Carbon Farming Newsletter

Issue 13, December 2011

Hi,

Welcome to the last issue of the Carbon Farming Group newsletter for 2011. In this issue we: discuss the recent drop in the price of carbon, give you an overview of the recent biological farming conference, and introduce our six updated info sheets.

Biological Farming Conference

In earlier newsletters we’ve commented on “soils first” farming, and in June 2010 we featured the Berryman farm where biological farming methods are already in use. This more natural form of farming known commonly as Biological Farming, appears to be gaining popularity, as could be seen by the over 250 people who attended a recent conference held in Rotorua. A commentary on the conference is available here. The conference received coverage in the media, links to these articles can be found here. Although not quantified yet, this type of farming may reduce nitrous oxide emissions, through less N inputs, and build up carbon in the soil, resulting in a reduction of agricultural greenhouse gases.

Looking at soils on a biological farm

CFG Info Sheets Updated

In the last few months we’ve update six of the Carbon Farming Group Info Sheets. The farm case studies in the info sheets have been updated to include the new climate change regulations for agriculture. We have also created a new info sheet covering native forests in the Emissions Trading Scheme. The table below lists the new or revised info sheets.

Issue	Date	Link
Info Sheet 8 - Sheep and Beef - Carbon Example	Oct 2011	Download pdf
Info Sheet 9 - Dairy Farm - Carbon Example	Sep 2011	Download pdf
Info Sheet 10 - Dairy, Sheep and Beef - Carbon Example	Nov 2011	Download pdf
Info Sheet 11 - Arable Farm - Carbon Example	Oct 2011	Download pdf
Info Sheet 13 - Native Forests in the ETS	Sep 2011	Download pdf
Info Sheet 15 - Sheep & Beef - Northland Carbon example	Nov 2011	Download pdf

As a result of re-doing the numbers there have been some noticeable changes from implementing the new intensity based emission approach, compared with the previous animal based method. Essentially, instead of emissions being calculated on the basis of livestock carried on the farm they are now based on production. For example: production of milk solids or slaughter records. You will note that some farms will have higher costs and others will have reduced costs.

Number	Comment
Info Sheet 8 Sheep and Beef	Annual emissions increased from 1800NZUs to 2098, however, 30 ha of pine forest still covers the emissions from 2015 to 2040.
Info sheet 9 Dairy	Total annual NZUs dropped from 1929 to 1900, while the area of forest required to; offset emissions from 2015 to 2040 dropped from 40ha to 30ha.
Info Sheet 10 Dairy Sheep and Beef	Total NZUs emitted have reduced about 25% on previous calculations. The Area of forest required to offset emissions from 2015 to 2040 is now 46ha, not 60 ha as previously found.
Info sheet 11 Arable	Total emissions have increased by 34%, but the likely cost is similar and the same forestry area is required for offset.
Info Sheet 15 Sheep and beef + indigenous forest	The recalculation of liabilities based on output increases costs by 20%. Along with this, the revised indigenous table increases credits to more than compensate.

In conclusion, sheep and beef, and arable on-farm emissions have increased, while dairy emissions have dropped. It is understood that previous “animal” based emissions for dairy cows were double accounting the animal maintenance component, now this has been rectified, the total emissions have dropped.

Carbon Price Drops Quickly

Recently, there have been several reports in the media suggesting if the carbon price keeps dropping at the current rate, it will be zero in 100 days. We have been tracking the weekly spot price of carbon since June 2010, from both Westpac and OMF and have graphed them below. Currently the price is sitting around $8 per NZU.

NZU price since June 2010

The price of spot NZUs remained reasonably steady at the $18 to $20 mark for around a year until June 2011, when it started dropping and hasn’t really stopped. There are several reasons why this is the case, but it mainly has to do with hot air units for sale offshore, and the dumping of carbon credit reserves by European industrial companies to boost cashflow .

It is useful to compare recent events in New Zealand with the experience in Europe. In 2008, when it first started trading the EU ETS followed a similar pattern as the NZETS, as can be seen in the graph below.

EU ETS Spot price comparison

The market officially started trading in 2007, however, there was little or no trading before the commencement of Kyoto (1 Jan 2008). Once trading stated in earnest the price for an EUA launched at just above €20. It reached a high of €28.59 on the 1st of July 2008 ($58NZ), and then dropped over a 9 month period to below €10. The price then rallied to around €15 and remained constant until around July 2011. It has subsequently dropped €7.16 as at 5 December 2011.

As a commodity the price of an NZU is subject to the usual national and international market pressures.

http://i.stuff.co.nz/the-press/business/6081834/Carbon-credits-pricing-crashes-and-burns

http://www.fridayoffcuts.com/index.cfm??id=455#3

Feedback

If you have any questions about climate change and the rural sector, or have ideas/suggestions that you’d like to share please contact us on 0800 123 733 or [email protected]

Thank you for your support of the Carbon Farming Group during 2011. We would like to wish all our subscribers a happy and safe festive season. We look forward to keeping you up-to-date on climate change related issues in 2012.

Best Regards,

Clayton Wallwork

Trustee

Carbon Farming Group

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