Carbon Capture Project Final Report An evaluation of the opportunity and risks of carbon offset based enterprises in the Kimberley-Pilbara region of Western Australia Carbon Capture Project Final Report An evaluation of the opportunity and risks of carbon offset based enterprises in the Kimberley-Pilbara region of Western Australia Mark Alchin, Elizabeth Tierney and Chris Chilcott Industry Development - Rangelands, Department of Agriculture and Food WA March 2010 Disclaimer: the Chief Executive Officer of the Department of Agriculture and Food and the state of Western Australia accept no responsibility whatsoever by reason of negligence or otherwise from the use of this information or any part of it. Copyright © Western Australian Agriculture Authority, 2010 EXECUTIVE SUMMARY Commercialisation of carbon in the Australian Rangelands could lead to the development of a multi-billion dollar industry, and Western Australia has the potential to capture a significant share of this revenue. A significant proportion of the WA Rangelands is degraded which is the legacy of the exploitative practices of historical pastoral development and the mining industry. Full environmental restoration of these areas is well beyond the fiscal capacity of land managers and the WA State Government. Carbon based enterprises have the potential to restore large tracts of degraded land in a cost-effective manner and can deliver a number of other socio-economic co-benefits to regional WA. The WA Rangelands have the potential to play an important role in mitigating the adverse impacts of climate change primarily through biosequestration and controlled savanna burning programs. There are a number of issues which need to be resolved in order for this potential to be realised. This study makes a contribution to the resolution of some of these issues. This study was an initiative of the Department of Agriculture and Food WA, Rangelands NRM WA and the ChemCentre and was funded by the Caring for our Country Program of the Commonwealth Government. The study involved an in-depth assessment of the greenhouse gas (GHG) biosequestration potential of three case study business in the Kimberley-Pilbara region of WA. The study completed a natural resource inventory of the pastoral leases and financially benchmarked the existing pastoral businesses. A comprehensive carbon accounting survey of the three leases was then conducted in order to establish the baseline levels of carbon. The survey directly measured the main carbon pools (i.e. aboveground woody material, coarse woody debris, herbaceous standing and surface litter and soil carbon) and used allometric relationships to derive estimates of the others. Finally, carbon modelling of different management scenarios based on a range of grazing and savanna burning regimes was conducted for the three businesses in order to examine the potential for biosequestration. We sought to develop a comprehensive understanding of the resources (financial, physical, environmental and social) currently available to each of the three case study businesses and identify innovative ways in which they could potentially capitalise on the emerging carbon industry in the WA Rangelands. The principal findings from this study include: 1. GHG emissions produced by the three case study businesses ranged from 0.85 to 1.8 t -1 -1 -1 CO2-e ha yr or 25.4 to 54.4 t CO2-e per cattle unit yr (inclusive of emissions from enteric fermentation, diesel and petrol consumption and savanna burning). 2. Methane constituted a relatively minor proportion of the total GHG emissions that were produced by the case study pastoral businesses (< 6% of the total). Emissions from diesel and petrol consumption were the primary source of emissions followed by savanna burning (CH4 and N2O gases only included for savanna burning). Consequently, significant reductions in GHG emissions could be achieved if the businesses adopted and/or developed technology and management practices which reduce diesel and petrol consumption (e.g. telemetry, solar power, electric powered vehicles, redesign of paddock configuration and low stress stock handling). CARBON CAPTURE PROJECT 3 3. The estimated baseline amount of total carbon of the 12 land-systems surveyed in this -1 study ranged from 100 to 373.7 t CO2-e ha (inclusive of carbon stored in the woody vegetation, coarse woody debris, herbaceous standing and surface litter and the soil pools). 4. Carbon held in the coarse woody debris and the soil pools comprised the majority of the carbon that was stored on the lease in the Pilbara (74% of the total). Carbon in the woody vegetation on this lease only comprised 17% of the total. In contrast, carbon in the woody vegetation (inclusive of above and belowground material) comprised more than 60% of the total carbon stored on the two Kimberley pastoral leases. 5. The land-systems with the higher pastoral potentials (i.e. highest net primary production) had significantly more soil carbon (P<0.001) compared to the land- systems with low pastoral potentials. However, some land-systems with low pastoral potentials which had a high density of trees and shrubs had some of the highest baseline levels of total carbon. 6. The level of variability of the estimates of the 12 different land-systems was considerable; the relative standard errors (RSE) of the carbon estimates for the land- systems ranged from 3 to 69%. The RSEs at a whole lease scale for the three businesses were all relatively similar and ranged from 28 to 35%. 7. Stocking rate (calculated as the percentage difference of the actual livestock numbers to the potential carrying capacity) had a significant effect on total carbon levels at the survey sites, however we found no distinct trend or pattern and a number of the factors confounded any plausible explanation. Increasing stocking rates did appear to result in a reduction in soil carbon at the sites, however the result was not significant (P>0.05). 8. Fire frequency had no significant effect on the total amount of carbon stored at the sites (inclusive of the woody vegetation, coarse woody debris, herbaceous vegetation and soil carbon pools). However, the amount of carbon stored in the woody vegetation was higher at sites which had a moderate fire frequency. 9. Strong relationships (e.g. R2 = 0.63) between ground cover and soil carbon was found for some of the land-systems on the Pilbara pastoral lease. However, the relationship became very weak to almost non-existent for land-systems in the Kimberley region (e.g. R2 = 0.11). We suggest that this is principally related to the greater requirement of semiarid ecosystems to attract and retain water and nutrients and enhance heterogeneity at a local scale. 10. The model results suggest that full destocking and implementing a controlled savanna burning regime on the two Kimberley pastoral leases will biosequester the highest level of carbon compared to any of the other management options (i.e. set-stocking with a 15% or 30% utilisation rate; rest-based grazing). This is primarily because this management regime leads to a substantial increase in the amount of carbon biosequestered in the woody vegetation. 11. The model results suggest that management regimes which involved livestock grazing can biosequester carbon albeit not to the same extent as the full destock scenarios. CARBON CAPTURE PROJECT 4 12. Based on the modelling output we found that depending on the type of grazing and savanna burning regime that is adopted, at a whole lease scale, the gross income derived from the sale of carbon offsets could range from -$1.02 to $27.10 ha-1 yr-1 ( carbon price used was $10 t CO2-e). However, much higher returns could be achieved if offset projects were conducted at much smaller spatial scales (< 10,000 ha) and on areas that are highly degraded with very low baseline carbon levels. This is because the variation in carbon levels (degraded cf non-degraded areas) can be homogenized at larger scales and therefore the capacity to improve the existing baseline level may diminish accordingly. 13. The financial and economic analyses found that the scenarios which involved fully destocking, controlled savanna burning and/or rest-based grazing systems were more feasible compared to scenarios that involved set-stocking at 15% or 30% utilisation rates. This is primary due to the significant increase in the carbon biosequestered in the woody vegetation and the potential sale of this as an offset at a price of $10 t CO2-e. Real cattle prices and the price of carbon had a significant impact on the feasibility of the management scenarios. 14. The financial equity and borrowing capacity of two of the case study businesses in this study may expose them to unmanageable financial risk and this may limit their capacity to implement some of the management scenarios. 15. Managing landscapes principally for carbon offsets could potentially cause adverse distortions to the socio-economic and environmental integrity of the pastoral businesses and the broader Kimberley-Pilbara region. It is important that a balanced assessment is made of the suitability of the management scenarios or a ‘hybrid’ of the management scenarios. Accordingly, we developed a qualitative framework to assist land managers, service providers and policy makers to evaluate the different enterprise options. In summary, this study found evidence to suggest that a change in management practices on the case study businesses in the Kimberley-Pilbara region may increase the baseline levels of soil and woody plant carbon. We demonstrated that biosequestering carbon and livestock grazing are not mutually exclusive and we suggest that pastoralists in the Kimberley-Pilbara region may have an opportunity to reduce GHG emissions and improve rangeland condition whilst continuing to produce high quality beef for both the export and domestic markets. However, we recognise that the potential financial returns that may arise from carbon offset based enterprises is at present heavily dependent on the voluntary carbon market and the policy settings of the Commonwealth and State Governments.