EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Industry, Energy and Emissions Reduction
Carbon Credits (Carbon Farming Initiative) Act 2011
Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems—Revocation) Instrument 2021
Purpose
The Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems—Revocation) Instrument 2021 (the Revocation Instrument) revokes the Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018 (the 2018 soil determination) made under the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act).
The 2018 soil determination has been superseded by the Carbon Credits (Carbon Farming Initiative—Estimation of Soil Organic Carbon Sequestration using Measurement and Models) Methodology Determination 2021 (the 2021 soil determination). The 2021 soil determination aims to support greater uptake of soil carbon projects by overcoming barriers to participating in the Emissions Reduction Fund (ERF) by reducing costs and introducing new activities to store carbon. For the first time it will allow modelled estimates of soil carbon change to be used, in combination with measurement approaches. It builds on the measurement framework in the 2018 soil determination.
Legislative Provision
The 2018 soil determination to be revoked was made under subsection 106(1) of the Act. It is being revoked under subsection 123(1) of the Act, as set out in section 3 of the revocation instrument.
Background to the Emission Reduction Fund
The Act enables the crediting of greenhouse gas abatement from emissions reduction activities across the economy. Greenhouse gas abatement is achieved either by reducing or avoiding emissions or by removing carbon dioxide from the atmosphere and storing it in soil, biomass, or organic matter.
In 2014, the Australian Parliament passed the Carbon Farming Initiative Amendment Act 2014, which established the ERF. Further information on the ERF is available at: www.industry.gov.au/funding-and-incentives/emissions-reduction-fund or www.cleanenergyregulator.gov.au/ERF.
Emissions reduction activities are undertaken as offsets projects. The process involved in establishing an offsets project is set out in Part 3 of the Act. An offsets project must be covered by, and undertaken in accordance with, a methodology determination.
Subsection 106(1) of the Act empowers the Minister to make a methodology determination by legislative instrument. The purpose of a methodology determination is to establish procedures for estimating abatement (through emissions avoidance or sequestration) from eligible projects and rules for monitoring, record keeping and reporting. The methodology determinations ensure that emissions reductions are genuine—that they are both real and additional to business as usual.
In deciding to revoke the 2018 soil determination, the Minister has had regard to the advice of the Emissions Reduction Assurance Committee (ERAC), an independent expert panel established to advise the Minister on proposals for making, varying or revoking methodology determinations.
Background to the Determination
The 2021 soil determination, like the 2018 soil determination, provides an incentive for proponents to sequester carbon in soil in a range of agricultural systems through improved land management.
The key features of the 2021 soil determination are:
- Project proponents must conduct at least one new or materially different eligible management activity on land that was used for pasture, cropping or was fallow for at least the 5 years immediately before the project registration application was submitted.
- Project proponents must not conduct prohibited activities and conduct restricted activities only in accordance with the 2021 soil determination.
- Project proponents can estimate carbon stocks at intervals of 1 to 5 years using one of the following approaches:
- use soil cores only to estimate soil carbon (measurement-based estimates);
- use models with soil core samples (model-assisted estimates) to reduce the sampling density required to obtain precise estimates of soil carbon (and to validate the modelled estimates to support the model-based estimates approach mentioned below);
- use models without soil core samples (model-based estimates) using validated model carbon stock estimates. This approach cannot be used for the baseline estimate and must be complemented with one of the other two approaches at least once every 10 years to ensure estimates are aligned with the abatement occurring in the relevant Carbon Estimation Area (CEA).
- The 2021 soil determination applies a statistical approach for adjusting estimates of soil carbon change to account for the possibility that observed changes are the result of sampling noise rather than management actions. This is referred to in the determination as the ‘probability of exceedance’ discount specified in the Supplement.
- If claiming credits after only undertaking two sampling rounds or estimation events (including your baseline sampling round or first estimation event), 25 per cent of the resulting creditable abatement (after the specified probability of exceedance approach and permanence discounts are applied) will be withheld until three sampling rounds or estimation events have been reported and the soil carbon increases maintained.
Impact on Existing Projects
Existing projects are not affected by the Revocation Instrument. Even after the 2018 soil determination has been revoked in accordance with the Revocation Instrument, an eligible offsets project already registered and whose crediting period has begun can continue to use that determination in the form it was at the time the project was registered under section 127 of the Act. However, the 2018 soil determination has issues with how it calculates abatement. Existing projects may transfer to the 2021 soil determination to report and be issued Australian Carbon Credit Units. The 2021 soil determination includes transition provisions to facilitate this.
New offsets projects that apply to be registered after commencement of the Revocation Instrument will not be able to register under the 2018 soil determination. These projects can register under the 2021 soil determination. Further, projects that registered under the 2018 soil determination whose crediting periods have not commenced before the commencement of the Revocation Instrument, cannot continue under that determination, and can register under the 2021 soil determination.
Public Consultation
The proposal to replace the 2018 soil determination with the 2021 soil determination was developed by the Clean Energy Regulator through a co-design process with industry, potential end-users, scientists and technical experts and the ERAC. The co-design process involved workshops, bilateral stakeholder consultation, and technical review.
An exposure draft of the 2021 soil determination was published on the website of the Department of Industry, Science, Energy and Resources (the Department) for public consultation from 30 August 2021 to 27 September 2021. As part of this consultation, the ERAC also consulted on the revocation of the 2018 soil determination. Forty submissions were received. There were no objections to the revocation of the 2018 soil determination. Details of the non-confidential submissions are provided on the Department’s website, https://www.industry.gov.au/.
The 2021 soil determination has now been made as the Carbon Credits (Carbon Farming Initiative—Estimation of Soil Organic Carbon Sequestration using Measurement and Models) Methodology Determination 2021.
Determination Details
The Revocation Instrument is a legislative instrument within the meaning of the Legislation Act 2003.
The Revocation Instrument commences on the day after it is registered.
The Revocation Instrument will sunset according to the ordinary rules in the Legislation Act 2003.
Details of the Revocation Instrument are at Attachment A. Numbered sections in this Explanatory Statement align with the relevant sections of the Revocation Instrument.
A Statement of Compatibility prepared in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011 is at Attachment B.
Attachment A
Details of Instrument
1 Name
Section 1 sets out the full name of this instrument, which is the Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems—Revocation) Instrument 2021.
2 Commencement
Section 2 provides that this instrument would commence on the day after it is registered.
3 Authority
Section 3 provides that the instrument is made under subsection 123(1) of the Carbon Credits (Carbon Farming Initiative) Act 2011.
4 Interpretation
Section 4 defines the term ‘the Act’ as the Carbon Credits (Carbon Farming Initiative) Act 2011.
5 Revocation of methodology determination
Section 5 revokes the Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018 made under subsection 106(1) of the Act.
Attachment B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems—Revocation) Instrument 2021
This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislature Instrument
The Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems—Revocation) Instrument 2021 revokes the Carbon Credits (Carbon Farming Initiative—Measurement of Soil Carbon Sequestration in Agricultural Systems) Methodology Determination 2018 made under the Carbon Credits (Carbon Farming Initiative) Act 2011.
The determination being revoked has been superseded by the Carbon Credits (Carbon Farming Initiative—Estimation of Soil Organic Carbon Sequestration using Measurement and Models) Methodology Determination 2021. That determination credits each of the activities as the determination being revoked and introduced some new activities.
Human Rights Implications
This legislative instrument does not engage any of the applicable rights or freedoms.
Conclusion
This legislative instrument is compatible with human rights as it does not raise any human rights issues.
The Hon Angus Taylor MP
Minister for Industry, Energy and Emissions Reduction