Planning for Prosperity: NetZero 2050: What farmers need to know with Professor Richard Eckard

“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 percent like we were last year, we're 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.” Professor Richard Eckard. 

In the fourth episode of our series Planning for Prosperity, sponsored by Action Steel, BCG’s Janine Batters chats with soil carbon royalty: The University of Melbourne’s Professor Richard Eckard. The conversation covers: 

• What are greenhouse gas emissions 

• What is meant by scope 1, scope two and scope three emissions 

• What the difference is between NetZero and carbon neutral 

• What is carbon sequestration  

• What are carbon credits and how they are being used 

• The difference between offsets and insets and why knowing the difference is crucial 

Episode Transcript

S1 (00:00):
This podcast is sponsored by Action Steel.

S2 (00:06):
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.

S1 (00:27):
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,

(00:50):
as soil carbon royalty. So you were named as Reuters,
one of Reuters top most influential scientists, is that correct?

S2 (00:59):
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.

S1 (01:19):
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.

S3 (01:33):
Thanks, Janine. I am not royalty, but I'm feeling very
lucky to be with royalty today.

S1 (01:38):
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.

S2 (01:57):
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

(02:17):
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,

(02:38):
you don't get the right picture. You could get skewed
action that makes sense.

S1 (02:41):
And, Grace, can you tell me how you came to
be in this space?

S3 (02:45):
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.

(03:08):
So it's in collaboration with the grower Group Alliance, and
it involves a suite of extension activities surrounding carbon awareness raising.

S1 (03:14):
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?

S3 (03:27):
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.

(03:50):
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

(04:12):
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

(04:32):
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

(04:55):
part of the carbon footprint of the products that we
rely on and so we inherit them.

S1 (04:59):
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?

S2 (05:12):
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

(05:32):
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.

(05:52):
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

(06:16):
something different on farm.

S1 (06:18):
Whereas our scope one is say big banks, scope three correct.

S2 (06:23):
Largely a farm scope one is what the banks and
the supply chain are concerned about. That's direct emissions from
the farm.

S1 (06:31):
And so that's why they're interested in what we're doing.

S2 (06:34):
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.

S1 (06:51):
Sense. So I think taking a step back now, can
you explain to our listeners what actually is net zero?

S2 (07:00):
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

(07:21):
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

(07:43):
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

(08:06):
the residual.

S1 (08:07):
So they're both about counterbalancing not just about reducing our
emissions to zero.

S2 (08:12):
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.

S3 (08:25):
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?

S2 (08:34):
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.

(08:55):
So 2030 is really about emissions intensity, which says can
you be more efficient at producing that kilogram of grain.

S1 (09:02):
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?

S2 (09:12):
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

(09:36):
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.

S1 (09:47):
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?

S2 (10:04):
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

(10:28):
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.

S1 (10:40):
Are they passing that on to the farmer or is
that more expensive.

S2 (10:43):
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

(11:04):
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.

S1 (11:13):
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?

S2 (11:22):
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

(11:46):
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.

S1 (11:57):
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?

S2 (12:12):
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,

(12:35):
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

(12:55):
capacity sitting there.

S1 (12:56):
So what does that look like for us visually? What
is that solar? How much space is that going to
take up?

S2 (13:04):
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

(13:26):
you would need.

S1 (13:27):
Okay, I'm leaning in and I'm sure Grace is too.
How much do these commercial plants cost?

S2 (13:33):
Unfortunately, I have no idea.

S1 (13:36):
That was that was that was what I was like. Righto.
Sign me up. I'm ready to buy one.

S4 (13:40):
Yeah.

S1 (13:40):
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

(14:02):
approached by other people in the supply chain?

S2 (14:04):
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

(14:27):
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

(14:50):
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

(15:13):
all sharing.

S1 (15:14):
So you're the guru. I'm sure you've got an idea
on how they could.

S2 (15:17):
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

(15:39):
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.

S1 (15:51):
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

(16:12):
to be able to have as much nitrogen available as
if you didn't buy the pre coated urea.

S2 (16:16):
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

(16:38):
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.

S1 (16:47):
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.

S2 (17:03):
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

(17:24):
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,

(17:44):
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.

S1 (17:55):
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?

S2 (18:06):
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

(18:27):
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,

(18:50):
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.

S1 (19:10):
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.

(19:33):
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

(19:55):
for a start, can you just explain what are carbon credits.

S2 (19:59):
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

(20:22):
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.

S1 (20:37):
So how are they currently being used.

S2 (20:39):
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

(21:01):
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.

S1 (21:11):
Do you think that the interest in carbon credits will
increase with this push for net zero?

S2 (21:19):
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

(21:41):
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

(22:03):
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

(22:23):
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.

S1 (22:31):
You worked on the net zero policy with government, and
as part of that, this was supposed to not happen.

S2 (22:38):
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

(23:00):
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.

S1 (23:20):
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.

S2 (23:37):
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

(24:00):
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.

(24:21):
Unless you reduce your scope one emissions, that's ultimately the
long game.

S1 (24:25):
So that's where you would recommend farmers focus their energy.

S2 (24:28):
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

(24:50):
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

(25:10):
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.

S1 (25:18):
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?

S2 (25:26):
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

(25:47):
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.

S1 (25:59):
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.
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(26:44):
sizes and prices.

S2 (26:48):
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

(27:08):
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.

(27:29):
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

(27:49):
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.

S1 (28:00):
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.

S2 (28:08):
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

(28:32):
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.

S1 (28:53):
That's really interesting. Can you quickly explain what you mean
by carbon sequestration?

S2 (29:00):
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

(29:21):
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.

(29:43):
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,

(30:04):
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.

S1 (30:15):
So back to the numbers and knowing your numbers. How
do I know my numbers on my farm?

S2 (30:22):
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

(30:43):
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.

S1 (30:59):
So that's pretty much what every farmer would have anyway
for their cost of production.

S2 (31:03):
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

(31:23):
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.

S1 (31:37):
So you're talking about this software. What kind of software
plugs into your engine?

S2 (31:42):
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

(32:03):
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.

S1 (32:21):
How long would it take for a farmer that had
2500 hectares in mixed cropping.

S2 (32:27):
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.

S1 (32:44):
It's always more difficult with livestock, Richard, much more difficult.

S2 (32:47):
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

(33:08):
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.

S1 (33:29):
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

(33:50):
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,

(34:11):
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?

S2 (34:19):
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

(34:42):
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

(35:03):
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

(35:24):
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

(35:46):
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.

S1 (35:56):
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?

S2 (36:15):
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

(36:38):
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

(36:59):
animal welfare and animal health issue, get better land survival
and carbon credits. Then it changes fundamentally how you view
trees on the farm.

S1 (37:09):
Can you explain, Richard? I hear the term offsetting and insetting.

S2 (37:15):
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

(37:35):
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

(37:57):
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

(38:20):
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.

S1 (38:40):
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?

S2 (38:56):
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,

(39:17):
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

(39:40):
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

(40:01):
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.

(40:24):
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

(40:45):
if you don't respond to that, you'll find yourself left
out of the pack in the future. Okay.

S1 (40:49):
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.

S2 (41:08):
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,

(41:31):
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

(41:52):
what's being required of you at this stage.

S1 (41:54):
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?

S2 (42:05):
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

(42:28):
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,

(42:48):
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

(43:09):
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

(43:29):
the calculation rather than the only tool available.

S1 (43:33):
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.

S3 (43:55):
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.

S1 (44:14):
So big question, Richard, are all these policies, these things
that are coming in, is it actually going to affect
our atmosphere.

S2 (44:24):
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

(44:47):
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

(45:09):
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.

(45:32):
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

(45:53):
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.

S1 (46:06):
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

(46:27):
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.

S2 (46:37):
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

(46:59):
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.

S1 (47:08):
Is there a lot of money going into research in
this space? Richard?

S2 (47:11):
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

(47:33):
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

(47:54):
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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S5 (48:25):
BCG drives the prosperity of Australian farmers, communities and landscapes
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(48:46):
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