Who is the report targeted at?
The report is intended for use by CMAs, relevant government policy-makers and regulators, as well as by other institutions that may be considering accreditation under GGAS or the like.

Background
Natural resource management (NRM) activities carried out by landholders and catchment managers across Australia, especially for land repair purposes, place considerable emphasis on revegetation as a means of addressing a range of issues, including salinity mitigation, erosion control, water quality and biodiversity. Through working closely with CMAs and landholders, the project proponents identified an opportunity to utilise the carbon sinks created by tree plantings on farms as an additional source of revenue to support further targeted revegetation in catchments, through their accreditation under the GGAS.  GGAS imposes mandatory greenhouse gas benchmarks on all NSW electricity retailers. Benchmark participants are required to reduce their emission of greenhouse gases to the level of their greenhouse gas benchmark by off-setting their excess emissions through the surrender of abatement certificates. These certificates are created by accredited abatement certificate providers and can be traded to benchmark participants.  For landholders to participate in GGAS, appropriate accounting, risk management and other accreditation requirements must be met by a prospective provider. The project assessed the prospects and challenges for a CMA or similar pool manager in meeting these requirements. The scale of benefit has been estimated at up to $12m per annum for NSW alone. Depending on the cost incurred in pool management, and the agreed shares of net income between landholders and CMAs, this represents a considerable additional area of land that could be revegetated.

Aims/Objectives
The primary objectives of the project are:

1. To establish the feasibility of including environmental plantings in the GGAS carbon market;
2. To identify issues associated with inclusion of these plantings within the GGAS carbon market such as: carbon pool and risk management; the suitability of low-transaction cost carbon accounting systems; ways of minimising the costs of compliance requirements by linking accreditation with other property level planning instruments (eg property management plans); and other administration systems such as those developed for record-keeping and reporting to the NSW and Australian Governments and other agencies; and
3. To develop the basis for a pilot project involving one or more CMAs preparing to apply for accreditation as a carbon pool manager under the GGAS as a means of generating additional revenue to support beneficial natural resource management activities.

Methods used
The approach followed was to identify specific issues associated with inclusion of these plantings within the GGAS carbon market that could present significant difficulties for successful accreditation.  The principal issues assessed were as follows:

• Barriers to a CMA becoming a carbon pool manager, including risk management;
• Availability and suitability of low-transaction cost carbon accounting systems; and
• Ways of minimising the costs of compliance requirements, by linking accreditation with other property level planning instruments (e.g. property management plans), and other administration systems such as those developed for record-keeping and reporting.

Subject to these issues being positively resolved, the study would provide the basis for a future pilot project involving one or more CMAs preparing to apply for accreditation as a carbon pool manager under the GGAS.  The study investigated the capacity of a CMA to meet the specific requirements listed in the Application for Accreditation as an Abatement Certificate Provider under the Carbon Sequestration Rule:

1. Registration of carbon sequestration rights on the title of the land;
2. Demonstration that the land was predominantly non-forest on 31 December 1989;
3. Demonstration that the land was planted to forest on or after 1 January 1990;
4. Demonstration that the provider has management control of the Sequestration Pool and  ownership or control of the respective carbon sequestration rights that are registered on the title of the land;
5. Demonstration of capability to maintain the abatement registered as New South Wales Greenhouse Gas Abatement Certificates (NGACs) for 100 years through maintenance of carbon stocks in the Sequestration Pool;
6. Effective risk management arrangements;
7. Satisfactory record keeping arrangements;
8. Arrangements for reporting on compliance with the requirement to maintain the abatement for 100 years; and
9. Clear, well-documented and appropriate carbon sequestration estimation methodology.

The first eight of these questions were assessed through detailed discussions and assessments of existing business processes in use by the Murrumbidgee CMA (MCMA), in consultation with the Department of Lands, and after thorough familiarisation with the GGAS requirements. In addition, a steering committee was established for the project that comprised representatives of the MCMA, the Department of Natural Resources, the NSW Greenhouse Office and IPART (the GGAS regulator) as an observer.  The last question (Point 9) was evaluated through a two-stage process of firstly identifying potentially suitable carbon accounting methods and assessing these against defined criteria to select the most appropriate methods. The second stage compared the predictions of carbon stocks made using the two selected methods for a range of sites typical of locations in western NSW, with estimated stocks based on actual measurements of biomass taken at these sites. These results were then analysed to assess how accurately the two selected methods predicted carbon stocks at these locations.  Another issue that may constrain the viability of a CMA-managed pool is the question of the legal status of CMAs as pool managers, and the risks to their core business activities that pool management may present. This aspect requires further assessment.  The key criteria used in selecting suitable carbon accounting methods were as follows:

• Acceptable accuracy;
• Economy of input data;
• Capacity for uncertainty analysis; and
• Ease of use.

On this basis two methods were selected and evaluated – the Carbon Sequestration Predictor (CSP) and the National Carbon Accounting Toolbox (NCAT).

Results/Key findings
This evaluation indicated that, with only minor changes, CMA business systems could be adapted to satisfy the GGAS requirements for developing contracts, registering carbon rights and restrictions on use, developing risk management procedures, and monitoring and reporting compliance. Specific issues that may present difficulty are the disincentive to landholders that the 100–year rule represents, and the capacity of the CMA as pool manager to plan for this requirement.  A business case was developed by MCMA (the full report is commercial-in-confidence, but key sections are reported here) to assess the attractiveness of establishing a carbon pool in the Murrumbidgee Catchment. This showed that the returns could justify such a venture, but were dependent on the level of interest and uptake demonstrated by landholders, as well as the income sharing agreed between landholders and CMAs. Attracting existing eligible plantings into the pool would be important to provide an immediate source of revenue. A draft revegetation strategy was developed that could create a pool of over 5,000 ha of eligible plantings over ten years. Depending on overhead costs, it may be more attractive to develop a larger pool based on several CMA areas.  For the small data set available, both carbon accounting methods evaluated were found to provide generally unbiased estimates for plantings of typical dryland eucalypt species over 5 years of age, however, for younger plantings the estimates were inaccurate. Neither model provided a precise measure, and the level of uncertainty associated with these methods would result in very conservative estimates of the quantum of carbon sequestration for which for abatement certificates can be created. Nevertheless either model may be suitable for use by CMAs, subject to calibration for a wider range of species and planting types, and additional assessment of uncertainty.  It was concluded that it is feasible for one or more CMAs to seek accreditation as a GGAS carbon pool manager, based on environmental plantings, either new or existing, on private land.

Implications for relevant stakeholders
The findings of this project suggest that it is feasible for one or more CMAs or other similar bodies to seek accreditation as a pool manager under GGAS. If this opportunity can be successfully realised, it will provide an alternative source of income to supplement the current public funding available. Although the amounts are modest in relation to the total current budgets of CMAs, increases in the price of carbon would increase the income from this environmental service. With greater experience in the operation of a pool, further economies may be realised (eg through increased scale), leading to greater net returns.  Another outcome from the successful adoption of this area of business may be the development of other environmental markets (eg for salinity benefits, biodiversity services). This would be an important change in the way in which currently unrecognised contributions by landholders to maintenance of a healthy, productive environment could be identified and rewarded appropriately.  The effects of this change on NRM strategies and standards are likely to be significant.

Recommendations
Based on the positive findings reported here, a pilot project should now be undertaken to develop the documentation required for accreditation of a CMA as a pool manager under GGAS. The pilot could involve either one or preferably several CMAs. It should also address the unresolved issues identified through this study. An important focus for the pilot project should be to acquire additional growth data for representative types of plantings to be included in the pool to allow improved accuracy and precision of carbon stock estimation.