Biloela • Rockhampton • Emerald (2) • Springsure • Nebo • Outline of CPRS and voluntary carbon trading • Mock Auction Part I • 4 case study scenarios • Mock Auction Part II • Alternative contract rules

  9. Mock Auction Part I • Tree basal area: 8m2ha • Current stocking rate: 1AE : 8ha (20ac) • Paddock size: 500ha (total property area: 5,000ha) • Pasture: buffel • Water points: 1 trough • Fences: Good condition • Location: NOT in a priority area

  10. Answer the following questions • What action you would normally take in a paddock of this condition to continue grazing? (E.g. blade-plough now, blade-plough in five years, no action) • How many hectares of this paddock would you include in the CSC? • How much would you wish to be paid to enter into a Carbon Sequestration Contract (CSC)? (under the stated rules) $ /yr • How likely is it that you would participate given the stated rules of a CSC? (ie 100% - would definitely participate, 0% definitely would not participate) % • The stocking rate you would expect after 20 years (if under a CSC): Ha/head

  11. Results – Experimental Auctions

  12. Results – Experimental Auctions • Multiple regression on demographic factors found: • Education level significant and positive impact on bid price and participation • Age, previous participation in NRM activities, position in business, were not significant • Models for both bid price and participation were found to have low explanatory power

  13. Results – Experimental Auctions Part II Rule Changes • increased bids between 30% (increased administration requirements) and 50% (50yr contracts) • Decreased participation rates Percentage of participants with <50% likelihood of participating

  14. Next Steps…. • CPRS now on hold until at least 2013 – Federal election….? • National Offset standards still being developed • Need better information on what factors likely to influence landholders to participate • Online game/survey being developed to collect information from wider sample

  15. Advantages of regrowth over carbon plantings • Requires no effort to plant • Species naturally adapted to site • Once mature species approximate original vegetation • Provide useful biodiversity and ecosystem health outcomes in addition to carbon reductions • Opportunities exist to sequester carbon in a manner that compliments existing grazing systems

  16. Brigalow regrowth strips in central Queensland • Range of stimulatory and complimentary benefits of silvo-pastoralism • Also constrained impacts on pasture production • Unclear if these benefits are sufficient to outweigh opportunity costs of not clearing all regrowth • This was tested using purpose built bioeconomic model

  17. Financial analysis • Compared retention of tree strips vrs business as usual (routinely clear all regrowth) • Comparisons made using four different carbon accounting frameworks • 1000 ha paddock used for breeding and finishing • 25yr discounted cashflow • 6% discount rate

  18. Options Option 1 Business as usual (clear all regrowth) • No carbon accounting • Carrying capacity declines over time as regrowth competes with pasture Option 2 – Clear strips • Regrowth strips retained 20m wide every 60m • No carbon accounting undertaken • Incorporates constrained and stimulated affects of retaining regrowth strips on pasture growth

  19. Options cont… Option 3 Retain strips accounting for carbon in row • Regrowth strips retained • Sell carbon sequestered from retained strips only net of livestock methane emissions • Ignore carbon released from clearing inter-row zone • Ignore sequestration within inter-row zone Option 4 Retain strips accounting for carbon using short decomposition period • Sell carbon sequestered from retained strips and regrowth from inter-row zone (net of livestock methane emissions) • Carbon released from clearing inter-row zone accounted for using IPCC 10 yr decomposition model • Cleared regrowth not burnt Option 5 • Same as option 4 but 20yr decomposition

  20. Results

  21. Conclusions • Adjusting stock numbers to sequester carbon can be profitable, depending on the carbon rules • Benefits of sequestering carbon from the retention of regrowth strips is higher for lower productivity country • Most graziers want significantly more than breakeven price for carbon • Incorporates risk premium • Indicator of price discovery process required and concern over changing government rules • Participation rates depend highly on contract rules and carbon price

  22. So…. What next? • Understanding property emissions profiles is useful • Still a waiting game for carbon trading rules, nationally and internationally, especially for agriculture • Possibility of win-win carbon and productivity practices • Eg agroforestry, improved genetics etc • Further projects • Estimate the cost of purchasing X tonnes of carbon from the CQ Beef industry • impact on beef production?

  23. Links • Carbon Productivity tradeoffs available at http://www.fba.org.au/publication/ • The Bioeconomic Potential for Agroforestry in Northern Cattle Grazing Systems: An evaluation of tree alley scenarios in southern and central Queensland, available at https://rirdc.infoservices.com.au/items/09-140

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