Buying up the land

Land has always been an asset. If you control land you can live on it, grow food, exploit other natural resources on or under it, and even charge people for passing through. Land makes money. We didn’t call the old money upper classes ‘the landed gentry’ for nothing.

What we choose to do with land depends on its potential and the owner’s ability to realise that potential. Assuming, of course, the owner recognises the opportunity.  In turn opportunity is about where the land is and what other people want either from it or from what it can produce.

A hectare that overlooks Sydney harbour to the opera house might have been used to raise sheep 200 years ago before there was such an iconic view. Not even the most recalcitrant planning officer could block development of dwellings on such land today. It simply has orders of magnitude more value as a place for dwellings than as a paddock.

Sheep production will not suffer for a few hectares given up to buildings. Grazing properties in Australia cover more than 4 million km2, more land area than India and seven times the size of France.

Nevertheless the Sydney Morning Herald recently printed a story with the following opening line: “FARMERS fear a new rush of environmental plantings for biodiversity and carbon offsets will accelerate the loss of land for food production”.

The story was about mining companies, energy utilities and investment banks buying up land, often through carbon trading companies, to plant trees that will become biodiversity and carbon offsets under the Australian governments Carbon Farming Initiative.

Much of the land purchased is degraded or marginal with limited production potential – a gentle way of saying uneconomic. The new owners have trees planted and account the carbon that these plants pull out of the atmosphere as they grow. This they can register as credits to offset their obligations to purchase emission permits.

Under the carbon accounting rules the new plantings are expected to be “permanent”. That is they must persist long enough to count as emission reductions on the greenhouse gas balance sheet.

An offset planting is not a plantation or production forest. There is no mechanism to allow for later use of the timber resource.  They are carbon sinks, soaking up CO2 from the atmosphere, and providing habitat for any number of creatures that were under pressure as a result of land clearing.

The green end of town is happy indeed. A good thing you would think.

Farmers and their advocates are less enamoured. The prospect of losing large tracts of agricultural land sends a disturbing message to a community already worried by drought, flood, pests, a strong currency and uncertain terms of trade. Then there is also the buy up of productive land by foreign entities, both companies and sovereign states, looking for food security at home.  More land going out of our control.

With this kind of reporting it is a small psychological step to thinking that the land is being appropriated from under our feet creating a threat to a 200 year old way of life.

This will not happen. Even at their maximum extent offsets will be a tiny percentage of the total land area. After all it takes a lot of plantings to cover an area the size of India. However, the reality is that there will be questions asked of land use in the coming decades. We will need more efficient production, regrow vegetation for its carbon value, pay more attention to conservation efforts and be smarter about water use. There will be changes. And this is what the reporters latch onto. Tradition will not be enough to guarantee persistence of the current use everywhere. We will find new ways of making the land productive. Like the plot of land across from the Opera House values will change in ways that make alternate so attractive that change is inevitable.

And in the shakedown, who owns the land may be less important than what is done with it.

Staggering numbers

It is a tick over 1,900 km from Sydney to Melbourne and back again. Two full days of driving are needed to cover this distance if you keep to the speed limits.

Imagine each side of the road lined with oil tanker trucks parked end to end in one giant parking lot. Each of the 98,000 trucks is roughly 18m in length and is carrying 34,000 litres of crude oil.

This amount of oil, roughly 21 million barrels, is the amount of oil burnt in America in a single day.

Two-thirds of this vast amount goes into the engines of cars, trucks, planes buses and trains whilst the rest goes to heat buildings and manufacture chemicals and plastics.

OMG those Americans!

Well, hold on.

Australia uses around 950,000 barrels a day or a line of trucks 60 km long.

Hah, that’s nothing, won’t even get you across the Sydney basin.

Except that in less than a month there would be enough trucks to park along the road to Melbourne and back.  Just like the Americans.


Who’s behaviour are we trying to change?

The Australian government has just released its clean energy future legislation, a long awaited climate change policy framework.

In line with other jurisdictions the focus is emission reduction by putting a price on carbon to change behaviours away from dirty, fossil fuel based energy and industry to a cleaner, more efficient economic system. Clean energy futures is an elaborate, and in many ways clever, market based system for the commercial exchange of what amount to licenses to pollute, is transitioned in through a tax on the 500 heaviest emitters.

Hit commercial entities with a cost and, on the assumption that the hit hurts, they will do their upmost to avoid it. They are expected to be rational after all. Some will cop the cost and simply pass it on to their customers. But this will benefit their competitors who choose to become more efficient and change to less carbon intensive activities. So the market will sift the options and favour the cleaner ones. Exactly what is wanted.

In this case $25 billion over 5 years is the hit – evened out it is $1 million a year per entity – and that sounds like it should hurt enough to prompt a change. Some entities will become more efficient, trade to get the best price for what they must pay for and, eventually, transition to clean practices.

So we have a system to change the behaviour of… the 500 heaviest emitters.

Only why do these companies emit? For the majority it is because they supply energy or goods to the market at a profit. In other words they have customers, ultimately us.

In the formulation of the clean energy future policy, the $25 billion raised from emitters will go back to consumers through raising the tax threshold at a cost $15 billion and another $10 billion to support exposed jobs. This is so that should the emitters pass the cost of their permits on to the consumer or cut costs in the form of jobs, it is not too painful for those on the receiving end. Us again.

No collective hurt there. And so no change in behaviour.

Propping up the consumer also eases the pain on the emitters and reduces the incentive to change.

At some point it will be necessary to try and change our behaviours too; or even the most intricate of policy formulations will be a waste of effort and opportunity.

The missing link

Some years ago I wrote an essay entitled ‘What if it’s not emissions’. I was not in denial or even sceptical about climate change, more concerned that we had become fixated with emission reduction as the solution to climate change. So convinced had we become that it was a given that if emissions came down, we would have fixed that awkward problem and all will be well with the world.

My real issue was that we risked putting all our eggs into the emission reduction basket.

Burning landfill site, GaboroneAfter more years of political inaction than seems decent, the Australian government has just released a clean energy future policy on climate change. And, guess what? We still have the same fixation. The proposal is all about emission reduction, initially through a tax on pollution followed by a cap and trade system to make emitting greenhouse gas so expensive that no rational business could afford such behaviour.

It might be about emissions, but the policy formulation sees only a modest reduction target – 5% below 2000 emission levels by 2020. This means in 2020 Australia is pledging to emit 509 million tCO2e in greenhouse gases or 56 million less than it did in 2009.

Only by 2020, even with the proposed intricate emissions reduction policy fully functional, emissions of 679 million tCO2e are predicted.

Actual emissions will increase because the Australian population will grow in numbers at roughly 890 people per day, the economy will grow and so will affluence. Economic growth will require energy to follow the historical trend of a doubling in consumption every 30 years. And although the policy does talk about energy efficiency and alternative sources, the required capacity increase will inevitably be met by traditional means.

Emissions growth will leave a shortfall in the target of 170 million tCO2e or 30% of current emissions. So it would seem that the emissions reduction basket has few eggs.

This again begs the question ‘What if it’s not emissions?

Let us accept what the science tells us and agree that it is emissions that are a significant driver of the current climate warming. What the policy shows is that, rather like American debt ceiling, we cannot quite admit the severity of the problem. And, more importantly, we lack the courage to tackle the problem head on. It is just too hard and too scary.

And this would actually be ok if we hadn’t missed the critical issue in all this.

We have stopped talking about how 7 billion people are going to sustain growth in affluence on a warming planet. We have forgotten about adaptation. Forgotten that we will need to use water wisely, deliver sustainable production on farms, and manage our landscapes when the temperatures change, rains forget to fall, seasonality shifts, severe weather events become more frequent and the sea levels rise.

Less than $1 billion of the $25 billion revenue generated from the carbon tax will go incentive land management through carbon offset projects. They will mostly be Kyoto compliant activities such as permanent tree plantings and flaring methane – just as the international agreement to proceed with a second commitment period of the Kyoto protocol teeters.

There will be money for biodiversity initiatives. Good stuff, but just more of what we have already been doing.

What happened to incentives to revegetate the landscape and put carbon back into the soil? The critical activities that will help us manage that scarce water, produce reliable quantities of food and help save what is left of nature. Missing, presumed dead.

Seems like we should ask again, ‘What if it’s not emissions?