S1: This podcast is sponsored by Action Steel.
S2: Because the fossil fuel sector has started reducing its emissions,
S2: the transport sector started reducing its emissions and agriculture stayed
S2: the same. Suddenly this year we're not 14% like we
S2: were last year. We are 17%. It's a percentage game.
S2: So what's going to happen over time is if agriculture
S2: does nothing, we'll become the only sector of greenhouse gas
S2: emissions while all other sectors go to zero.
S1: Hello and welcome back to Shared Solutions by BCG. I'm
S1: Janine Batters. In this episode of our series planning for prosperity,
S1: I'm going to be speaking with the University of Melbourne's
S1: Professor Richard Eckard, about what farmers can expect from the
S1: net zero policy and steps they can take now as
S1: farmers and in the near future. I feel like Richard
S1: needs no introduction. We're actually talking about you in the office, Richard,
S1: as soil carbon royalty. So you were named as Reuters,
S1: one of Reuters top most influential scientists, is that correct?
S2: Yes. Thanks, Janine. And I named 1000 of the top
S2: climate science influencers. And I think it's got a lot
S2: to do with annoying in the media, regular appearances in
S2: the media, because everybody wants to know something about carbon farming.
S2: And can we get to net zero? And there's not
S2: a lot of voices out there that are independent.
S1: We are so pleased to have you in the room, Richard,
S1: and I feel like I should be calling you Professor Richard,
S1: so I hope it's okay that I'm calling you Richard.
S1: We also have with us BCG senior research and extension
S1: manager Grace Hosking, who's going to be joining us.
S3: Thanks, Janine. I am not royalty, but I'm feeling very
S3: lucky to be with royalty today.
S1: Looking forward to chatting to you today about what farmers
S1: can do now, things that are in their control to
S1: help in this space. I thought it might actually be
S1: interesting for our listeners. Richard, if you gave a little
S1: bit of a background on why you actually are in
S1: this space, so your experience and why you actually chose
S1: to do this. I was really.
S2: Introduced the other day as the grandfather of carbon farming.
S2: And I'm not sure I'm still processing that, but it
S2: goes to history as to, you know, doing an undergraduate
S2: in biochemistry of ruminant nutrition, which positioned me to look
S2: at methane and then doing a master's degree in soil nitrogen,
S2: so suddenly became a soil scientist. It was really at
S2: this sort of PhD and then subsequent level, that it
S2: took more of a systems view of the world stepping
S2: back and say, how does it all fit together? And
S2: that's what got me into carbon farming, because it's not
S2: just we're just going to put on less nitrogen. It's
S2: actually a whole systems view of carbon cycling through our
S2: agricultural systems. And unless you take that sort of holistic
S2: view of how this is all going to come together,
S2: you don't get the right picture. You could get skewed
S2: action that makes sense.
S1: And, Grace, can you tell me how you came to
S1: be in this space?
S3: No worries Janine. So I grew up on a farm
S3: at Quambatook, so a broadacre livestock and cropping farm. I
S3: then went away to study a Bachelor of Agriculture at
S3: the University of Melbourne, and in recent years have returned
S3: to the region. So I'm now working in the research
S3: and extension team at BCG. So our team works with
S3: a number of projects, and one of the really exciting
S3: projects that we're involved in is the Carbon Farming Outreach Project.
S3: So it's in collaboration with the grower Group Alliance, and
S3: it involves a suite of extension activities surrounding carbon awareness raising.
S1: Grace thought it might be helpful for some of our
S1: listeners to know a little bit more about what are
S1: the basics behind greenhouse gas emissions, what are they, and
S1: then what is meant by scope one, scope two, and
S1: scope three?
S3: Yeah, so it can be a bit of a confusing space,
S3: particularly as a grower. Janine, we're hearing it in the media.
S3: There's lots of different jargon being used, but essentially it
S3: presents quite an opportunity for the industry and a bit
S3: of a challenge. On one hand, we're emitting greenhouse gases,
S3: so things like carbon dioxide, nitrous oxide and methane, and
S3: that's through various farming activities. So it might be running machinery.
S3: It's through using fertilizers and even the breakdown of crop residues.
S3: But then on the other hand, through photosynthesis, our crops
S3: actually take in carbon dioxide from the atmosphere, and some
S3: of that carbon gets stored in the soil as organic carbon.
S3: And that's really essential to a healthy soil. So we
S3: can then kind of break emissions down further into what's
S3: known as scope one, scope two and scope three. So
S3: it's things like carbon dioxide from burning diesel in our tractors,
S3: or nitrous oxide that's released when fertilizers and crop residues
S3: break down in the soil. We've then got scope two emissions.
S3: So they're what's known as indirect emissions. And for our
S3: farming system they're mostly from electricity use. So a really
S3: good example of this is aeration cooling for stored grain
S3: on farm. The electricity that is used to run that
S3: cooling system is what's known as a scope two emission.
S3: Then finally there's scope three emissions. And these ones are
S3: kind of the trickiest for us because they come from
S3: the production of the inputs that we use on farms.
S3: So anything like urea, herbicides, pesticides, other fertilizers, that sort
S3: of thing. So whilst we don't directly emit these, they're
S3: part of the carbon footprint of the products that we
S3: rely on and so we inherit them.
S1: Okay. Thanks, Grace. That was a really good outline. So Richard,
S1: can you tell our listeners why it's important that we
S1: understand scope one, scope two and scope three, and why
S1: our scope one is other people's scope three?
S2: Yeah, correct. Scope one, two and three, as Grace explained,
S2: differs depending on which organisation you are in the supply chain.
S2: So when you are selling your product to your supply
S2: chain and they have a target. Their target is your
S2: scope one, two and three. They call it their scope three.
S2: So if you think about what Grace was saying, the
S2: supply chain scope one is just their local petrol consumption.
S2: Their scope two is electricity, but their scope three is
S2: your farm and that is your on farm emissions of
S2: scope one, two and three. So that's why it matters,
S2: because when you're at a farm level and you're looking
S2: at the different scopes, well, there's something you can do
S2: about each one of them, but it's a different action.
S2: Scope one is changing farm practice or doing less to
S2: emit on farm. Scope two is deciding whether you put
S2: solar panels and batteries versus drawing electricity out of the grid.
S2: Scope three is your purchasing power. Where do you buy
S2: your products from? Where do you buy your your your glyphosate?
S2: Where do you buy your grain? Where do you buy inputs,
S2: fertilizer inputs. So that's that's purchasing power rather than doing
S2: something different on farm.
S1: Whereas our scope one is say big banks, scope three correct.
S2: Largely a farm scope one is what the banks and
S2: the supply chain are concerned about. That's direct emissions from
S2: the farm.
S1: And so that's why they're interested in what we're doing.
S2: They have set targets because they have to appeal to
S2: international shareholders who are concerned about the risk of exposure
S2: to greenhouse gas emissions. So you can see how they've
S2: set the targets, but they're equally nervous about they don't
S2: control what farmers do on farm. So they're concerned about
S2: how they're going to get to their targets. It makes.
S1: Sense. So I think taking a step back now, can
S1: you explain to our listeners what actually is net zero?
S2: So there's two terms out there carbon neutral and net zero.
S2: And they sound very similar but they are slightly different.
S2: Carbon neutral implies you're going to do everything you can
S2: in your power to get your emissions down to zero.
S2: And then if you can't get the last few kilograms
S2: down to zero, you plant a few trees or you
S2: sequester carbon in soils and you offset the balance. Net
S2: zero doesn't care how you get there. Net zero says
S2: the sum of what you emit, minus what you store
S2: in the soil and tree, must just be a zero sum.
S2: So you can plant trees first as the first course
S2: of action and still be net zero. So if you
S2: think about case studies, we've done Jigsaw Farms, which is
S2: a prominent case study. And essentially we used to talk
S2: about it being carbon neutral. But it's not actually it's
S2: actually net zero because they have planted trees, but the
S2: methane from the animals is still there. They haven't done
S2: anything about reducing that. And that's where we've got to
S2: in that case study is saying, what are we going
S2: to do about that? Because actually to get to carbon neutral,
S2: you've got to turn the equation around and do something
S2: first about your scope one emissions and then offset only
S2: the residual.
S1: So they're both about counterbalancing not just about reducing our
S1: emissions to zero.
S2: That's the true definition of carbon neutral is getting emissions
S2: down to zero. It's embedded in both terms net zero.
S2: But net zero says we can plant trees first rather
S2: than actually take the hard yards of doing something about
S2: the emissions.
S3: So, Richard, as a grain grower, knowing that these targets
S3: are on the horizon, should I be trying to focus
S3: on my my farm becoming carbon neutral?
S2: I'd say no. No supply chain at this stage is
S2: asking for carbon neutral. If you look at all the targets,
S2: they vary a bit. But most supply chain and banks
S2: have a target of about 30% less emissions intensity by
S2: 2030 and net zero by 2050. So really 2050 is
S2: the zero target and it's hopefully a long way out still.
S2: So 2030 is really about emissions intensity, which says can
S2: you be more efficient at producing that kilogram of grain.
S1: Okay. So let's talk about that. Both of us are
S1: grain farmers. What are some of the things that we
S1: can do now to help reduce our emissions or meet
S1: this net zero target?
S2: So if you're a grain producer and you look at
S2: the pie chart of grain emissions, it's mainly from nitrogen fertilizer.
S2: So it's about where you buy your nitrogen fertilizer. And
S2: it's how you use your nitrogen fertilizer on farm. So
S2: immediately it goes to can we buy more benign sources
S2: of nitrogen, or can we move one day to on
S2: farm generation of nitrogen using solar energy. And those technologies
S2: are emerging. So we see a future post 2030 where
S2: farmers will have solar panels generating their own ammonia for
S2: instead of buying fossil fuel fertilizer.
S1: I'm very excited about this, Richard, because what I feel
S1: like farmers are thinking when they hear net zero got
S1: to reduce our nitrogen is how am I going to
S1: grow a crop if I have to reduce my nitrogen?
S1: So can you explain what you mean by more benign products?
S2: A more benign source of urea, for example. Urea has
S2: a massive amount of natural gas used to fire the
S2: haber-bosch process, which makes ammonia out of air. And so
S2: it has a very high carbon footprint. Now, it depends
S2: where you buy urea from around the world. If you
S2: buy from China, for example, where they don't recycle within
S2: the manufacturing plant, that's 2.7 tons of emissions per tonne
S2: of urea. If you buy from Canada where they do recycle,
S2: that's 0.9. So now we've got fertilizer companies in Australia
S2: preferentially buying from Canada to reduce the footprint of the product.
S2: So selling something more benign.
S1: Are they passing that on to the farmer or is
S1: that more expensive.
S2: It wouldn't be more expensive. csbp in Western Australia have
S2: already gone down that route and the unit cost is
S2: the same. It's just they what they do pass on
S2: is the 0.9 instead of the 2.7. So when you're
S2: doing a farm audit and you're a Western Australian grain producer,
S2: you should use a 0.9 in your scope three emissions.
S2: So that makes quite a big difference if you think
S2: about it. But then we've got the on farm side
S2: which is about coated ureas. So these nitrification inhibitor products
S2: that also make urea more benign.
S1: So about those, is there a risk that if I'm
S1: in a low rainfall environment that by coating those products,
S1: it might not work as well in my soil?
S2: Correct. The main process by which nitrous oxide is lost
S2: is what we call denitrification, which is where you've got
S2: nitrates sitting in the soil and it's waterlogged so it's anaerobic.
S2: Now if you think about the Western Australian grains industry
S2: with sandy soils and 200mm of rainfall, that doesn't happen
S2: very often. So most of the nitrous oxide they they
S2: lose is from an aerobic process called nitrification. And really
S2: if that's the main source of nitrogen you're losing, it's
S2: not a big issue. So you probably wouldn't spend the
S2: extra money to reduce that nitrogen because you talk about
S2: milligrams per hectare okay.
S1: I also really like that. I'm sure Grace really liked
S1: what you spoke about before, about making our own urea,
S1: because I think that might help input costs, too. But
S1: I could be dreaming. Richard, am I going to need
S1: to turn my farm into a solar farm to make
S1: my own urea?
S2: We've done some work in the cotton industry, where we
S2: discovered that the majority of water pumping in cotton is
S2: off grid solar. And if you think about how many
S2: months of the year they pump, it's probably less than
S2: half the year. So they had a lot of off grid, disconnected,
S2: idle solar for six months of the year. And so
S2: if you connect that up to a passive green hydrogen technology,
S2: which is available commercially already and is pretty much being
S2: developed rapidly, you could use surplus solar on farm to
S2: generate your own ammonia. So the idea of a solar farm,
S2: you could if you wanted to move quicker. But if
S2: you had lots of off grid pumping or you had
S2: lots of off grid solar, you could already have the
S2: capacity sitting there.
S1: So what does that look like for us visually? What
S1: is that solar? How much space is that going to
S1: take up?
S2: If you had to generate all the passive ammonia for, say,
S2: a large grain property in the north west of Victoria,
S2: you're not talking about hectares under solar, you're talking about
S2: sub hectares. So it would require a solar farm, but
S2: it wouldn't be a solar farm that occupies a lot
S2: of land area because you can get them fairly efficient
S2: within less than a hectare to generate all the ammonia
S2: you would need.
S1: Okay, I'm leaning in and I'm sure Grace is too.
S1: How much do these commercial plants cost?
S2: Unfortunately, I have no idea.
S1: That was that was that was what I was like. Righto.
S1: Sign me up. I'm ready to buy one.
S4: Yeah.
S1: Can we go back to the scope one? The scope
S1: two and the scope three. And why there is such
S1: a push? We're hearing carbon credits. We're hearing banks now
S1: talking about these things. What do farmers need to know
S1: about net zero about these different scopes if they're being
S1: approached by other people in the supply chain?
S2: Yeah. So what we're starting to see is all those
S2: targets set by your supply chain, what we call your
S2: value chain, which is the banks as well as the,
S2: the buyers of the product and perhaps some of the
S2: suppliers of products, the farms, they all have these scope
S2: three targets. And those targets are actually your phone. And
S2: so they need what you have on your farm to
S2: meet their target. They can't meet their target without your
S2: farm participating and sharing or socializing their carbon number along
S2: the value chain. So this creates an interesting dynamic where
S2: there's a co-dependency that hasn't been realized before, where the
S2: banks scope 330% target is the same as Cargill's 30% target,
S2: which is the same as Nutrien's target, which is the
S2: same as everyone else's target, which is your phone. But
S2: what we haven't seen is those entities setting the target,
S2: actually sitting around the table and realizing their codependency. And
S2: we think that's where the solution lies. Actually, the farmers
S2: got something to offer, which is a low number that
S2: they would preferentially want to buy. But we need to
S2: figure out what the business model looks like for each
S2: of these, because that co-dependency means not everybody's paying. We're
S2: all sharing.
S1: So you're the guru. I'm sure you've got an idea
S1: on how they could.
S2: There are ways in which we can do it. It's
S2: fertilizer companies working with government on pre coating all the fertiliser.
S2: So can we get all the fertilizer we buy instead
S2: of buying straight urea you're buying coated urea and you're
S2: cropping emissions are 50% less overnight. If all the fertiliser
S2: companies did it it wouldn't be 14% per unit nitrogen.
S2: It would be 4%. So suddenly you're talking about a
S2: more tolerable level. And then if everyone in the value
S2: chain were able to come to the party with a
S2: small amount of investment to buy into that consortium, that 4%
S2: is negligible.
S1: So are you talking about working with the government to Precoat?
S1: But the question I asked before about low rainfall environments,
S1: and I'm probably got this wrong because I'm not neither
S1: a soil scientist or an agronomist. Does that mean that
S1: if it's in a low rainfall environment and you have
S1: to buy the pre coated stuff, that you're not going
S1: to be able to have as much nitrogen available as
S1: if you didn't buy the pre coated urea.
S2: That probably wouldn't be the case because the nitrogen would
S2: just be slightly more efficient regardless of which system you
S2: put it on. What you'd probably argue is if the
S2: system that it goes on to is never anaerobic is
S2: never saturated, then the efficacy of the coating is probably
S2: not as much as if it was put on in
S2: a saturated the environment, so the amount of savings of
S2: nitrous oxide would be less proportionately. But you would argue
S2: that if that system is never saturated, it wasn't producing
S2: nitrous oxide in the first place.
S1: I love that you've got all this information in your
S1: head and I've just got access to it. I'm really
S1: loving this. My second question around what you were saying
S1: in regards to numbers, you were talking numbers and how
S1: farmers could give the value chain their numbers. Explain to
S1: me more about these numbers, Richard.
S2: So there's two types of targets for greenhouse gas emissions.
S2: There's absolute targets, which is what governments set and say
S2: we want to be zero by 2050. That's not what
S2: the farmer is facing. The supply chain and value chain
S2: can only buy on the basis of emissions per tonne
S2: of grain. And that's what we call emissions intensity. It's
S2: quite different because you might not be able to shift
S2: the greenhouse gas emissions, but you can increase the efficiency
S2: of the grain production. And so if you were a
S2: farmer that is in a low rainfall region and you
S2: are putting on, say, 50 kilos of nitrogen and getting
S2: a three tonne grain crop, you could be a lower
S2: number than someone who's putting on 100 kilos and only
S2: getting three tonnes. It gives farmers a direction to move to, say,
S2: in the emissions intensity metric for grains, we can go
S2: from 0.15 to 0.5 tonnes of emissions per tonne of
S2: grain just by being more efficient with nitrogen fertiliser.
S1: I think that's that crucial point, probably of our conversation.
S1: I'm actually going to get you to repeat that. Can
S1: you tell me again about numbers and why it's so
S1: important that we know our numbers?
S2: So the importance of knowing the number is if you're
S2: a grain buyer and you have a target, there's no
S2: incentive for you to buy a higher emissions farming system
S2: grain supply than a lower. But the metric on which
S2: they can buy is emissions per tonne of product. So
S2: that's greenhouse gas emissions per tonne of grain. And if
S2: you are a less efficient farmer then you're 0.5. In
S2: other words, 0.5 tonnes of emissions per ton of grain
S2: if you better. With nitrogen fertilizer efficiency, you're a 0.15.
S2: In other words, an order of magnitude lower than the
S2: high emitting farmer. So if you're a buyer and you
S2: have a 30% target, you're going to buy all the
S2: 0.15 first, because you'll meet your quota with the 0.15,
S2: you won't bother with the 0.5, because if you buy
S2: all 0.5, it costs you more in carbon credits to
S2: achieve your target. You suddenly have to go buy carbon
S2: credits to get to your target, whereas if you only
S2: bought the 0.15, you would probably meet your 2030 target
S2: just by preferentially buying low emission or low emissions intensity
S2: farms first.
S1: I feel like you've just completely flipped the script on
S1: this conversation and this whole discussion, because farmers are all
S1: about being more efficient. BCG is all about helping farmers
S1: be more efficient. We are focusing on all the time
S1: how we can improve efficiencies, improve yields. And so I
S1: think it's a really positive way to look at all this.
S1: If we can think about it rather than, oh, I've
S1: got to do this, and I'm just looking at doing
S1: what I'm already doing, and there's some more strategies and
S1: there's some more tools out there that can help me
S1: achieve that. I think that's actually really exciting. Now, I
S1: picked up that you mentioned carbon credits there, Richard. And
S1: for a start, can you just explain what are carbon credits.
S2: So carbon credits are a represent one. Carbon credit is
S2: one tonne of carbon dioxide equivalents turned into a financial instrument.
S2: So you can think of a carbon credit just like
S2: a BHP share certificate. It doesn't have value until you
S2: choose to monetize it, but you can generate it. And
S2: the reason why it's an equivalent because if you reduce
S2: nitrous oxide by a tonne of carbon dioxide equivalent, that's
S2: one carbon credit. If you can store one tonne of
S2: soil carbon as a one tonne of CO2 equivalent as
S2: soil carbon, that's one carbon credit. If you sell your
S2: animals early for market and there's a ton of methane
S2: less as a result, that's one carbon credit.
S1: So how are they currently being used.
S2: At the moment? There's voluntary markets around the world. And
S2: these compliance markets will be called government markets. Not many
S2: government markets mainly in Alberta for farmers and in Australia,
S2: the carbon farming initiative was the market. It's now morphed
S2: into other things. But Australia is probably the biggest carbon
S2: compliance carbon credit market in the world. And they have
S2: a currency called an Australian carbon credit unit, which has
S2: a approximate value if you sell it on the free
S2: market at the moment of about $35 per carbon credit.
S1: Do you think that the interest in carbon credits will
S1: increase with this push for net zero?
S2: So the flow in carbon credits, the way I see
S2: it is it makes it too easy for the big
S2: emitters to avoid doing serious action. It makes it easier
S2: for them to just go to the market and buy
S2: their way out of trouble. Because for a farmer, paying
S2: $35 a tonne for carbon is expensive. For a mining giant,
S2: it's spare cash. And so for the mining giants to
S2: buy their way out of trouble, buying carbon credits from
S2: the land sector is the easy way out of trouble.
S2: Which gets you back to the net zero versus carbon
S2: neutral argument. So they're heading for net zero, but they
S2: won't be carbon neutral because they've done nothing about their emissions.
S2: If you just buying your way out of trouble, what
S2: you do is you affect land use change in the
S2: land sector. And that's unfortunately what we're seeing is the
S2: big end of town can afford to buy up agricultural
S2: land and plant trees. That's not in the interests of
S2: farmers or the agriculture sector. And so we see some
S2: skewed behaviour from carbon credits instead of actually taking real
S2: action that affects the environment. A carbon credit doesn't actually
S2: change the environment much. It just means the emission reduction
S2: occurred on your farm. You sold it to a mining
S2: giant who continues to pollute and the net position of
S2: the atmosphere doesn't change.
S1: You worked on the net zero policy with government, and
S1: as part of that, this was supposed to not happen.
S2: Well, if you map all sectors to their own net
S2: zero target by 2050, the demand for carbon credits is massive.
S2: But if you just map the agricultural industries, each industry,
S2: individually wheat, you know, the grains industry separate from the
S2: cotton industry, dairy using known technologies to get to net
S2: zero by 2050. We need to keep all our carbon
S2: credits within agriculture. We'll need every single offset we can
S2: get to actually achieve. And then we still don't get
S2: to net zero. So this notion that there's all this
S2: spare carbon in agriculture that we can flog off to
S2: the mining industry, short term gain, but long term pain,
S2: because it means agriculture steadily makes its own target almost
S2: impossible to achieve.
S1: And that's a really good point, I think. But you
S1: could also apply that to the ag industry. You could
S1: also say that you would be recommending farmers are thinking
S1: about focusing on their scope rather than saying, well, I'll
S1: just plant a heap of trees. For example. Would you
S1: say that? Yeah.
S2: Right now, because of the metric that we were talking about,
S2: the emissions intensity metric, the best action you can take
S2: is just to lower that number. Planting trees isn't actually
S2: required at this stage. You could get the lower number.
S2: So say you were a 0.5 and you didn't want
S2: to change your nitrogen fertilizer strategy. You could plant trees
S2: and then offset that number to get a lower number.
S2: But in the long term, the trees will grow up
S2: and you won't get any more carbon out of them. So,
S2: you know, we've got we've got examples like the Jigsaw
S2: Farms example where, you know, carbon neutral for a period
S2: of time, but eventually the day of reckoning comes where
S2: the trees grow up and the soil saturates and you
S2: no longer are getting more carbon sequestration. The emissions remain.
S2: So in the end, we come back to the same equation.
S2: Unless you reduce your scope one emissions, that's ultimately the
S2: long game.
S1: So that's where you would recommend farmers focus their energy.
S2: Definitely. If you're in the grains industry, the main one
S2: is looking forward to a future of insulating your urea
S2: from the fossil fuel price, which regardless of greenhouse gas emissions.
S2: That's a good idea, because three years ago we saw
S2: the urea price shoot through the roof. I think it
S2: went up three fold just because of the petrol price
S2: went up. We've got to disconnect that regardless of fossil
S2: of greenhouse gas emissions. So on farm generation or some
S2: way of generating passive ammonia to feed our crops in
S2: the future is going to be essential. But then separate
S2: to that is what can we do about being more
S2: efficient with converting nitrogen? You'll never get the grains industry
S2: away from using nitrogen fertilizer. It's essential to grain, protein
S2: and to plant growth. But what we can do is
S2: look to a future of using more efficient nitrogen and
S2: more benign sources of nitrogen.
S1: Which farmers want to do anyway. And if they have
S1: more control of it because they can make it themselves,
S1: that's probably going to make them more profitable anyway. Would
S1: you say?
S2: Most definitely. In the long term. In the short term,
S2: there's a bit of hiccup in in renewable energy, technologies
S2: are expensive when they first start and then suddenly solar
S2: becomes the cheapest technology in town. Even the international reviews
S2: are stunned at how the price per kilowatt of solar
S2: when it first came out. Compared to now, no one
S2: would have predicted it would drop in the price as
S2: much as it did. So I think that's the general
S2: rule for all renewable energy technologies. Is they expensive at
S2: the start? But once you through that initial adoption curve,
S2: they become cheaper than any other form of energy.
S1: That is a really positive message. Now I just want
S1: to jump back to you talking about trees. How long can.
S1: So if I plant a tree today, how long will
S1: I be able to claim carbon credits on that? Before
S1: you say it's just not, it's not making any more.
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S2: So trees differ depending on what you plant. If you
S2: take the Jigsaw Farms example again, the environmental plantings or
S2: wattles wattle only lives for 20 years and then it dies.
S2: So you'll get your maximum rate of sequestration at about
S2: five years old when the annual growth rate is at
S2: its peak. But it's curving from then on. It's slowing
S2: down from then on, and by 20 years you're in
S2: second generation, you're getting natural seeding taking place and the
S2: second generation coming up. But your carbon sequestration has flattened out.
S2: If you plant something like a long lived eucalypt or
S2: spotted gum, it will grow for 80 years, but its
S2: peak is in the first 15 years. So after 15 years,
S2: you've got that tree there, but it's not peaking at sequestration.
S2: What we would like to see eventually is harvest, replant
S2: where we turned it, instead of a locked up area
S2: of land that you can't ever harvest and generate profit from,
S2: you turn it into a agroforestry operation, because we know
S2: that if you harvest it at that spot at Gum,
S2: at 25 years, 40% of that could be locked away
S2: in construction timber as a permanent carbon credit. And then
S2: you replant on the same area. So the same area
S2: of land gets used over and over as revenue, as
S2: timber generation, as well as carbon offset. That's a workable
S2: model that we've put to government.
S1: So if I had a paddock of Bush on my farm,
S1: how does that work? Or is that just those trees
S1: are too old, they don't count anymore.
S2: If it's what we call remnant vegetation, then there's nothing
S2: you've done to change the carbon stored in that remnant vegetation.
S2: What we also, when farmers ask us about that, we
S2: say put that Bush into our calculator and tell us
S2: it's 100 years old. And then the calculator says there's
S2: zero carbon change because it's stable. And that kind of
S2: answers the question if it's remnant vegetation that's been there
S2: for 100 years or more, well, it's not changing much.
S2: It's just weather cycles that change it. So there's no
S2: sequestration there. There's a stock of carbon that was the
S2: avoided deforestation methodology was paying farmers not to clear that land,
S2: but that didn't actually help the atmosphere, because if you
S2: didn't intend to clear it, then the atmosphere doesn't benefit
S2: at all by not clearing the land.
S1: That's really interesting. Can you quickly explain what you mean
S1: by carbon sequestration?
S2: Carbon sequestration is is that process of photosynthesis? If you
S2: think about all organic material around you, even the wood
S2: in front of us on the table, all that wheat stubble,
S2: it's all 50% carbon, 45% of all organic material is carbon. Inherently,
S2: we are all carbon farmers. Anything we do that captures
S2: photosynthesis is capturing carbon dioxide out of the atmosphere, putting
S2: it in a plant and putting it into some use.
S2: That is sequestration. What we talk about true carbon sequestration
S2: in the long term is, well, what is the fate
S2: of that carbon? Because the carbon in your stubble gets
S2: eaten by sheep and belched out as CO2, and it
S2: goes back to the atmosphere. It's the carbon that goes
S2: into the soil, into long term storage that we call sequestration.
S2: It's now sequestered. It's locked away from the environment for
S2: at least 100 years. It's the carbon in that tree
S2: that is going to now grow for 100 years. That
S2: spotted gum, that 100 years later, there's carbon. You can
S2: see it. It's standing in the tree. That's sequestration. We
S2: can't call it sequestration if it's just photosynthesis going into
S2: grass that is eaten by a cow and belched out,
S2: we can't call it sequestration if it's carbon going into
S2: photosynthesis in a wheat crop, that then within the 12
S2: months is eaten by humans and released back to the atmosphere.
S2: That's just a neutral cycle.
S1: So back to the numbers and knowing your numbers. How
S1: do I know my numbers on my farm?
S2: Yeah. So fortunately we've been working on this for a
S2: long time. I always say I developed carbon accounting tools
S2: in Australia before anyone cared. Now everybody cares and wants
S2: to know how to get the number. Lucky you. He's
S2: a bit too much workload there, but we've produced a
S2: number of simple Excel spreadsheets that can give you your
S2: number for a cropping operation. It's a case of choose
S2: a crop that one of sort of 5 or 6
S2: crops that you're growing on the property. Tell us what area,
S2: what the crop annual grain yield was, how much nitrogen
S2: you applied, how much diesel electricity you used, and how
S2: much glyphosate you put on. Once you've got that, you've
S2: got your number.
S1: So that's pretty much what every farmer would have anyway
S1: for their cost of production.
S2: That's what we're trying to do is bury these tools
S2: behind existing farm software. And so we've been working with
S2: Agriculture Innovation Australia to develop the environmental accounting platform, which
S2: is an engine, not a tool. We don't want farmers
S2: to put their data in. Again, if you belong to
S2: a software house that has all your production data sitting
S2: in it, it's what we call API. We get that software,
S2: your farm software, to talk to, this engine to get
S2: the result and to bring it back seamlessly in the
S2: background and give you your carbon number. So that's the
S2: plan at the moment. We're quite well down the track
S2: on that plan at the moment.
S1: So you're talking about this software. What kind of software
S1: plugs into your engine?
S2: Well, all we do with the engine is declare what
S2: we call an API. An API is just a set
S2: of instructions. It says if you've got software, we need
S2: to know annual yield of the grain. We need to
S2: know the annual urea applied and non urea applied. We
S2: need to know the annual fuel required. So it just
S2: tells the software your software what unit and time step
S2: to feed out to get the right result for the
S2: input to the engine and to send back the right result.
S2: Then it tells your software what the result that come
S2: back will be, and it'll be tonnes of emissions. Scope
S2: one tons of emissions, scope two. And so you know
S2: how to then represent that in your software. So it's
S2: just a set of writing instructions.
S1: How long would it take for a farmer that had
S1: 2500 hectares in mixed cropping.
S2: Well, you just introduce a complexity with the livestock if
S2: it's cropping and you knew the numbers that needed to
S2: go in the calculator, you could do it in ten minutes.
S2: If it's livestock, it's a bit more difficult because we
S2: need to know how many animals in each period of
S2: the year and when they were born, and what their
S2: growth rate was.
S1: It's always more difficult with livestock, Richard, much more difficult.
S2: And especially as you go further north in Australia where
S2: they don't even know where they are. So what we
S2: envisage eventually is, is that number comes out as a
S2: QR code, just like we started to buy everything with
S2: QR codes. It's a way of locking down that number
S2: and all the information is stored in a QR code,
S2: and then we just send it through secure transaction like
S2: a blockchain technology from the farmer directly to the supply
S2: chain or the value chain, who then says, well, okay,
S2: we'll queue up all those blockchains and start with the
S2: ones first. We'll buy all those first because they now
S2: have a mechanism to say why? Why would they buy
S2: the ones? Well, we've got a 30% target we've got
S2: to meet. So we'll buy all the QR codes that
S2: are zero point ones, and then we'll buy the 0.2
S2: and then the 0.3. And that's how we drive change.
S1: That's amazing. I feel like grace that I felt like
S1: when we came into this conversation, I was thinking, oh
S1: my goodness, I'm going to have to do all these things.
S1: It's going to be really hard. And now I feel
S1: like you've done all this stuff for us, and all
S1: I really need to do is get the engine and
S1: or input my figures into a spreadsheet to go into
S1: this engine, get my numbers. That's the first thing that
S1: I'm thinking that I need, and then start thinking about
S1: this commercial. I like the idea of this commercial urea
S1: factory on my place with my very small solar farm.
S1: But what I am thinking about in this engine is
S1: what about this year, Richard? So this year I thought, yep,
S1: going to have a good crop. Not so good last year.
S1: Great crop. How doesn't that mean that my numbers are
S1: going to change every year?
S2: Entirely correct. So it's bigger again in the livestock industries
S2: because you've got climate variability you're dealing with, which means
S2: six tonne grain crop two tonne grain crop could be
S2: in successive years and your nitrogen could even be out
S2: of kilter with that. You might have overinvested underinvested in
S2: the high rainfall year and got your six tonne, but
S2: you actually eroded soil nitrogen in the process. So next
S2: year you've got to compensate by upping the nitrogen and
S2: being less efficient. So what we tend to do is
S2: take a running mean error in cropping. It's at least
S2: one full cropping cycle when it comes to sequestration. We
S2: think it's even more fair to take a ten year
S2: running mean at it, because soil carbon can vary wildly
S2: with rainfall. And so we kind of fool ourselves if
S2: we measure in short time steps. So if you take
S2: a series of samples once every five years and you
S2: you do a ten year running average on that. It
S2: actually smooths out those bumps a lot better. And so
S2: to get around that variability, I think the future is
S2: at least only every five years. It's the running mean
S2: average that we're going to use. Now it comes to
S2: how does the supply chain then use that. The supply
S2: chain can't do a bottom up audit of every firm.
S2: So when they selling internationally they're going to take a
S2: running average. They're going to say all the grain farmers
S2: in the northwest of Victoria are about a 0.2. And
S2: that's the grain we sell on the global market. So
S2: everything gets normalized as you go further up the supply
S2: chain to where the banks have to deal with the
S2: international monetary market, where the supply chain have to deal
S2: with shareholders on greenhouse gas emissions exposure. And then the
S2: whole of the Wimmera mallee becomes a 0.2.
S1: It's interesting because I was thinking that farmers might think
S1: I'm just going to be lumped in with everybody else,
S1: what's the point? However, if farmers want to be profitable
S1: and they want to remain efficient, then they're going to
S1: be focusing on these things anyway. So it's really not
S1: one or the other. It's really just about would you
S1: say that?
S2: I think that's the key point. Key point is the
S2: metric that they're buying on is an efficiency metric in itself.
S2: So emissions intensity is just another way of measuring your
S2: overhead costs relative to your output. And you might not
S2: be able to reduce the greenhouse gas emissions, but we
S2: sure can push that output a little bit better. If
S2: you take a view of trees and you say it's
S2: a carbon credit, then it's a square block on the
S2: worst part of your farm at the back of the farm,
S2: if you take the view that trees, the co-benefits have
S2: their own merit, in other words, land survival, then you
S2: plant rows of trees on the western boundary of every
S2: paddock and you get shade and shelter. Now that will
S2: pay more than carbon credits. It's taking that holistic view
S2: of how do we improve farm efficiency and address an
S2: animal welfare and animal health issue, get better land survival
S2: and carbon credits. Then it changes fundamentally how you view
S2: trees on the farm.
S1: Can you explain, Richard? I hear the term offsetting and insetting.
S2: So a good point. Offsets are generally a carbon credit.
S2: So it's saying I'll generate a carbon credit and I'll
S2: sell it to the mining giants so they can use
S2: it to counterbalance. So they've got, you know, 100 million
S2: tonnes to meet. If they can buy them all as
S2: carbon credits, they can claim to have met zero targets,
S2: which is not actually true. But that's the game that
S2: we play. When you talk about inset, you're saying, let's
S2: not sell that, because actually my value chain, my bank,
S2: my advising firm, my buyer, they want that carbon credit.
S2: So it's actually socializing that carbon credit inset within the
S2: family the value chain family. Now important caveat here. If
S2: you're dealing in an offset it has to be a
S2: monetary unit called a carbon credit. So that it actually
S2: is like a share certificate, so it gets traded. Whereas
S2: if you're in setting, you actually don't need a carbon credit.
S2: You just need to socialize your QR code of your
S2: farm audit within the value chain. And that's in setting.
S2: So a really important distinction is an inset doesn't require
S2: a carbon broker to actually generate a financial unit called
S2: a carbon credit. You can actually just bypass that entire
S2: market and say, I'm just going to socialize my QR
S2: code of my farm with my value chain. And if
S2: I'm the most efficient farmer, they will value that. And
S2: that's where the revenue lies for me. And being first
S2: in the queue to sell down the value chain.
S1: So there'd be some people out there, Richard, that would
S1: say net zero climate change and maybe, perhaps roll their eyes.
S1: What would your advice to them be? What would you
S1: say to people that are questioning whether climate change is real?
S2: Well, that's where a few colleagues and I came up
S2: with this, because go back a decade and the reception
S2: on the farming community wasn't nearly what it is now.
S2: If things have changed quite a lot. And so we
S2: came up with this way of getting around that hurdle,
S2: and we called it the three P's of Climate Change.
S2: And what we meant is the first P was the
S2: physical effects. In other words, hotter, drier, all those scenarios,
S2: the doomsday scenarios. And we're not dealing with that in
S2: this concept we're talking about. The second P is the
S2: policy implications. They real. You can't say that we don't
S2: have a greenhouse gas emission target in Australia. You can't
S2: say the Paris agreement didn't set us on a course
S2: to net zero. That policy environment is tangible. It's real.
S2: It's there. So you can ignore the first P of
S2: the physical environment. But the policy environment is with us.
S2: So it raises the question. Ignoring the first one doesn't
S2: mean say you can ignore the second one, and then
S2: the third one is the people or peripheral impacts of
S2: climate change, which is why do shareholders care? Why are
S2: we seeing shareholders in boardrooms around the world? Care? Well,
S2: they care about what the future customer wants from your
S2: agricultural system. And so we start seeing the supply chain,
S2: setting targets to insulate themselves from the risk of greenhouse
S2: gas emissions. That's real. Those targets are real. They are there.
S2: Every supply chain has got one. All the banks have
S2: got them. You'll find new coal ventures are struggling to
S2: get capital out of the banks. The banks won't lend
S2: them money. That's real. So that's how you get around it.
S2: You can say, well, you can be a climate change cautionary,
S2: I'll call it. I don't like the word skeptic because
S2: that implies you can say, I don't really appreciate the
S2: science on climate change. I don't think it's real. That
S2: doesn't absolve you of the second P or the third
S2: P if you're in business, because the second P policy
S2: is real and the third P people is real. And
S2: if you don't respond to that, you'll find yourself left
S2: out of the pack in the future. Okay.
S1: So coming back to sort of more bigger picture and
S1: what farmers can do, if I had 200,000 to spend
S1: and I thought I'm going to put it into bringing
S1: my number down. What would you say farmers could do
S1: with that money? What would you recommend? Well, that's a
S1: difficult question.
S2: If you're a livestock operation, you'd say getting yourself into
S2: a better position with fencing and water points and getting
S2: more consistent grazing management across your property would probably be
S2: the best way to get your emissions intensity down. If
S2: you're a cropping property. Putting yourself in a position for
S2: better precision agriculture would probably put yourself in the strongest
S2: position to be more efficient knowing how to spatially apply nitrogen,
S2: for example, rather than just a blanket application across the field.
S2: Those kind of precision technologies would probably be the best
S2: investment where if you're looking at saying, well, it's not
S2: just about carbon, it's about efficiency as well. It's about
S2: the bottom line. If I had to invest, you'd invest
S2: in reducing emissions intensity, because right now the planting of
S2: block of trees to get yourself to neutral isn't actually
S2: what's being required of you at this stage.
S1: That makes sense. Now moving on to so I want
S1: to get my number. Is there only one system that
S1: I can put my numbers into, or are there different
S1: systems that create different numbers for me?
S2: So that's an important point because we see countries around
S2: the world with multiple tools. New Zealand, UK have multiple
S2: tools that give different numbers. And the moment you have
S2: a policy environment that restricts emissions like New Zealand, you've
S2: got to lock it down to. It's like having the
S2: tax office have multiple calculators owned by private sector. You
S2: can't have that. We convinced the Australian government they needed
S2: to lock it down. They needed to say this is
S2: the only methodology. So between now and the end of
S2: the year, we're working on developing a national standard for
S2: carbon accounting in agriculture. Then we don't care how many
S2: software tools emerge after that. We just ask the question,
S2: does your tool 100% comply with the standard? Yes or no?
S2: Which means if you run this tool versus that tool,
S2: you get the same number. We've got all the Excel
S2: versions on the website, but over time we've shifted in
S2: our position from these are the definitive tools, the greenhouse
S2: accounting framework. Tools to being. Here's an Excel spreadsheet that
S2: is transparent, unlocked, and you can go and have a
S2: look at how we've done all the calculations. So there's
S2: no black box involved. And we've got a note next
S2: to every calculation as to where we got the number from.
S2: So there's no making up stories. We now see them
S2: not as the definitive tool, but as a representation of
S2: the standard. In other words, if you are a software
S2: provider and you want to put the right standard into
S2: your tool, go and hack into our tools and get
S2: all the calculations out and put them into your tool.
S2: So it's more a transparent representation of how to do
S2: the calculation rather than the only tool available.
S1: I think transparency is so important, particularly when it's something new,
S1: because I feel like new things change always creates. It's
S1: just reality. It makes people feel uneasy. So I think
S1: having that transparency is really important. Grace, can you talk
S1: a little bit more about the Carbon Outreach Program and
S1: how that links into what Richard's been talking about? Yeah.
S3: So through the Carbon Outreach program, a lot of these
S3: questions that we've discussed today, that's what we're wanting to answer.
S3: We want it to, as you say, be really transparent
S3: for farmers. We know that knowledge is power. And a
S3: lot of this is quite unknown. So hopefully over the
S3: next 18 months, we'll be able to roll out a
S3: number of different activities that help increase that awareness level
S3: for growers.
S1: So big question, Richard, are all these policies, these things
S1: that are coming in, is it actually going to affect
S1: our atmosphere.
S2: The way we've put it forward? It will eventually help.
S2: There's no question that the biggest emission sources are fossil fuel.
S2: So coal fired power stations and diesel consumption in road transport,
S2: if you get those under control, you've got a good
S2: way forward. Agriculture is a very small part of the equation.
S2: So it used to be 14%. But recently we've seen
S2: what we always feared is that because the fossil fuel
S2: sector has started reducing its emissions, the transport sector started
S2: reducing its emissions and agriculture stayed the same. Suddenly this
S2: year we're not 14% like we were last year, we 17%
S2: it's a percentage game. So what's going to happen over
S2: time is if agriculture does nothing, we'll become the only
S2: sector of greenhouse gas emissions while all the other sectors
S2: go to zero. So from an appearance point of view,
S2: from a visual point of view it doesn't look good.
S2: So all sectors are going to have to do their
S2: bit towards the future, whether carbon credits exist in the future.
S2: My personal view is no because they are just a
S2: cheap way of getting out of jail. It's a cheap
S2: way of buying your way out of trouble, and the
S2: atmosphere doesn't really benefit from that from a carbon crediting scheme.
S2: If you think about the models we've talked about of
S2: reducing emissions from farm production, eventually that will drive through
S2: the supply chain in a shared arrangement. We'll all get
S2: down to some lower number. Will it be zero? Unlikely
S2: for agriculture, because there's no way you can use nitrogen
S2: on soils and not have any greenhouse gas emissions. You'd
S2: have to sterilize the soil to do that, and we're
S2: not about to intervene at that level. Will the northern
S2: livestock industries ever get to zero when we don't even
S2: know how many animals there are or where they are?
S2: Probably not. But there are sectors that can get to
S2: zero and will get to zero.
S1: You've highlighted some huge points there, Richard. I think focusing on,
S1: because that's another thing, I think that people sometimes think, oh,
S1: this other country, they're producing all these emissions or this industry,
S1: they're producing all these emissions. Why do we have to
S1: do something? But what you're saying in regards to that
S1: pie chart is that if we actually don't do anything
S1: in agriculture, our slice of the pie is going to
S1: get bigger. And again, if we do try and reduce
S1: that piece of the pie, we're actually going to be
S1: more efficient anyway.
S2: And that's why we focused on emissions intensity, because it
S2: empowers farmers to do something today so we can do
S2: things to make our farms more efficient. Get that number
S2: down from 0.5 to 1.10 .15. Then how do we
S2: get to zero? That's what's still got to come out
S2: of research. Cost effective options to drop that number to zero.
S2: Is that ever possible? That's still sitting in research. We
S2: don't want farmers to be stressing about being absolute zero
S2: when the technology that lets them get there cost effectively,
S2: isn't currently in the marketplace.
S1: Is there a lot of money going into research in
S1: this space? Richard?
S2: We've just had the net zero agriculture CRC commissioned by
S2: the government. And to give you some idea, it's the
S2: biggest CRC in Australia's history. So I think it's about
S2: $167 million and 73 commercial partners. So the biggest number
S2: of commercial partners have signed up to the CRC, which
S2: gives you some idea of how big the problem is
S2: being perceived. If out of all the cooperative research centres
S2: in Australia's history, net zero agriculture is the biggest that's
S2: ever formed with the biggest number of partners, it does
S2: send a very strong message saying we're looking for research
S2: solutions here. The other thing to remember is we're not
S2: alone in the world. New Zealand puts millions of dollars
S2: into this research. So it means we can rationalize what
S2: we do because New Zealand is doing a methane vaccine program.
S2: There's no point in Australia repeating that. So at the
S2: moment let them come up with a methane vaccine. We
S2: don't have to do that work. I sit on a
S2: couple of EU committees that commission millions of euros into
S2: this type of research in the European Union, Canada, the
S2: United States, even Brazil. So we're not alone.
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