“Time has run out to avoid dangerous climate change by reducing emissions alone. … Storing carbon away from the atmosphere is essential …”

That’s the opening sentences of Reduce, Remove and Store, a report on carbon sequestration by the federal government’s Climate Change Authority in April.

“… the only pathway known to science that has the immediate capacity to remove greenhouse gases (CO₂) from the atmosphere at scale is photosynthesis: the mechanism by which plants … use light, CO₂ and water to create energy …” 

And that second quote is from the foreword to Professor Ian Chubb’s independent review of Australia’s carbon credit units.

Carbon dioxide must be removed from the atmosphere to avoid the horrible consequences of 2 degrees of warming, or more, and the only way to do that is with trees.

Given what’s going on in the northern hemisphere at the moment as a result of about 1.1 degrees of warming – 50-degree heat, floods and bushfires – the urgent question is, how’s that photosynthesis going?

Answer: There isn’t enough of it, in the world or Australia.

Australia has a sophisticated forest regeneration system that was launched by the Labor government in 2011, butchered by the Coalition between 2013 and 2016, and is being brought back to life by the new Labor government as part of the effort to cut emissions by 43 per cent by 2030 and achieve net zero by 2050.

It works through a market for Australian Carbon Credit Units (ACCUs), with a price that is supposed to equalise supply and demand.

Daunting objectives

The supply comes mainly from farmers growing trees and the demand from two sources – companies in the safeguard mechanism that emit more 100,000 tonnes of CO₂ a year and are required to reduce their emissions by 4.9 per annually or offset them with ACCUs if they can’t, and “voluntary” buyers – companies wanting to sell products that are labelled “carbon neutral”.

Here’s a table of the task confronting the 215 companies in the safeguard mechanism, and their likely demand for ACCUs:

Source: Reputex

To achieve their legislated budget, those 215 firms must cut their annual emissions by 34 per cent by 2029.

For some, like airlines and cement and steel manufacturers, it’s impossible by then, so they will be buying ACCUs for their entire obligation. Others will be able to reduce emissions, but it will take investment and time, which is why the right-hand column has them buying ACCUs for their entire abatement for the first three years, and then meeting half of their requirement by cutting emissions.

That figure of 126.3 million tonnes for the demand for ACCUs between now and 2030 is a “mid-case” guess – it could be anywhere between 100 million and 200 million.

About 13 million ACCUs are being issued to farmers each year, so that’s 90 to 100 million by 2030, which equals the lowest forecasts of demand. So supply will probably fall short.

But even if the supply of ACCUs equals demand, that simply offsets the extra emissions – it doesn’t do what the Climate Change Authority says we must, which is to remove carbon from atmosphere as well.

Classic market failure

To do that Australia’s – and the world’s – carbon credit system must result in a lot more new trees than are needed to offset the extra carbon dioxide going into the atmosphere between now and 2050, and beyond.

What we have is a classic market failure – the spot price of ACCUs isn’t high enough to encourage farmers to sequester more carbon than is needed to offset emissions. To get more photosynthesis, the government will need to step in and push up the price – not just above the current price of $30, but probably well beyond the arbitrary cap of $75 that has been decreed.

This is the last thing any government would want to do because it will increase both government spending and consumer prices because companies will pass on the higher price of offsets.

But the idea that we can deal with global warming without cost has always been a fantasy.

What’s needed is what central banks, including the Reserve Bank of Australia, did during the pandemic emergency – they bought government bonds to drive the price up and suppress interest rates.

The difference is that central banks did it independently with newly printed money, but this is clearly a worse emergency that also merits money printing. But the money printers are independent and don’t have climate change in their mandates, alongside employment and inflation. Maybe they should.

Another apt analogy is government water buybacks for the environment.

Meanwhile, as discussed here two weeks ago, the scheme itself is controversial, under fire from one of its architects, Professor Andrew Macintosh of ANU, former chairman of the Emissions Reduction Assurance Committee, which helped design and run the system.

As a result of his criticisms, the government commissioned former chief scientist, Professor Ian Chubb, to review it. He pronounced the system broadly OK, and made 16 recommendations to improve it, including changes to its governance. In June the government announced a plan to implement all of them.

‘It leaves the door open’

Macintosh says he’s supportive of the governance changes, but the rest of Chubb’s report didn’t go far enough: It “leaves the door open for ongoing stupidity”.

Since my article two weeks ago, I’ve had a number of briefings from the Clean Energy Regulator, people involved in the Chubb review and Climate Friendly, one of the firms that helps farmers earn carbon credits for land regeneration in return for a commission. They all say Andrew Macintosh is wrong.

I spoke to Macintosh again. He says he’s right.

To be honest, I’m simply not equipped to adjudicate. These are incredibly complicated and difficult issues, which is why four experts, including the former chief scientist, took six months working full-time to review the system, including reading more than 200 submissions.

Your humble correspondent’s head is spinning after a fortnight of briefings, but I do understand that these are serious, honest people who are motivated to do the right thing and save the planet. It is an argument between passionate, well-meaning experts, not cynics, and the rest of us are spectators.

I also spoke at length to some carbon farmers – Will and Sasha Treloar who own a 72,000-hectare cattle property called Boothulla near Quilpie in south-west Queensland.

They changed their grazing practices and reduced the number of cattle and have been issued with 466,294 Australian Carbon Credit Units, worth $13.3 million at today’s ACCU spot price. Climate Friendly, which runs the project for them, says native forest cover has gone from 13.4 per cent to 36.8 per cent.

I understand what they did to achieve that, and it’s clear that they have earned their ACCUs.

But will the extra mulga at Boothulla result in 466,294 tonnes of carbon dioxide being photosynthesised out of the atmosphere? And will those mulga trees last?

Shayleen Thompson, head of scheme operations at the Clean Energy Regulator, told me that the science about how much carbon is pulled out of the atmosphere for a given amount of tree growth is “well understood”, and their process for measuring it is robust and rigorous, and she took me through it in some detail.

‘Not consistent with the literature’

On the other hand, in this video Dr David Eldridge, professor in the University of NSW’s School of Biological, Earth and Environmental Sciences, and a man who has been quoted by the regulator, says “the notion that removal of grazing is going to result in more cover or density of woody plants is just not consistent with the literature”. More experts arguing.

But planting trees costs a lot more than less grazing – a price of $30 per ACCU makes it worthwhile for graziers like the Treloars to change their practices, but the price would need to be $85 to $100 to encourage mass tree planting.

Andrew Macintosh says that regeneration in places like the Treloar’s property is high risk – it should be hundreds of kilometres to the east, he says, where trees really do grow, with lots of foliage.

“What we are really calling for is the integration of more trees in the agricultural landscape. They can actually boost production, providing shade and shelter,” he says.

‘Australia Felix’ – the name given by early explorer Thomas Mitchell to the lush pastures in the east of the country – is very productive land, so to replace its food production with carbon farming would require government intervention.

But this is not just a public good, and a market failure, but an emergency.

Alan Kohler is founder of Eureka Report  and finance presenter on ABC news. He writes twice a week for The New Daily