House debates

Thursday, 16 June 2011


Carbon Credits (Carbon Farming Initiative) Bill 2011; Second Reading

11:25 am

Photo of Mark DreyfusMark Dreyfus (Isaacs, Australian Labor Party, Cabinet Secretary) Share this | Hansard source

As the member for Eden-Monaro was the final speaker, I would like to thank members for their contributions to the debate on the Carbon Credits (Carbon Farming Initiative) Bill 2011, Carbon Credits (Consequential Amendments) Bill 2011 and the Australian National Registry of Emissions Units Bill 2011. I would also like to thank the members for Lyne, Denison, New England and Melbourne for their contributions to the debate on these bills.

The Carbon Farming Initiative is a key part of the Gillard government's climate change agenda. Under this scheme for the first time the federal government will help facilitate the sale of carbon credits on domestic and international markets. The scheme will begin to unlock abatement opportunities in the land sector, a sector which currently accounts for around a quarter of Australia's emissions. It will contribute to improving farm productivity, creating jobs in the regions, providing new opportunities for Indigenous communities, enhancing our biodiversity and building resilience to the impacts of climate change.

The Carbon Farming Initiative provides a framework which is grounded in the science of climate change and provides clear economic value to actions which store or reduce carbon pollution. It will create new, real and lasting economic opportunities for regional communities. Farmers and landholders will be rewarded for their actions to reduce or store carbon pollution. By 2020, the credits that are created from this initiative each year are likely to be worth hundreds of millions of dollars for regional and rural Australia. (Quorum formed)

I take this opportunity to respond to some of the issues raised. There has been much said by those opposite about the threat to prime agricultural land from tree planting. The government is confident that prime agricultural land is not at risk and that the legislative structure will prevent perverse outcomes. First, while permanent tree plantations will be rewarded, these must take into account applicable natural resource management plans. Secondly, all state, territory and Commonwealth requirements must be complied with, including any water entitlements which may be required. Thirdly, managed investment schemes will not be eligible because short-rotation commercial forestry will fail the common practice test, and management investment schemes will be explicitly excluded. Fourthly, the economics of carbon credits are such that land use change is likely to occur on marginal agricultural land, as evidenced by recent estimates of abatement by my department and the CSIRO.

It must also be remembered that the Carbon Farming Initiative is not just about tree planting but also covers a range of agricultural practices which reduce emissions, such as better fertiliser use, manure management and enhancing soil carbon. Many of these practices increase the productivity of prime agricultural land and this initiative will provide a new income stream for those who take up new and more sustainable farming practices.

This bill includes provision to exclude activities that carry a high risk of adverse outcomes on the environment or local communities through a 'negative list', which will be contained in regulations. The government will include activities on the negative list that pose a significant risk for the availability of water, to the conservation of biodiversity, to employment or to local communities. These activities will not be eligible to receive carbon credits under the Carbon Farming Initiative.

The Department of Climate Change and Energy Efficiency has undertaken a first pass risk assessment of carbon forest activities and released this for public comment. The government's position is that the following activities should be on the negative list: establishing vegetation on land cleared of native vegetation since 1 July 2007—this will remove the risk of a perverse incentive to clear native vegetation in order to establish a carbon forest; establishing a known weed species—this will remove the risk that invasive species will be part of carbon projects; establishing forest in conditions where it would risk impacts on the availability of water—this will remove the risk that carbon plantings will affect environmental flows for other water users; establishing a forest as part of a managed investment scheme—this will remove the risk of distortions to markets for agricultural land.

The government recognises the need to monitor issues that may be raised with crediting methodologies and will engage with local government, natural resource management bodies and other stakeholders on whether additional activities should be added to the negative list. The government also recognises the need to act promptly with respect to these issues to ensure that perverse outcomes for biodiversity or agricultural land use are avoided.

Negative list activities, and the circumstances in which they apply, will be tightly defined to avoid prohibiting low-risk projects.

The Carbon Farming Initiative has been designed to minimise the possibility of adverse outcomes from abatement projects. The consultation processes on the regulations will ensure comprehensive opportunities for public and parliamentary scrutiny.

With key regulations and the first methodologies now published, there is no reason to delay the passage of these bills. Investment in further methodologies and the underpinning science is dependent upon stakeholders having certainty that the initiative will actually go ahead. That is why it is essential for this parliament to pass these bills and not continue to find excuses for delay. It is a great shame that the opposition has blown so hot and cold on the Carbon Farming Initiative, having first called on all sides of politics to embrace the proposal and now, at the eleventh hour, capitulating to the views of the Nationals and walking away from that commitment.

The environmental integrity of the Carbon Farming Initiative is essential to the value and credibility of the credits that are created. The government recognises that some types of carbon projects can indirectly cause emissions elsewhere in the economy through the effect of 'leakage'. For example, a project based on preventing logging in part of our native forest estate could lead to an increase in logging elsewhere in the country, if demand for timber remains. If unaddressed, leakage can reduce or even obviate abatement from such projects.

The regulatory framework includes requirements for streamlined accounting treatments for leakage to be incorporated in methodologies. The department is currently developing mandatory guidance to establish the accounting rules for dealing with leakage. This will be based on a discounting approach which identifies the likely risk and extent of leakage for projects based on forecasts about supply and demand in the relevant market. The government will work closely with key stakeholders to develop this guidance.

Another key to environmental integrity is the 'risk of reversal' buffer. The government has recognised the need to keep this under review as further evidence is gathered of the potential risks. The CSIRO is well placed to do further work in this area. Similarly, the permanence requirements, which are relevant only for sequestration projects, will also be monitored in light of international consensus on these issues. It has also been said, incorrectly, that there is little in carbon farming for the Northern Territory. There is in fact a wealth of opportunities for Carbon Farming Initiative offsets in the Northern Rangelands. Australia's rangelands carry significant biodiversity values, but in many cases these have been degraded as a result of overgrazing and the proliferation of feral animals. Restoration of these rangelands will provide carbon as well as biodiversity benefits and create new revenue streams for landholders. Landholders will be able to receive credit for increasing carbon stores on rangelands through increasing soil carbon, establishing new vegetation, protecting existing vegetation by fencing off stock or reducing land clearing and removing feral animals. Reducing numbers of feral animals, including camels, feral cattle and feral buffalo, also reduces methane emissions. These emissions reductions can also generate Carbon Farming Initiative credits.

Management of savannah fires is another significant opportunity to generate carbon credits. The Carbon Farming Initiative will provide incentives for land managers to undertake strategic fire management across the north. As well as reducing emissions, fire management increases biodiversity and will generate jobs in remote communities. The government is committed to ensuring Indigenous Australians can participate and benefit from the Carbon Farming Initiative. The first methodology to be released for public comment under the Carbon Farming Initiative is the one I mentioned: savannah fire management. That is a methodology that could inject over $2 million of revenue each year into projects such as those in west Arnhem Land.

The member for Lyne spoke of the potential importance of the Carbon Farming Initiative to Indigenous Australia. The government is consulting with Indigenous Australians through a working group that I am chairing to work through implementation issues with the initiative. I am committed to ensuring that Indigenous Australians do stand to benefit. To this end, clarifying the consent rights of non-exclusive-possession native title holders will be important.

The government also recognises that other groups may need to be prescribed by regulation as having eligible interests. In particular, those who hold mining leases over an area of land have a legitimate interest in projects involving the same area of land and will be prescribed as an eligible interest. The government also accepts the need to work with natural resource management bodies to improve the consistency of regional planning. The government recognises the need to help build carbon literacy among landholders and has already engaged Landcare facilitators to communicate the benefits and responsibilities involved with the initiative to interested landholders. The government will continue to work with landholders, including Indigenous leaders, to ensure that they have the greatest ability to capitalise on the benefits of this very substantial opportunity for regional Australia.

In conclusion, the bills before the House today will provide real opportunities to regional and rural Australia to be part of the climate change solution. We appreciate that in this sector we need to learn more about the potential abatement opportunities by making a start with the Carbon Farming Initiative and getting projects off the ground.

Question put:

That the words proposed to be omitted (Mr Hunt's amendment) stand part of the question.

The House divided. [11:45]

(The Speaker—Mr Harry Jenkins)

Question agreed to.

Original question put:

That this bill be now read a second time.

The House divided. [11:52]

(The Speaker—Mr Harry Jenkins)

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.


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