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