A new legal avenue for pricing GHG emissions? To trade or to tax?

In a September 2010 media release the Prime Minister of Australia presented the terms of reference for the newly established Multi-Party Climate Change Committee. Although the Committee is charged with considering climate change mitigation measures in general, specifically the Committee must consider an appropriate mechanism for the establishment of a carbon price. The purpose of this article is to provide an overview of the mechanisms to be considered by the Climate Change Committee, including the use of emissions trading and carbon levies in other jurisdictions. This article argues that for any effective investigation of a carbon price for Australia to occur, a thorough knowledge of other jurisdictions’ methods for carbon pricing is essential.

Soil N2O and CO2 emissions from cotton in Australia under varying irrigation management

Irrigation is known to stimulate soil microbial carbon and nitrogen turnover and potentially the emissions of nitrous oxide (N2O) and carbon dioxide (CO2). We conducted a study to evaluate the effect of three different irrigation intensities on soil N2O and CO2 fluxes and to determine if irrigation management can be used to mitigate N2O emissions from irrigated cotton on black vertisols in South-Eastern Queensland, Australia. Fluxes were measured over the entire 2009/2010 cotton growing season with a fully automated chamber system that measured emissions on a sub-daily basis. Irrigation intensity had a significant effect on CO2 emission. More frequent irrigation stimulated soil respiration and seasonal CO2 fluxes ranged from 2.7 to 4.1 Mg-C ha−1 for the treatments with the lowest and highest irrigation frequency, respectively. N2O emission happened episodic with highest emissions when heavy rainfall or irrigation coincided with elevated soil mineral N levels and seasonal emissions ranged from 0.80 to 1.07 kg N2O-N ha−1 for the different treatments. Emission factors (EF = proportion of N fertilizer emitted as N2O) over the cotton cropping season, uncorrected for background emissions, ranged from 0.40 to 0.53 % of total N applied for the different treatments. There was no significant effect of the different irrigation treatments on soil N2O fluxes because highest emission happened in all treatments following heavy rainfall caused by a series of summer thunderstorms which overrode the effect of the irrigation treatment. However, higher irrigation intensity increased the cotton yield and therefore reduced the N2O intensity (N2O emission per lint yield) of this cropping system. Our data suggest that there is only limited scope to reduce absolute N2O emissions by different irrigation intensities in irrigated cotton systems with summer dominated rainfall. However, the significant impact of the irrigation treatments on the N2O intensity clearly shows that irrigation can easily be used to optimize the N2O intensity of such a system.

Nitrous oxide emissions from irrigated wheat in Australia : impact of irrigation management

Background and Aims: Irrigation management affects soil water dynamics as well as the soil microbial carbon and nitrogen turnover and potentially the biosphere-atmosphere exchange of greenhouse gasses (GHG). We present a study on the effect of three irrigation treatments on the emissions of nitrous oxide (N2O) from irrigated wheat on black vertisols in South-Eastern Queensland, Australia. Methods: Soil N2O fluxes from wheat were monitored over one season with a fully automated system that measured emissions on a sub-daily basis. Measurements were taken from 3 subplots for each treatment within a randomized split-plot design. Results: Highest N2O emissions occurred after rainfall or irrigation and the amount of irrigation water applied was found to influence the magnitude of these “emission pulses”. Daily N2O emissions varied from -0.74 to 20.46 g N2O-N ha-1 day-1 resulting in seasonal losses ranging from 0.43 to 0.75 kg N2O N ha-1 season -1 for the different irrigation treatments. Emission factors (EF = proportion of N fertilizer emitted as N2O) over the wheat cropping season, uncorrected for background emissions, ranged from 0.2 to 0.4% of total N applied for the different treatments. Highest seasonal N2O emissions were observed in the treatment with the highest irrigation intensity; however, the N2O intensity (N2O emission per crop yield) was highest in the treatment with the lowest irrigation intensity. Conclusions: Our data suggest that timing and amount of irrigation can effectively be used to reduce N2O losses from irrigated agricultural systems; however, in order to develop sustainable mitigation strategies the N2O intensity of a cropping system is an important concept that needs to be taken into account.

Engine performance characteristics for biodiesels of different degrees of saturation and carbon chain lengths

This experimental study examines the effect on performance and emission outputs of a compression ignition engine operating on biodiesels of varying carbon chain length and the degree of unsaturation. A well-instrumented, heavy-duty, multi-cylinder, common-rail, turbo-charged diesel engine was used to ensure that the results contribute in a realistic way to the ongoing debate about the impact of biofuels. Comparative measurements are reported for engine performance as well as the emissions of NOx, particle number and size distribution, and the concentration of the reactive oxygen species (which provide a measure of the toxicity of emitted particles). It is shown that the biodiesels used in this study produce lower mean effective pressure, somewhat proportionally with their lower calorific values; however, the molecular structure has been shown to have little impact on the performance of the engine. The peak in-cylinder pressure is lower for the biodiesels that produce a smaller number of emitted particles, compared to fossil diesel, but the concentration of the reactive oxygen species is significantly higher because of oxygen in the fuels. The differences in the physicochemical properties amongst the biofuels and the fossil diesel significantly affect the engine combustion and emission characteristics. Saturated short chain length fatty acid methyl esters are found to enhance combustion efficiency, reduce NOx and particle number concentration, but results in high levels of fuel consumption.

Issues in negotiating a Carbon Sequestration Agreement for a Biosequestration Offsets Project

Biosequestration of carbon in trees, forests and vegetation is a key method for offsetting greenhouse gas emissions. To facilitate it, the Commonwealth has introduced the Carbon Farming Initiative, a scheme whereby carbon credits can be earned for biosequestration offsets projects. The project proponent must acquire under state law a ‘carbon sequestration right’ which confers the benefit of the sequestered carbon on the land. Each State provides for an agreement associated with the carbon sequestration right between the landowner and the holder of the right (‘carbon sequestration agreement’). This article identifies some key risks and issues that must be considered in the drafting of a carbon sequestration agreement to support the successful operation of a biosequestration offsets project.

Challenges facing carbon dioxide labelling of construction materials

In the absence of a benchmarking mechanism specifically designed for local requirements and characteristics, a carbon dioxide footprint assessment and labelling scheme for construction materials is urgently needed to promote carbon dioxide reduction in the construction industry. This paper reports on a recent interview survey of 18 senior industry practitioners in Hong Kong to elicit their knowledge and opinions concerning the potential of such a carbon dioxide labelling scheme. The results of this research indicate the following. A well-designed carbon dioxide label could stimulate demand for low carbon dioxide construction materials. The assessment of carbon dioxide emissions should be extended to different stages of material lifecycles. The benchmarks for low carbon dioxide construction materials should be based on international standards but without sacrificing local integrity. Administration and monitoring of the carbon dioxide labelling scheme could be entrusted to an impartial and independent certification body. The implementation of any carbon dioxide labelling schemes should be on a voluntary basis. Cost, functionality, quality and durability are unlikely to be replaced by environmental considerations in the absence of any compelling incentives or penalties. There are difficulties in developing and operating a suitable scheme, particularly in view of the large data demands involved, reluctance in using low carbon dioxide materials and limited environmental awareness.

Assessment of the application of contingent valuation theory to bio-sequestered carbon

The issue of carbon sequestration rights has become topical following the United Nations Convention on Climate Change (United Nations 1992 at page 1414) and the subsequent Kyoto Protocol (United Nations Climate Change Secretariat 1998) which identified emissions trading as one of the mechanisms to reduce greenhouse gas emissions. Australian states have responded by creating a legal framework for the recognition of rights to bio-sequestered carbon. There is a lack of uniformity in the approach of each state to the recognition of these rights, which vary from the creation of new and novel interests in land to the adoption of more traditional rights such as a profit a prendre. Rights to bio-sequestered carbon are likely to have an impact on the utility, marketability, value and financing of rural land holdings. Despite the creation of the legal framework for recognition of rights to sequestrated carbon, there has been a delay in the introduction of a formalised carbon trading scheme in Australia. In the absence of an established carbon market, this paper addresses the applicability of contingent valuation theory to assess the value of bio-sequestered carbon rights to a rural land holder. Limitations and potential controversies associated with this application of contingent valuation theory are also addressed in this paper.

The cost of carbon : capital market effects of the proposed emission trading scheme (ETS)

In March 2008, the Australian Government announced its intention to introduce a national Emissions Trading Scheme (ETS), now expected to start in 2015. This impending development provides an ideal setting to investigate the impact an ETS in Australia will have on the market valuation of Australian Securities Exchange (ASX) firms. This is the first empirical study into the pricing effects of the ETS in Australia. Primarily, we hypothesize that firm value will be negatively related to a firm's carbon intensity profile. That is, there will be a greater impact on firm value for high carbon emitters in the period prior (2007) to the introduction of the ETS, whether for reasons relating to the existence of unbooked liabilities associated with future compliance and/or abatement costs, or for reasons relating to reduced future earnings. Using a sample of 58 Australian listed firms (constrained by the current availability of emissions data) which comprise larger, more profitable and less risky listed Australian firms, we first undertake an event study focusing on five distinct information events argued to impact the probability of the proposed ETS being enacted. Here, we find direct evidence that the capital market is indeed pricing the proposed ETS. Second, using a modified version of the Ohlson (1995) valuation model, we undertake a valuation analysis designed not only to complement the event study results, but more importantly to provide insights into the capital market's assessment of the magnitude of the economic impact of the proposed ETS as reflected in market capitalization. Here, our results show that the market assesses the most carbon intensive sample firms a market value decrement relative to other sample firms of between 7% and 10% of market capitalization. Further, based on the carbon emission profile of the sample firms we imply a ‘future carbon permit price’ of between AUD$17 per tonne and AUD$26 per tonne of carbon dioxide emitted. This study is more precise than industry reports, which set a carbon price of between AUD$15 to AUD$74 per tonne.

Brave new green world : consequences of a carbon economy for the conservation of Australian biodiversity

Pricing greenhouse gas emissions is a burgeoning and possibly lucrative financial means for climate change mitigation. Emissions pricing is being used to fund emissions-abatement technologies and to modify land management to improve carbon sequestration and retention. Here we discuss the principal land-management options under existing and realistic future emissions-price legislation in Australia, and examine them with respect to their anticipated direct and indirect effects on biodiversity. The main ways in which emissions price-driven changes to land management can affect biodiversity are through policies and practices for (1) environmental plantings for carbon sequestration, (2) native regrowth, (3) fire management, (4) forestry, (5) agricultural practices (including cropping and grazing), and (6) feral animal control. While most land-management options available to reduce net greenhouse gas emissions offer clear advantages to increase the viability of native biodiversity, we describe several caveats regarding potentially negative outcomes, and outline components that need to be considered if biodiversity is also to benefit from the new carbon economy. Carbon plantings will only have real biodiversity value if they comprise appropriate native tree species and provide suitable habitats and resources for valued fauna. Such plantings also risk severely altering local hydrology and reducing water availability. Management of regrowth post-agricultural abandonment requires setting appropriate baselines and allowing for thinning in certain circumstances, and improvements to forestry rotation lengths would likely increase carbon-retention capacity and biodiversity value. Prescribed burning to reduce the frequency of high-intensity wildfires in northern Australia is being used as a tool to increase carbon retention. Fire management in southern Australia is not readily amenable for maximising carbon storage potential, but will become increasingly important for biodiversity conservation as the climate warms. Carbon price-based modifications to agriculture that would benefit biodiversity include reductions in tillage frequency and livestock densities, reductions in fertiliser use, and retention and regeneration of native shrubs; however, anticipated shifts to exotic perennial grass species such as buffel grass and kikuyu could have net negative implications for native biodiversity. Finally, it is unlikely that major reductions in greenhouse gas emissions arising from feral animal control are possible, even though reduced densities of feral herbivores will benefit Australian biodiversity greatly.

Offsetting methane emissions : an alternative to emission equivalence metrics

It is widely recognised that defining trade-offs between greenhouse gas emissions using ‘emission equivalence’ based on global warming potentials (GWPs) referenced to carbon dioxide produces anomalous results when applied to methane. The short atmospheric lifetime of methane, compared to the timescales of CO2 uptake, leads to the greenhouse warming depending strongly on the temporal pattern of emission substitution. We argue that a more appropriate way to consider the relationship between the warming effects of methane and carbon dioxide is to define a ‘mixed metric’ that compares ongoing methane emissions (or reductions) to one-off emissions (or reductions) of carbon dioxide. Quantifying this approach, we propose that a one-off sequestration of 1 t of carbon would offset an ongoing methane emission in the range 0.90–1.05 kg CH4 per year. We present an example of how our approach would apply to rangeland cattle production, and consider the broader context of mitigation of climate change, noting the reverse trade-off would raise significant challenges in managing the risk of non-compliance. Our analysis is consistent with other approaches to addressing the criticisms of GWP-based emission equivalence, but provides a simpler and more robust approach while still achieving close equivalence of climate mitigation outcomes ranging over decadal to multi-century timescales.

Crime and the commodification of carbon

Carbon will be the world's biggest market. Barclays was the first UK bank to set up a dedicated carbon trading desk to help clients, and Barclays Capital is the most active player in the emissions trading market having traded 300 million tonnes as at February 2007. (Barclays, 2007: 1)

Carbon dioxide reforming of methane to produce synthesis gas over metal-supported catalysts: State of the art

Carbon dioxide reforming of methane produces synthesis gas with a low hydrogen to carbon monoxide ratio, which is desirable for many industrial synthesis processes. This reaction also has very important environmental implications since both methane and carbon dioxide contribute to the greenhouse effect. Converting these gases into a valuable feedstock may significantly reduce the atmospheric emissions of CO2 and CH4. In this paper, we present a comprehensive review on the thermodynamics, catalyst selection and activity, reaction mechanism, and kinetics of this important reaction. Recently, research has centered on the development of catalysts and the feasible applications of this reaction in industry. Group VIII metals supported on oxides are found to be effective for this reason. However, carbon deposition causing catalyst deactivation is the major problem inhibiting the industrial application of the CO2/CH4 reaction. Ni-based catalysts impregnated on certain supports show carbon-free operation and thus attract much attention. To develop an effective catalyst for CO2 reforming of CH4 and accelerate the commercial application of the reaction, the following are identified to be the most important areas for future work: (1) selection of metal and support and studying the effect of their interaction on catalyst activity; (2) the effect of different promoter on catalyst activity; (3) the reaction mechanism and kinetics; and (4) pilot reactor performance and scale-up operation.

Fraud risk and the visibility of carbon

In recent years, carbon has been increasingly rendered ‘visible’ both discursively and through political processes that have imbued it with economic value. Greenhouse gas (GHG) emissions have been constructed as social and environmental costs and their reduction or avoidance as social and economic gain. The ‘marketisation’ of carbon, which has been facilitated through various compliance schemes such as the European Union Emissions Trading Scheme (EU ETS), the Kyoto Protocol, the proposed Australian Emissions Reduction Scheme and through the voluntary carbon credit market, have attempted to bring carbon into the ‘foreground’ as an economic liability and/or opportunity. Accompanying the increasing economic visibility of carbon are reports of frauds and scams – the ‘gaming of carbon markets’(Chan 2010). As Lohmann (2010: 21) points out, ‘what are conventionally classed as scams or frauds are an inevitable feature of carbon offset markets, not something that could be eliminated by regulation targeting the specific businesses or state agencies involved’. This paper critiques the disparate discourses of fraud risk in carbon markets and examines cases of fraud within emerging landscapes of green criminology.

Growing biodiverse carbon-rich forests

Regrowing forests on cleared land is a key strategy to achieve both biodiversity conservation and climate change mitigation globally. Maximizing these co-benefits, however, remains theoretically and technically challenging because of the complex relationship between carbon sequestration and biodiversity in forests, the strong influence of climate variability and landscape position on forest development, the large number of restoration strategies possible, and long time-frames needed to declare success. Through the synthesis of three decades of knowledge on forest dynamics and plant functional traits combined with decision science, we demonstrate that we cannot always maximize carbon sequestration by simply increasing the functional trait diversity of trees planted. The relationships between plant functional diversity, carbon sequestration rates above-ground and in the soil are dependent on climate and landscape positions. We show how to manage ‘identities’ and ‘complementarities’ between plant functional traits in order to achieve systematically maximal co-benefits in various climate and landscape contexts. We provide examples of optimal planting and thinning rules that satisfy this ecological strategy and guide the restoration of forests that are rich in both carbon and plant functional diversity. Our framework provides the first mechanistic approach for generating decision-making rules that can be used to manage forests for multiple objectives, and supports joined carbon credit and biodiversity conservation initiatives, such as Reducing Emissions from Deforestation and forest Degradation REDD+. The decision framework can also be linked to species distribution models and socio-economic models in order to find restoration solutions that maximize simultaneously biodiversity, carbon stocks and other ecosystem services across landscapes. Our study provides the foundation for developing and testing cost-effective and adaptable forest management rules to achieve biodiversity, carbon sequestration and other socio-economic co-benefits under global change.