Independent Review of Australian Carbon Credit Units: Call for submissions

30 September 2022

Attention: Professor Ian Chubb
ACCU Review Panel
By email: ACCUreview@industry.gov.au

Dear Professor Chubb,

Submission to Independent Review of Australian Carbon Credit Units (ACCUs)

Climate Friendly welcomes the Albanese Government’s commitment to a high integrity carbon crediting framework, and we supported calls for this independent review. We are confident in the integrity of the carbon farming projects we support, and welcome measures to continuously improve Australia’s carbon market. This will provide a sound basis for Australia to deliver on its emissions reduction targets, contributing to net-zero and negative emissions required to limit global warming to 1.5C.

This letter outlines our key recommendations for consideration by the Review Panel, and is accompanied by a detailed submission, with Part 1 addressing aspects of governance and transparency, and Part 2 providing a detailed response on the integrity and rigour of the human- induced regeneration method.

Climate Friendly believes that a carbon crediting framework is a critical component of Australia’s approach to tackling the challenge of climate change. Australia’s ACCU framework is world- leading, and while we have recommendations for areas in which it can be strengthened and continuously improved, we believe the current framework has high integrity and that it is vital to re-establish investor and community confidence in carbon farming as an outcome of this review.

Key Recommendation 1: the Review Panel confirm that there is no evidence of fraud, and that ACCUs issued from Human-induced Regeneration projects are based on credible science, have rigorous technical safeguards, and passed independent audits.

The term “fraud” has a well-defined legal and regulatory meaning, and carries a range of serious penalties under various legislative instruments which govern Australia’s world-leading carbon crediting framework. Potential consequences of fraud include, but are not limited to, the following:

1. Relinquishment of ACCUs;
2. Unilateral revocation of a carbon farming project by the Regulator;
3. Imposition of carbon maintenance obligations on the land;
4. A range of civil and criminal penalties administered by ASIC relating to financial products
and directors’ duties.

Recent commentary on scheme asserted that “70 to 80 per cent of the ACCUs issued to these projects are devoid of integrity... What is occurring is a fraud on the environment, a fraud on taxpayers and a fraud on unwitting private buyers of ACCUs “ (ANU Media Release, 24 March
2022, quotations by Professor MacIntosh). Further, the co-authors state in a related papers their
“decision to use the word ‘fraud’ was deliberate and considered.” (ANU Paper, Fixing the Integrity
Problems with Australia’s Carbon Market, June 2022). By implication, it is our view that these statements suggest that organisations like Climate Friendly and our partners who are involved in delivering projects are involved in activities that are either fraudulent or result in fraudulent outcomes. However, in subsequent statements the lead author Professor MacIntosh stated “we also recognise we don’t have all the data” (Radio National interview, 24 March 2022, 8.05am at
7.22). In addition to not having access to all the data, we note that the series of ANU Papers on
the human-induced regeneration method authored by the co-authors are a) not peer reviewed, and b) do not provide any evidence of fraud.
The deliberate decision to use the term “fraud” in the absence of access to adequate data is highly concerning, and undermines achievements made by carbon farmers to tackle climate change.

Climate Friendly is a purpose-driven organisation, and our people have dedicated their professional careers, and much of their personal time, to tackling climate change. Our leadership team has collectively spent decades working on high-integrity land-based carbon farming, including working in the public service, research organisations, independent audit organisations, and in Climate Friendly. We provide detailed responses to the commentary on the human- induced regeneration method and analysis of the portfolio of projects Climate Friendly supports in Part 2 of this submission.

We include here a snapshot of that analysis showing increases in forest cover in the project implementation areas following implementation of management practice changes in early projects. These early projects implemented practice changes in the period of 2010-2013, following announcements from the Australian Government of their intention to create land-based carbon farming methods and to include provisions to recognise early action. These early management actions are evidenced by management data included in the submission. This management change information has been subject to third party independent audits as part of project implementation. The early projects are located in the same regions and rainfall bands as later projects that commenced carbon farming between 2017 and 2021. As shown in the graph below, early projects had a long history of no increase in forest cover, consistent with long run suppression. Once they changed management practices, previously supressed areas increased forest cover and declined in bare land. On the contrary, similar areas of land in later projects with long histories of suppression remain stagnant over an extended period leading up to project commencement. This includes relatively stagnant, and for periods declining, forest cover during three La Nina rainfall cycles since 1996. See Part 2 of our submission for in-depth analysis.

Note that NCAS “forest pixels” do not equate to "forest area", but are isolated forest pixels that can contain some larger pre-existing paddock trees. Pixels are classified as forest against a threshold of at least 20% crown canopy cover in the pixel.
There must be at least three contiguous pixels for an area to constitute a “forest area” in line with internationally approved definitions of forest in Australia. All forest areas are removed from carbon estimation areas. We also note that Climate Friendly currently utilises Sentinel-2 satellite data which are higher resolution (10x10m pixels) for our human-induced regeneration project mapping, but these datasets are only available back to 2015. For the purposes of time series analysis, we have utilised two different versions of NCAS datasets (25x25m pixels) which are the only long run change datasets available. Further, the above analysis shows that carbon estimation areas contain less than 10% forest pixels at project start. We are not credited for these pre-existing paddock trees. All existing carbon stocks are removed from crediting and the presence of scattered trees is accounted for in the FullCAM model calibration. See Part 2 of submission and technical annexes for further details.
While in our view the use of the term fraud is inappropriate and disappointing, there is one aspect on which we do agree wholeheartedly with the Professor MacIntosh and his co-authors, and that relates to the establishment of better national data sharing systems to improve transparency.
This has the potential to deliver a multitude of benefits, including enabling better informed analysis of the impact of carbon farming.

Key recommendation 2: the Government establish a National Integrated Land Database to enable sharing of carbon, environmental and agricultural production data in a way that protects privacy while enhancing transparency of information, expanding research capability and informing best practice land management and policy development.

Climate Friendly and our carbon farming partners collect an enormous amount of environmental, carbon, agricultural production and other land management data. This data is collected as part of our rigorous feasibility assessments covering a 10-year baseline period, with ongoing data collection throughout the 25-year project implementation period. We use this data to apply scientific approaches to measure, monitor and estimate the amount of additional carbon stored by land managers. We have adopted the latest technology for verification and monitoring, including aerial lidar and high-resolution satellite imagery, and track quarterly reporting by land managers on implementation of their changed management practices. We also conduct regular visits to the project so that experts can monitor and validate project impact. All of this evidence is regularly reviewed by independent accredited auditors and the Clean Energy Regulator.

There is a significant opportunity to share this data to support ongoing research, continuous improvements of national carbon, environmental and agricultural policies, programs and systems, and to provide information to other land managers to aid decisions on managing their property.

In the case of carbon farming projects, this data is tightly linked to privacy laws and the livelihoods of individual land managers. Therefore, there are careful legal, ethical and technological considerations in enabling access to this information. For the last two years
Climate Friendly has been working on possible solutions to enhance data sharing and transparency with industry, government and research partners, and supports the establishment of a national data sharing platform which makes information accessible, while also protecting privacy. A short explainer video on our proposal to establish a National Integrated Land
Database is available here: https://www.climatefriendly.com/future-of-carbon-farming/.

Key recommendation 3: the Review Panel proposes structural governance reforms to address any perceptions of conflict of interest and enhance public trust in the governing bodies through greater separation of policy review, policy development, market operations and project compliance functions

In our view, Government officials involved in administering the carbon farming framework have shown dedication to implement the intents and purposes of the legislation, and many market participants have shown a similar dedication to best practice by developing voluntary self- regulation, such as through the Code. However, there remain some opportunities to further strengthen governance and address some structural risks to deliver best practice governance and promote continued scale up of the carbon crediting framework. In particular, transparency and accountability of ministerial decision making on method prioritisation could be strengthened, and the ERAC method development structure could be reformed to include a dedicated land sector sub-committee with adequate staffing and expertise. The Government could also enhance regulation of service providers, either through formalising the voluntary Carbon Market Institute
(CMI) Code of Conduct, or by introducing accreditation requirements for agents administered by
Government. Refer to Part 1 of our submission for more details on our proposals.
Key recommendation 4: the Review Panel recommended an integrated approach to co- benefit standards, including by amending the Carbon Farming Initiative Act to incorporate the planned Biodiversity Stewardship Certificate Framework and enabling the Regulator to declare one project that applies multiple carbon farming methods or biodiversity protocols on a single property to streamline administration.

Best practice land-based carbon farming has a significant potential to deliver multiple environmental, Indigenous, agricultural productivity and other benefits. There are many controls already embedded within the ERF scheme and its methods to minimise the risk of adverse impacts. Recognising that many carbon farming participants may also wish to participate in other certification standards or markets for ecosystem services, Climate
Friendly believes it is important, to harmonise the regulatory frameworks to streamline administration, avoid risks of double claiming in different schemes, reduce the cost of compliance, and optimise the ability of land managers to deliver multiple, long-term benefits.
Key recommendation 5: the Review Panel recommend the Integrated Farm Management method be finalisation as a priority way to both scale up benefits for Indigenous
Australians and scale up land-based carbon sequestration using the latest science and technology.

High integrity land-based carbon farming is critical to achieving net-zero and negative emissions required to limit global warming to 1.5C. We believe this is best delivered through an integrated land carbon farming method, which enables land managers and Indigenous
Australians to implement best practice sustainable land management in all regions of Australia.
The Integrated Farm Management method can deliver this and apply the latest science and technology. It is currently being developed through a co-design process, and its development should be confirmed as a priority as an outcome of this review.

We are deeply committed to continuous improvements in our own practices, as well as across broader Australian and global carbon markets to ensure they effectively reduce emissions.
Science is not static – advances in technology mean this is a rapidly evolving sector that should be under periodic review and continual improvement. We will continue to advance the science and methods that underpin effective land sector carbon abatement projects, and provide a pathway for regional Australia, land managers and Traditional Owners to participate in a net zero, socially inclusive transition.

Thank you for the opportunity to contribute to the review process, and please do not hesitate to contact us if you require further information.

Kind regards

Josh Harris Skye Glenday

Co-CEO & Director Co-CEO & Director
Summary of Detailed Recommendations:
Service provision & participation in ERF:
1. Government should provide realistic, unbiased guidance to land managers outlining the
true complexity of operating carbon projects, and the full package of expertise required.
This contrasts with current communications materials published that commonly suggest
navigating the scheme is simple and imply land managers could self-service. This would
help build trust in the skilled advice provided by the carbon service industry, and enable
land managers to conduct an honest appraisal of the trade-offs of self-managing a
carbon project, as compared with appointing one or multiple service providers to assist
them with project management and administration.
2. Government should enhance regulation of service providers, either through formalising
the voluntary Carbon Market Institute (CMI) Code of Conduct, or by introducing
accreditation requirements for agents administered by Government.
Governance:
3. Structural revisions be implemented to scheme governance to improve the perception of
potentially conflicted roles in a) policy review, b) policy & method development, c) project
compliance and d) market operation.
4. Restructuring of the ERAC to create additional technical subcommittees with adequate
staffing and expertise.
5. New technical subcommittees continue to be supported by a form of co-design, such as
that currently adopted for method development by the Clean Energy Regulator, involving
a broad cross-section of organisations and interests that results in greater integrity and
more implementation-ready methods that are informed by diverse perspectives and
experience.
6. Provide clear guidance on the relative importance and potential trade-offs between high
integrity, volume of abatement and costs of compliance or scheme complexity. Clearer
guidance from the government on the costs of compliance and expertise required would
help prospective participants make more informed choices on self-management vs
service partnerships when commencing a project.
7. Increase the transparency of how the offsets integrity standards are applied by the
ERAC or as part of Ministerial decisions related to method prioritisation and approval.
8. Establish a clear and transparent decision-making process around prioritisation of any
new methods for development or variation.
9. Continuation of a method co-design model similar to that currently adopted by the Clean
Energy Regulator. This will ensure high integrity, implementation-ready methods that are
informed by both the latest science and real world operational issues.
10. Establishment of two separate advisory bodies, one focused on the land sector and one
on energy and waste sectors.
Transparency:
11. Create a public registry of individual precedents or rulings on carbon farming projects,
similar to the system of public rulings provided by the ATO.
12. Establish a National Integrated Land Database to enable sharing of carbon,
environmental and agricultural production data in a way that protects privacy while
enhancing transparency of information, expanding research capability and informing
best practice land management and policy development.
13. Consider the interaction of data transparency recommendations made in the Samuels
Review of the nation’s environment laws.
Procedural improvements:
14. Introduce the option of process-based audits to lower transaction costs, utilise emerging
technologies to unlock viability of carbon farming for smaller scale land managers.
15. Auditor guidelines and training should be updated to ensure auditors have the
appropriate skills and expertise to conduct process-based audits. This could draw on
guidelines and requirements from other sectors where process-based audits are
common.
Co-benefits:
16. Amend the Carbon Farming Initiative Act to incorporate the Biodiversity Stewardship
Certificate Framework into a joint carbon and biodiversity framework, rather than
creating two separate but mirroring pieces of legislation.
17. Enable to Regulator to declare one project that applies multiple carbon farming methods
or biodiversity protocols, so that land managers can opt to participate in relevant carbon
farming methods and biodiversity protocols on a single property through one harmonised
project.
18. Consider other opportunities to integrate emerging standards, policies and programs to
optimise multiple benefits, streamline land manager participation and help to reduce
regulatory complexity and costs of participation in parallel schemes.
19. The eligible interest holder consent process for Native Title Holders be reviewed to
determine if the process is fit for purpose for this category of interest holder, or whether
changes could be made to improve this process for Native Title Holders and further
encourage land managers to establish projects in partnerships in regions with
determinations. Opportunities to strengthen may include provision of further support
mechanisms (financial and advisory) for Native Title Holder groups. Additionally, it
should be considered whether there is any benefit to regulatory notification deadlines
similar to those that apply in other sectors such as mining. This review should be done
through a consultative process involving Native Title Holder groups and other Indigenous
Australian input, as well as land managers and service providers.
20. Climate Friendly has reviewed the ICIN Report (Sept 2022, Mapping the Opportunities
for Indigenous Carbon in Australia: Identifying opportunities and barriers to Indigenous
participation in the Emissions Reduction Fund), and broadly supports its
recommendations, including specifically their recommendation to develop an Integrated
Farm Management Method that is suited to all environments across Australia, including
the Desert and the Savanna, and has appropriate Indigenous participation in the design
and development.
21. Consider the recommendations from Climate Friendly’s submission on the Biodiversity
Certification Scheme for how biodiversity can be optimised.
22. Repeal the veto power and requirement for additional project approvals by the
agricultural minister for regeneration projects which cover more than 30% of a property
(Section 13(4) and 20C of the Carbon Credits (Carbon Farming Initiative) Rule 2015,
should be repealed)
23. Recognise the positive benefits of carbon farming on agricultural production and drought
resilience of farms and regional communities in Australia.

Relationship to voluntary Climate Active certification:
24. If the Government’s 43% emission reduction target for 2030 takes into account voluntary
corporations carbon neutrality commitments, then 100% of Climate Active’s offsets
should be sourced from ACCUs (rather than the current requirement of 20%). This helps
ensure the national ambition is not undermined. However, we note this may also
discourage voluntary action which will be important to exceed the 43% target and place
Australia on a trajectory to meet the 1.5C Paris commitment.
25. If the Government’s 43% target does not include Climate Active carbon neutral
commitments, then there is less imperative to mandate the use of over 20% ACCUs in
any Climate Active certification. However, any other eligible units able to be used under
the Climate Active standard should be carefully screened to ensure they meet a similar
integrity benchmark to ACCUs.
26. Refer to our separate submission to Climate Active on the proposed land standard and
harmonise review recommendations.
27. Provide a clear policy position on how and when other international voluntary standards
can be applied in Australia, to ensure there is no double counting of abatement.
Technical Rigour
28. Note the evidence of grazing, feral animal, clearing and other suppression of vegetation
in the rangelands region where human-induced regeneration projects commonly occur
29. Note the evidence of land management practice changes and the consequent
regeneration of the project implementation areas that has occurred in human-induced
regeneration projects. Confirm that there is no evidence of fraudulent conduct, and that
ACCUs issued from human-induced regeneration projects are based on credible
science, have rigorous technical safeguards, and passed independent audits.
30. Note the substantial risk of plantation forests being cleared and not replanted, releasing
carbon.
Future
31. Note the potential of the Integrated Farm Management method to scale up land-based
carbon sequestration using the latest science and technology, informed by lessons from
implementation of land-based carbon projects to date, and support finalisation of this
method as a priority.

Submission: Independent Review of Australian Carbon Credit Units
September 2022

About Climate Friendly
Founded in 2003 by a CSIRO scientist, Climate Friendly is a profit-for-purpose company with a vision for a productive, sustainable land sector that contributes to a zero net emission Australia by 2050. We achieved our first target to support 20 million tonnes of greenhouse gas reductions at the end of 2020, and our purpose is to scale up to 100 million tonnes by 2025. We are one of the longest operating and most experienced carbon extension service providers in Australia. Our growing team of 65+ expert staff has supported registration of over 150 carbon projects since 2014. We partner with agricultural producers, foresters, Traditional Owners, conservation organisations and governments to design and implement these projects across approximately 10 million hectares of land.

Climate Friendly welcomes the opportunity to provide a submission to the Independent
ACCU Review. A high-integrity carbon crediting framework is critical to meeting and beating
Australia’s emissions reduction goals and transforming the way land is managed in Australia.
This transformation is essential to draw carbon down from the atmosphere to achieve net negative emissions and limit global warming to 1.5C, increase sustainable food production to feed a growing global population and reverse biodiversity loss.
Our experience with the Emissions Reduction Fund (ERF)
Climate Friendly has supported registration of more than 150 carbon farming projects under seven different land sector methods (human-induced regeneration, avoided deforestation, savanna burning, soil carbon, plantation forestry, environmental plantings and beef herd management). As part of our carbon farming extension services, we have obtained 285 eligible interest holder consents (91 banks, 97 government, 19 native title holder and 78 other). We have worked with partners on each of these projects to prepare property management and project permanence plans, including coverage of fire management.
We conduct quarterly monitoring on each of the projects that we support to collect time- series, third party auditable data on project implementation. We have completed 109 independent project audits with 12 different audit companies who are registered under
National Greenhouse and Energy Reporting Scheme (NGERS). We submitted more than
1000 offsets reports, which include review against our internal quality assurance processes, and more than 1000 associated applications for ACCU issuance to the Clean Energy
Regulator. We have submitted more than 50 first regeneration checks for human-induced regeneration projects that we support. We invest deeply in technological innovation to continuously improve precision of measurement and monitoring, while driving down costs.
Part 1: Governance of the carbon farming framework
Climate Friendly’s role in these carbon farming collaborative partnerships is to bring together the complete package of expert skills and extension services needed to run a high integrity, high impact carbon project. Our goal is to make it easy for our partners to continue to focus on their passion and expertise in managing land for agricultural production or conservation or both, while we advise and enable them on how to participate in carbon farming and optimise their land management to deliver a suite of other environmental, cultural, agricultural productivity, economic and social benefits.
Best practice management of ecosystems and high integrity carbon farming necessarily requires expertise. Below is a non-exhaustive example of the package of expertise that
Climate Friendly brings together for our partners. Each project we support has one main point of contact to streamline and integrate services and information for our partners. Behind the scenes, that contact person is supported by a team of people with diverse skills delivering the full package of expertise that are required. It is unrealistic and undesirable for most land managers to develop the full set of necessary capabilities outlined in the below table. While it is an option to outsource specific tasks to different consultants, this requires significant project management and typically comes at a higher cost. There is also greater risk that different service providers advice will not be coordinated, leading to sub-optimal outcomes.
Table 1: Expertise & Services required to support a high integrity land based carbon farming project
Services & Typical services provided by Climate Friendly as part of carbon project
Expertise
1 Ecology Carbon projects require considerable knowledge of the environment and how it will respond to changes in land management. This
requires extensive environmental expertise that is combined with knowledge of the evidence required by auditors and the Clean
Energy Regulator (CER). Without understanding the ecology, a land manager will have limited ability to identify suitable land
management practice changes that will lead to carbon storage or avoidance of emissions.
2 Agronomy & Carbon projects are often operated on productive agricultural properties. To deliver the ecological and carbon benefits without
Forestry adversely impacting agricultural production requires expertise in agronomy to be combined with ecology and carbon expertise.
Climate Friendly has a team of people with grazing, cropping and forestry expertise that is applied in tandem with ecological
expertise. This enables better choices on how to optimise agricultural productivity as part of carbon farming management changes,
or informs land managers where trades offs might be required.
3 Modelling & Operating a carbon project requires carbon, environmental and financial modelling expertise. Climate Friendly has a team of
data science modelling and data science experts that manage complex timeseries datasets and model carbon abatement and other scenarios.
This skill is necessary to pass project audits and submit applications for ACCUs, as well as informing initial decisions about whether
or not a project is feasible to implement for a carbon, environmental and commercial perspective.
4 Geospatial Most land based carbon methods require substantial mapping expertise to determine eligibility and monitor project impact. Climate
mapping Friendly has a team of GIS experts for these tasks and has invested deeply in emerging technologies and automated mapping
systems, which would not be feasible to invest in at an individual project scale. This includes both the acquisition of suitable remote
sensing data from satellites, planes, drones, and advance technology that enables us to integrate this with field data sets.
5 Regulatory Operating a carbon project is generally a once in a lifetime process for land managers. To do so successfully requires compliance
compliance & with a broad range of complex laws including: CFI Act, CFI Rule, CFI Regulations, Methods, Technical Guidelines, Native Title Act,
other legal national tax laws, financial services legislation, multiple state and territory laws relating to land management. And the legal
services requirements often change through time, such as after government reviews. An in depth and current understanding of all these
requirements, and how they apply to a specific property is required to deliver a carbon project that is eligible to access carbon
credits over time. The ability of individuals to consistently meet these legal requirements, without expert advice, is likely low.
6 Traditional Establishing a carbon project can often involve the need to establish and maintain a partnership with Native Title holders or other
Owner Traditional Owner partners. In our experience, new relationships with a Native Title or Traditional Owner group can take 2-4 years to
partnerships establish and follow best practice consultation, consent and partnership establishment processes while observing cultural protocols.
These partnerships commonly require significant ongoing engagement to maintain productive, two-way relationships. Many projects
would not be able to proceed without successful establishment of such partnerships, and this is commonly outside of the expertise
of most land managers, many of whom have limited time to invest in these partnerships at conception. These partnerships also
provide important opportunities for two-way learning, sharing of Traditional knowledge and furthering reconciliation.
7 Audit and Carbon projects require extensive pre-feasibility assessments prior to registration to ensure they are viable for all partners, and once
assurance registered they require multiple audits across their life and ongoing quality assurance. This is a key integrity requirement. These
audits are expensive and time-consuming processes to manage. Climate Friendly undertakes full feasibility assessments on each
prospective project to determine its viability, or inform land managers that their property does not meet eligibility requirements.
These assessments are screened by an internal Technical Review committee before we recommend a project is eligible to proceed
to registration. Further, we pre-audit land management records, compile audit packs and manage independent auditor’s information
requests throughout each external audit, which typically involve detailed technical questions and responses.
Table 1: Expertise & Services required to support a high integrity land based carbon farming project
Services & Typical services provided by Climate Friendly as part of carbon project
Expertise
8 Project Operating a carbon project is a substantial logistical and project management exercise. The coordination of the range of expertise
management required to achieve a successful carbon project is substantial. Climate Friendly have a team of project managers who ensure each
land manager’s project meets required milestones and underpinning data requirements. This is delivered in a seamless fashion
through each carbon project having a dedicated project manager that is their primary point of contact.
9 Financial Australian Carbon Credit Units (ACCUs) are financial products. This means that land managers require advice to inform their
services decisions to trade, hold or voluntarily retire ACCUs generated from their projects. Climate Friendly holds an Australian Financial
Services Licence (AFSL) which enables us to provide market advice to our clients.
10 Research & Climate Friendly is constantly investing in R&D, to improve project services for our partners and ensure they are informed by the
development latest science, advance industry best practice, accelerate climate action and optimise land management. This includes through key
(R&D) partnerships with CSIRO, Bush Heritage Australia, WWF Australia, The Mulloon Institute, NSW Government, QLD Government,
UNSW and Charles Sturt University among others. Examples of our R&D investment include piloting a holistic approach to carbon
farming with Bush Heritage Australia which is now informing the design of a new Integrated Farm Management (IFM) method,
development of an Integrated Native Vegetation Condition (IVC) method that has been approved by Accounting for Nature. The IVC
enables dual monitoring of carbon and biodiversity when coupled with IFM. We are also well progressed in the development of a
drought resilience standard. Over 15% of Climate Friendly’s expert staff have a dedicated focus on R&D, with all staff having
opportunities to participate in specific R&D projects.
11 Government Climate Friendly manages the relationships with the Clean Energy Regulator and a wide array of other government bodies at the
relations state and federal levels. This includes day to day project management, as well as broader engagement on government policies that
relate directly and indirectly to carbon farming, including government reviews and submissions such as this one. A part of the focus
of this engagement is expanding opportunities to deliver climate impact on the ground and ensuring government policies are
“implementation-ready” and address existing barriers to implementation and participation.
12 Capital Climate Friendly provides significant upfront investment to get carbon projects up and running. Our standard model is that we don’t
investment get paid until our project partners generate ACCUs. The time between initial feasibility assessment to first issuance of ACCUs is
typically a minimum of 18+ months. It requires significant investment in field work, mapping and data collection such as drone plots
or aerial lidar, preparation of various applications, obtaining consents and payment of audit fees, among other costs. This all comes
at substantial cost and is an at-risk investment in the project by Climate Friendly. Many land managers would not have the capital
available to design and implement the projects without this investment. We also support mobilisation of capital (directly and
indirectly) to fund other capital intensive land management practice changes, such as upfront planting costs.
The review consultation paper questions under the section “Your experience with the ERF scheme” seem largely targeted at individual land managers. This contrasts with the fact that the majority of ERF participants are supported by one or more service providers. We recommend that the Review Panel consider the range of skills needed to ensure a high integrity carbon crediting framework. Recognising that most participants will have expert support will enable better regulation of the service industry and better advice to land managers about what considerations they should consider when deciding whether to self-manage or engage one or multiple services providers.
As the government continues to scale up its ambition to address climate change, we anticipate the carbon service industry will continue to expand to meet demand. This is to be encouraged, as we have a significant collective task to achieve net zero, and indeed net negative emissions.
However, it also creates emergent risks if not appropriately recognised and regulated. To date the industry has undertaken significant efforts to self-regulate, including through the establishment of the voluntary Australian Carbon Industry Code of Conduct (the Code), to which
Climate Friendly is a foundation signatory. However, we suggest that in a rapidly growing market this could be enhanced by either formalising a requirement to participate in the Code, or introducing new accreditation requirements for agents to ensure carbon service providers have the requisite skills and experience.
Recommendation:

• Government should provide realistic, unbiased guidance to land managers
outlining the true complexity of operating carbon projects, and the full package of
expertise required. This contrasts with current communications materials
published that commonly suggest navigating the scheme is simple and imply land
managers could self-service. This would help build trust in the skilled advice
provided by the carbon service industry, and enable land managers to conduct an
honest appraisal of the trade-offs of self-managing a carbon project, as compared
with appointing one or multiple service providers to assist them with project
management and administration.
• Government should enhance regulation of service providers, either through
formalising the voluntary Carbon Market Institute (CMI) Code of Conduct, or by
introducing accreditation requirements for agents administered by Government.
Governance of the ERF
Scheme level governance
The overarching governance of the CFI Act, Emissions Reduction Fund and the associated IT infrastructure has, in our view, been robust with world-leading government regulation of carbon crediting. Government officials involved in administering the carbon farming framework have shown dedication to implement the intents and purposes of the legislation, and many market participants have shown a similar dedication to best practice by developing voluntary self- regulation, such as through the Code. However, there remain some opportunities to further strengthen governance and address some structural risks to deliver best practice governance and promote continued scale up of the carbon crediting framework.
In Table 2, we outline our views on an amended governance structure, which includes greater separation of policy review, policy development, market operations and project compliance functions in line with best practice regulatory frameworks. See section on method governance for detailed recommendations around the policy & method development process.
Recommendations:

• Structural revisions be implemented to scheme governance to improve the
perception of potentially conflicted roles in a) policy review, b) policy & method
development, c) project compliance and d) market operation.
• Restructuring of the ERAC to create additional technical subcommittees with
adequate staffing and expertise.
• New technical subcommittees continue to be supported by a form of co-design,
such as that currently adopted for method development by the Clean Energy
Regulator, involving a broad cross-section of organisations and interests that
results in greater integrity and more implementation-ready methods that are
informed by diverse perspectives and experience.
Table 2: Best practice scheme governance structure
Minister & Parliamentary oversight
Maintaining a legislated scheme provides many beneficial governance features. One change we would recommend is to introduce new provisions that enhance transparency of advice provided to the Minister, reduce Ministerial discretion as to whether or not to implement expert advice, and include transparent decision-making criteria to prioritise new methods for co-design.

• Policy / Method Development • Project Compliance
• Policy Review • Market regulation
Land Sector Energy & waste sectors & registry development
Climate Friendly supports The current ERAC structure A separate committee should Project regulation and Regulates the market the Albanese Government’s does not have sufficient be formed for any energy and registry development should exchange which is under proposal to strengthen land sector expertise. A waste sector methods. The be separated from carbon development for ACCUs, as independent review of policy dedicated committee should appropriateness of these purchasing or other market well as RECs, LGCs, implementation and be formed to oversight methods should be regulation functions. Suggest biodiversity certificates. If recommendation on climate recommendations on land considered in the context of same entity also regulates government plans to targets. sector methods. The other policies such as the and develops other continue to purchase
committee role should be to Safeguard Mechanism. The environmental credit consider if this fits with
review existing and propose committee role should be to registries for carbon, market regulator or other
new methods to the Minister review existing and propose renewables and biodiversity investment entity such as
against specified criteria. new methods to the Minister projects given close CEFC or ARENA, or the
against specified criteria. intersection. Department.
Who: Climate Change Who: replace ERAC with Who: replace ERAC with new Who: CER or alternate entity Who: new entity or merge
Authority new Land Technical Energy & Waste Technical if CER maintains market with existing market
Committee Committee regulation function regulator
Expertise required: the Expertise required: Expertise required: Expertise required: Expertise required:
CCA should be supported by Secondee from carbon Secondee from carbon Compliance and Economic modelling & a broad panel of expertise. project compliance entity project compliance entity with enforcement; technical market governance;
CCA Board members should with experience regulating; experience regulating; method specific expertise for compliance & enforcement; publicly declare any conflicts rotating panel of scientific rotating panel of each regulated sector; IT; intelligence & audit; legal; of interest on a public experts (e.g. ecology, scientific/engineering experts intelligence & audit; legal; communications, education register and should not have agronomy, GIS etc); land (e.g. energy technology, communications, education & engagement paid employment or other management practitioner; waste management etc); & engagement financial benefits (for auditor, economic infrastructure practitioner; example shares) in a market modelling, legal auditor, economic modelling, participant or other relevant legal entity that may conflict with their ability to independently perform functions. .
Project level governance
We propose that there are three key parameters that must be balanced when examining options to reform and strengthen project level governance:

• maximising volume of abatement to achieve climate goals
• maximising integrity to ensure certainty of impact
• minimising costs (or maximise /simplicity) to enable greatest participation.

Minimise costs

Maximise integrity Maximise carbon abatement

Figure 1: constraint triangle showing competing priorities in project level governance

From our experience, while all three parameters are important, it is very difficult to achieve all three at once. The Review Panel should carefully consider which of these objectives are most important in assessing scheme governance. Climate Friendly believes that maximising volume of abatement is one of the most critical goals in order to urgently tackle climate change, and maximising integrity of this abatement is key to ensure the impact is validated. Since the scheme commenced, we have already experienced rising project costs due to strengthening of our integrity controls and investments to increase the accuracy of our abatement forests using the latest science and technology. While we seek to minimise costs through continuous system improvements where possible, we believe that higher scheme complexity and associated costs for project implementation are, to a certain extent, necessary trade-offs, as high integrity abatement requires expertise and verification of outcomes to deliver and prove results.
Recommendation:

• Provide clear guidance on the relative importance and potential trade-offs
between high integrity, volume of abatement and costs of compliance or scheme
complexity. Clearer guidance from the government on the costs of compliance
and expertise required would help prospective participants make more informed
choices on self-management vs service partnerships when commencing a
project.
Offsets integrity standards
Climate Friendly believes that the offsets integrity standards are generally aligned with international principles and emergent standards governing high integrity carbon projects, and therefore remain fit for purpose. We do however feel recent questions related to the offsets integrity standards are more related to perceived issues with their application. We strongly support increased transparency on how the standards are applied by the relevant governance body and Minister in decision making processes.
Recommendation:

• Increase the transparency of how the offsets integrity standards are applied by
the ERAC or as part of Ministerial decisions related to method prioritisation and
approval.
Method development governance
Since the Carbon Farming Initiative (CFI) Act was made in 2011, the process and responsible entity for method development under the CFI/ERF has changed over time. The Table below summarises the evolution in the method development process, and the advantages and disadvantages of each approach.
Table 3: summary of historical approaches to governance of method development
Time period 2011 – 2015 2015 – 2021 2021 - present
Entity responsible Domestic Offset Integrity Emissions Reduction Emissions Reduction
for method Committee Assurance Committee Assurance Committee
approval
Entity responsible Any interested Department of Environment or Clean Energy Regulator
for method stakeholder, with support equivalent
development from the Department
Method First draft prepared by Drafting conducted by Drafting conducted by the
development interested stakeholder Department using advice from Clean Energy Regulator with
process using a template. Later expert committees and regular input from
drafting done by consultants. Input from stakeholders via a co-design
Department in interested stakeholders process, plus a formal
collaboration with generally limited to 30 day consultation process on
interested stakeholder. consultation period. near-final draft
Process to Application from Ministerial discretion Annual nomination process
suggest new interested stakeholder to with Ministerial discretion on
methods the Department selected priorities
Advantages High level of industry High level of Government Mix of Government control
involvement control over the process and industry involvement
Relatively rapid pace of Relatively rapid pace of
method development method development
Disadvantages Large volumes of method Slow pace of method Lack of clear and transparent
applications that were development decision-making process
sometimes poorly drafted Resultant methods were highly around Minister’s choice for
or very narrow in scope, scientific that sometimes had method prioritisation1
making administration limited real world capacity for
difficult implementation.
Limited ability for stakeholders
to influence method
development priorities

1
While some methods, such as the Integrated Farm Management Method, had support from a very broad range of organisation types and sectors and publicly available documents outlining how they met the assessment criteria, the rationale for prioritisation of some other methods was less clear.
Currently, there are thirty-seven operational carbon farming methods. There are approximately
21 closed methods which are no longer active. While there are many available methods, in our experience many of the methods are not viable to implement. This is for a variety of technical, operational and financial reasons.
Based on our experience in these method development processes, we believe the most rigorous methods that are also likely to have significant uptake are those that were developed alongside an inclusive co-design process, similar to that currently conducted by the CER.
Recommendations:

• Establish a clear and transparent decision-making process around prioritisation
of any new methods for development or variation.
• Continuation of a method co-design model similar to that currently adopted by
the Clean Energy Regulator. This will ensure high integrity, implementation-ready
methods that are informed by both the latest science and real world operational
issues.
• Establishment of two separate advisory bodies, one focused on the land sector
and one on energy and waste sectors.

Transparency and data access
Sufficient transparency on decision making processes and access to key project information is at the heart of recent criticisms of the ERF. Climate Friendly supports increased transparency in both these areas to improve confidence in Australia’s carbon crediting framework.
Transparency of regulatory oversight
While the Clean Energy Regulator has published multiple guidance documents with key regulatory interpretations, we believe there is an opportunity to further strengthen transparency of regulatory decision making through the publication of public rulings by the Clean Energy
Regulator. Publication of rulings would provide greater consistency of advice, and ensure all participants have a common interpretation of the scheme. This increased transparency could be delivered through a system similar to the Public Rulings provided by the ATO.
Recommendation:

• Create a public registry of individual precedents or rulings on carbon farming
projects, similar to the system of public rulings provided by the ATO.

Transparency of project information via a National Integrated Land Database
As highlighted in our covering letter and Part 2 of this submission, Climate Friendly and our partners collect a substantial volume of environmental, carbon, agricultural production and other land management data spanning a 35-year period as part of assessing and implementing a land-based carbon farming project. There is a significant opportunity to share this data to support ongoing research, continuous improvements of national carbon, environmental and agricultural policies, programs, and systems, and to provide information to other land managers
to aid decisions on managing their property. Similar opportunities were identified in the
Samuel’s Review of the nations environment laws, which recommended changes to improve the centralisation of industry and government collected environmental data.
In the case of carbon farming projects, this data is tightly linked to privacy laws and the livelihoods of individual land managers. Therefore, there are careful legal, ethical and technological considerations in enabling access to this information. Technical challenges to sharing data are partly owing to the immense size of the data sets, and also related to the need for different types of data to be linked or integrated. For the last two years Climate Friendly has been working on possible solutions to enable data sharing with industry, government and research partners, and supports the establishment of a national data sharing platform which makes information accessible, while also protecting privacy.
Advances in data infrastructure technology mean it is now possible to bring together agricultural, biodiversity and carbon storage data at property, regional or national scales. A National
Integrated Land Database, with a data discovery portal, sharing agreements and usage licenses, will allow organisations and individuals to opt-into sharing information for purposes beyond just project level compliance and enforcement.

Figure 2: A regulated data network links data contributors to data users as part of a National Integrated Land Database
Creating a data network will enable public and private organisations or individuals to continue to hold and manage the data they collect, while making it available to data users in a de-identified, confidential manner. This is achieved through an Application Programming Interface (API2) implemented by multiple data contributors to allow these distributed datasets to be unified and accessed as a collective whole. Facilitating efficient data requests and exchange practices is a more agile way to manage and access large datasets with multiple contributors, than designing and implementing a single consolidated, centralised database. A custodian or oversight body, as proposed in the Samuels Review, can regulate the data network by setting standards for data contributions that public and private contributors implement. This also reduces costs of data collection by enabling private organisations to opt-in and contribute privately funded data sets, including lidar, field inventories and other environmental, carbon or agricultural management datasets, allowing government and research bodies to supplement these data sets with strategic data acquisitions.
This short video helps explains how the database could work and how governments, conservation organisations and agricultural producers might all contribute information and obtain benefits: https://www.climatefriendly.com/future-of-carbon-farming/.
Recommendations:

• Establish a National Integrated Land Database to enable sharing of carbon,
environmental and agricultural production data in a way that protects privacy
while enhancing transparency of information, expanding research capability and
informing best practice land management and policy development.
• Consider the interaction of data transparency recommendations made in the
Samuels Review of the nations environment laws.

Procedural improvements
Process-based audits
As part of our extension services, Climate Friendly oversees our partner’s project audits. This includes preparation of the audit pack (including field monitoring data, offsets reports, abatement calculations, spatial files that meet threshold accuracy tests, third party management information etc); engagement of the independent NGER accredited auditor, oversight of the audit process, responding to auditor action requests, participation in auditor field visits, and submission of the final report and accompanying request for ACCUs to the Regulator. Costs associated with data collection and the audit are extensive and are funded by Climate Friendly as part of our investment in the project to remove barriers to participation. For our projects that are modelled (i.e. projects that estimate abatement using a model, and do not involve direct field measurement of trees or soil), audits and related evidentiary requirements are generally the highest project cost after the project pre-feasibility assessments. Figure indicates the relative costs associated with audit years. Reducing audit costs is a way to increase viability of projects, however, any reduction in audit costs must be done in a way that maintains integrity.

2
APIs are information exchange protocols that allow systems to communicate with one another. Implementing data exchange practices in software allows for automation of search, access control and quality assurance.
Figure 3: Indicative cost trends for a typical modelled carbon farming project

We propose the introduction of an option for process-based audits for carbon service providers, as opposed to the current system where each audit is conducted for each project separately, even though the project utiilises the technical systems and procedures as numerous other audited projects. Transition to process-based audits would save significant costs and enable us to support smaller scale project participants, as currently smaller scale projects are not commercial to operate as they cannot cover the quality assurance costs. Analysis conducted by
Climate Friendly suggests that implementation of process-based audits could unlock the commercial viability of many smaller scale projects, and is akin to a $5 or more increase in carbon price.

Process-based audits are a common feature in other sectors, for example, finance. They would involve company-wide audits of processes and systems, where the implementation of a company’s internal quality control systems would be checked; coupled with appropriate project level spot checks. The spot checks could be based on a specified set of focal items as identified by the Regulator based on a risk assessment against the method. The recommended assurance level for the company wide process audit is reasonable assurance. The suggested timing of process-based audits would be every 1 – 5 years depending on portfolio size and frequency of reporting. There could be requirements for notification in the event of a substantial change to company processes or structure.

We believe that introduction of a process-based audit option would enhance scheme integrity and also enable greater participation. This is because the current audit arrangements tend to replicate the same checks and investigations for each project, with a lesser focus on assessment of company systems, processes and data storage. Project-specific audits should continue to be an option as an alternative to a process-based audit to enable different participants to choose depending on the number of projects they participate in.
Recommendations:
1. Introduce the option of process-based audits to lower transaction costs, utilise
emerging technologies to unlock commercial viability of carbon farming for
smaller scale land managers
2. Auditor guidelines and training should be updated to ensure auditors have the
appropriate skills and expertise to conduct process-based audits. This could draw
on guidelines and requirements from other sectors where process-based audits
are common

Co-benefits and other impacts
Best practice land-based carbon farming has a significant potential to deliver multiple environmental, Indigenous, agricultural productivity and other benefits. There are many controls already embedded within the ERF scheme and its methods to minimise the risk of adverse impacts.
Recognising that many carbon farming participants may also wish to participate in other certification standards or markets for ecosystem services, or to otherwise value-add on their existing carbon projects, Climate Friendly believes it is important, to harmonise the regulatory frameworks for carbon markets with other emerging ecosystem markets or standards that govern claims related to other co-benefits. This will streamline administration, avoid risks of double claiming in different schemes, reduce the cost of compliance, and optimise the ability of land managers to deliver multiple, long-term benefits.
Integrated governance with other emerging policies and programs
The Albanese Government is working on a range of complementary policy initiatives, many of which have parallel consultation processes currently underway. These include the Biodiversity
Stewardship Certificate framework, a new drought plan, a Climate Active land standard, remote employment plan, among other initiatives. Many of these areas relate to core or co-benefits of carbon farming, and such benefits are increasingly being valued financially, as a result of the
Taskforces on Climate-Related and Nature-Related Financial Disclosure and other initiatives.
As these emergent attributes are increasingly valued as benefits or ‘products’, increased and harmonised regulatory oversight is required. To reduce the cost of this oversight, it is important to integrate and align both carbon and other benefit verification requirements or standards wherever possible. This will minimise costs, reduce risks of double claiming of benefits, improve understanding of rules, and ultimately increase integrity and impact.
Recommendations:
1. Amend the Carbon Farming Initiative Act to incorporate the Biodiversity
Stewardship Certificate Framework into a joint carbon and biodiversity framework,
rather than creating two separate but mirroring pieces of legislation.
2. Enable to Regulator to declare one project that applies multiple methods or
protocols, so that land managers can opt to participate in relevant carbon farming
methods and biodiversity protocols on a single property through one harmonised
project.
3. Consider other opportunities to integrate emerging standards, policies and
programs to optimise multiple benefits, streamline land manager participation and
help to reduce regulatory complexity and costs of participation in parallel
schemes.

Maximising Indigenous benefits from carbon farming
While some important financial and non-financial benefits have flowed from some carbon projects to Indigenous Australians, we believe that there is significant scope to scale up these benefits and use carbon farming as a key mechanism to deliver economic opportunities for
Indigenous people, alongside environmental repair and reconciliation with non-Indigenous
Australian partners. It is important to review the types of opportunities for Indigenous Australians in the context of the different types of Indigenous land estate around Australia.

Summary of Indigenous Estate

While some Indigenous Australians have had land rights and/or native title determinations recognised, many remain excluded from having full ownership and control of the underlying land. As a result, economic opportunities for many Indigenous Australians remain limited to receipt of more passive income under Indigenous Land Use Agreements. Many Aboriginal corporations are underfunded (e.g. median income of native title prescribed bodies corporate is less than $90k p.a), with limited capital base and/or income.

Table 4: Indigenous Estate

Estate Category 1788 2021

First Nations owned* 100% 17%

First Nations managed* 100% 18%

First Nations co-managed* - 4%

Other special rights
- 44%
(e.g. native title)*

No explicit rights,
management or 43%
ownership*

* These categories are not mutually exclusive and have substantial overlap. A total of 57% has some form of First Nations
right, ownership and/or management
Indigenous Estate and Carbon Farming:

Opportunities for participation in carbon farming vary across these different categories of
Indigenous Estate. Our understanding of the potential opportunities is summarised in the table below.

Table 5: Opportunities to participate in carbon farming by Indigenous Estate Type
Carbon farming participation type
Estate Category 1788 2021 Eligible interest Implementing
Legal right
holder partner

First Nations owned* 100% 17%

Depends on
First Nations managed* 100% 18% Depends on tenure
tenure

First Nations co- Depends on
- 4% Unlikely
managed* tenure

Yes if exclusive
Other special rights Yes if determined
- 44% native title
(e.g. native title)* native title
otherwise unlikely
No explicit rights, Depends on
management or 43% relationship and
ownership* capacity

* These categories are not mutually exclusive and have substantial overlap. A total of 57% has some form of First
Nations right, ownership and/or management

As noted in the recent September 2022 report prepared by the Indigenous Carbon Industry
Network (ICIN) titled Mapping the Opportunities for Indigenous Carbon in Australia: Identifying opportunities and barriers to Indigenous participation in the Emissions Reduction Fund,
Indigenous Australians participation in carbon farming has to date been largely limited to two method, namely savanna fire management and human-induced regeneration.

We believe there are some key lessons from engagement in these two methods to date which could help unlock broader opportunities across the Indigenous Estate. Climate Friendly has reviewed the ICIN Report, and broadly supports its recommendations, including specifically their recommendation to develop an Integrated Farm Management Method that is suited to all environments across Australia, including the Desert and the Savanna, and has appropriate Indigenous participation in the design and development. In this submission our recommendations are focused on expanding on how we think the scheme could be strengthened to unlock further benefits for a specific sub-set of the Indigenous Estate, Native
Title Holders, based on our experience working with Native Title Holders under the human- induced regeneration method.
Expanding carbon farming opportunities for Native Title Holders

Figure 4: location of carbon farming projects relative to Indigenous Estate

Since 2014, Climate Friendly has developed partnerships with Native Title Groups on 18 carbon farming projects, delivering more that 4 million ACCUs from those projects to date. This is 92% of the ACCUs issued with Native Title Partnerships under that method. These Native Title Partnerships provide multiple benefits, including new economic opportunities for the Indigenous groups via a revenue or ACCU share, annual field monitoring work, ability to develop bush tucker gardens and undertake cultural heritage surveys, among other benefits. Most importantly, they have also resulted in strengthened relationships been agricultural producers and Traditional Owners and improved health of country. While these agreements are a positive step, we believe there are major opportunities to deepen the involvement and benefits for Indigenous Australians through a combination of governance reforms and development of the new Integrated Farm Management Method.

Firstly, when examining Figure 4, it is apparent that there is a higher concentration of projects located on land that does not have declared Native Title. This is despite considerable efforts by
Climate Friendly, and others in the carbon industry more broadly, to expand the impact of carbon farming on Native Title land. So far, only 22 human induced regeneration projects with
Native Title determinations have been issued ACCUs, while 72 projects are yet to obtain consent or have any ACCUs issued. Nearly half of these projects were registered more than two years ago. A further 21 projects with Native Title have been discontinued or revoked. Climate
Friendly believes there is an opportunity to support more projects to be successful on Native
Title land and deliver benefits to Indigenous Australians, along with the land manager partners.
Climate Friendly has identified the following key barriers to widespread implementation of carbon farming projects on land with a Native Title determination:
1. Establishing a partnership with Native Title Holder groups can be complex, costly and
time consuming. In our experience, formation of these partnerships has taken 18 months
to four years. While the outcome is highly rewarding, the upfront investment can be
daunting, for both the Native Title group and the land manager who are time limited.
2. There are limited support services for the Native Title Holders to get advice on
partnership models, and this can slow down their ability to make informed decisions. In
our experience, we provide funding for independent advisers, but these advisers still
have limited knowledge of carbon farming and often have high competing workloads.
3. Many of the Native Title Holder groups we have engaged with are overwhelmed by a
high number of various regulatory processes and applications that their Prescribed Body
Corporate must consider under other legislation. While carbon farming projects involve
regeneration of their traditional lands, their ability to consider opportunities to partner on
carbon farming projects is often delayed by statutory obligations to consider mining and
other similar applications, even in instances where such applications deliver no
economic benefits to the Native Title group.

Addressing these impediments to Native Title Holder participation may help to improve the flow of benefits to Indigenous Australians from carbon farming and promote reconciliation in regional
Australia.

Recommendation:

• The eligible interest holder consent process for Native Title Holders be reviewed
to determine if the process is fit for purpose for this category of interest holder,
or whether changes could be made to improve this process for Native Title
Holders and further encourage land managers to establish projects in
partnerships in regions with determinations. Opportunities to strengthen may
include provision of further support mechanisms (financial and advisory) for
Native Title Holder groups. Additionally, it should be considered whether there is
any benefit to regulatory notification deadlines similar to those that apply in other
sectors such as mining. This review should be done through a consultative
process involving Native Title Holder groups and other Indigenous Australian
input, as well as land managers and service providers.
Maximising biodiversity co-benefits
Carbon farming vegetation projects store carbon through increasing trees and shrubs and not maintaining habitat. Carbon farming soil projects often result in increased pasture biodiversity which in turn increases insect and bird life, in addition to soil microbial biodiversity. These activities can be expected to improve native habitat and have flow on improvements to biodiversity. Climate Friendly has provided a detailed submission to the Federal Government on the proposed Biodiversity Certification Scheme. While we support the development of the
Scheme, we have outlined in our submission views on how best to align the legislative elements of carbon and biodiversity to improve the biodiversity outcomes.
Please refer to our submission on the Biodiversity Certification Scheme for more detailed recommendations on how biodiversity benefits can be optimised.
Improving regional development and local communities
Climate Friendly and our partners believe that carbon farming should have positive impacts on local communities. To achieve this aim, we make significant investments into the regional communities where we live and work, and our partners have been shown to re-invest their carbon farming revenue back into their farms and the local communities they live in.
An analysis of farm management and tenancy statistics from Climate Friendly’s human-induced regeneration portfolio shows that 49% of projects are owner-occupied and a further 30% employ on-site managers. The remaining 21% are actively managed either by the owner, who typically lives nearby in the closest regional township, or a manager who is employed to manage multiple neighbouring stations. When this is compared to the farm tenancy prior to the carbon project, there has been a slight increase to the level of owner-operated on-farm management of our projects since they started carbon farming. This appears to be a result of the improved financial position enabling farmers to remain on the land.
Table 6: Farm manager tenancy on Climate Friendly human-induced regeneration projects

Farm tenancy / management arrangement Proportion of CF projects
Owner occupied 49%
On-site manager 30%
Off-site manager 13%
Off-site owner manager 8%
Source: Survey conducted by Climate Friendly of its own clients

New economic opportunities in regional Australia
At the time of writing, over 35.8 million Kyoto-compliant ACCUs have been issued to HIR and
NFMR projects since 2015, with an estimated value of over $622 million based on average auction prices (note: actual value will be higher, given some ACCUs traded outside ERF auction mechanism, estimated value calculated based on average ERF price).3 Around half of these have been issued to projects which Climate Friendly supports.

Regional training, community events and services
Climate Friendly supports the local communities in which we work in a range of other ways, including being a Co-Founder of the Wal Dunsdon Memorial Scholarship which was established in 2019. Annually, we host and support a variety of other regional community events and services, including field days, sporting events, and supporting important services such as the
Royal Flying Doctors.

3
Source: Clean Energy Regulator ERF Project Register (available at: https://www.cleanenergyregulator.gov.au/ERF/project-and- contracts-registers/project-register). Accessed 30 September 20222; and average auction price of $17.35 sourced from Clean
Energy Regulator April 2022 Auction Results. Available at: https://www.cleanenergyregulator.gov.au/ERF/auctions-results/april-2022
Employment opportunities for regional Australians
Apart from opportunities created directly through the management of carbon farming projects,
Climate Friendly is also a direct employer of people who live in the communities where we work.
In the last two years our team has nearly doubled in size. Our staff live in Quilpie, Dubbo,
Toowoomba, Tamworth, Moree, Trentham, Darwin and many other regional communities around Australia. We understand that country needs management and communities need people, and this is at the core of our partnership model.

Carbon farming enhances agricultural production outcomes
Most carbon farming projects we support involve improved management of livestock as a part of the project. We note that to be eligible for a human-induced regeneration project, land managers have historically been supressing regeneration on their property, typically through a combination of over-stocking relative to pasture availability, inadequate infrastructure and/or grazing rotations, vegetation clearing and/or lack of weed control. This means they have not had an optimal mix of sustainable agriculture and environmental stewardship, and that a carbon project necessarily involves adoption of more sustainable practices which improve long-term agricultural viability. A very common situation land managers found themselves in prior to starting a carbon farming project was running stock numbers above the land carrying capacity to ensure the short-term viability of their business and debt servicing. This resulted in land managers being in a position where both their land and agricultural activities were less productive for the medium to long term. Carbon farming has enabled their land to regenerate and for stock levels to be re-aligned with a level below carrying capacity, benefiting both the environment and agricultural productivity. The carbon project is an additional complementary activity and a new source of revenue, alongside sustainable agricultural and environmental stewardship activities that our carbon farming partners conduct on their respective properties.

For these reasons, we believe that Ministerial veto powers inserted by the Morrison Government into Section 13(4) and 20C of the Carbon Credits (Carbon Farming Initiative) Rule 2015, should be repealed, as the reasons cited for requiring the Ministerial veto power are erroneous. We reiterate from our January 2022 submission to the Morrison Government that this amendment to the CFI Rule introduces uncertainty and duplication, unnecessarily increases scheme complexity without adding any new controls, and potentially leads to material adverse impacts for regions that are yet to benefit from carbon farming. Given the significant potential for the veto power to lead to adverse impacts, we recommend that this project level requirement be reconsidered and removed as part of the ACCU Review. Further details on how it duplicates existing requirements for weed, pest and fire controls are included at Attachment A.

Improving drought resilience
In 2021, Climate Friendly received an NRM drought resilience grant from the Australian
Government’s Future Drought Fund. The purpose of the grant was to understand the impacts of carbon farming on drought resilience. As part of the project activities, Climate Friendly worked with Charles Sturt University to conduct a survey of 200 farmers from across Australia. The detailed results are presented in Attachment B.
Key findings of the research are that carbon farming is viewed as participants as a powerful drought impact mitigation tool. 75% of carbon farming respondents indicated that the carbon farming revenue helped them meet their loan repayments during drought. The revenue provided from carbon farming helped support and enhance their traditional agricultural enterprise.
Improving management of pests, weeds and fire risks
For human-induced regeneration projects, the humane control of feral animals and the management of plants that are not native to the area, are two of the eligible management changes. Therefore, control of feral animals and weeds is an integral mechanism behind the carbon farming payments for many land managers.
In addition, the carbon farming legislation contains numerous requirements for management and reporting of weed, pest and fire risks, either directly or indirectly via at least nine existing provisions in the CFI Regulatory Framework, as described in Attachment A.

Recommendations

• Repeal the veto power and requirement for additional project approvals by the
agricultural minister for regeneration projects which cover more than 30% of a
property (Section 13(4) and 20C of the Carbon Credits (Carbon Farming Initiative)
Rule 2015, should be repealed)
• Recognise the positive benefits of carbon farming on agricultural production and
drought resilience of farms and regional communities in Australia.

Relationship to voluntary Climate Active certification
We believe Climate Active policies must be reviewed in the context of Australia’s international commitment to limit global warming below 1.5C. Whether or not a % ACCU purchase requirement is appropriate depends on how voluntary actions are accounted for as part of
Australia’s NDC. This is to ensure that voluntary action supports Australia to increase our level of ambition and go beyond the legislated 43% reduction target.
Separately, we note that Climate Active is currently consulting on a land standard. We believe this is an important development, as it will better enable standardisation of carbon neutrality assessments for the land sector. This standard should be harmonised with emerging best practice for carbon farming methods. We will respond directly to this separate review, but encourage the Review Panel to coordinate recommendations.
Further, Climate Friendly suggests the Australian Government could give greater regulatory guidance on how other non-regulated voluntary carbon market standards can be applied in
Australia to ensure that this is done consistently with Australia’s National Greenhouse Gas
Inventory. The lack of clarity on how and when international carbon standards can be used domestically risks double counting of abatement within Australia and in other nations.

Recommendation:

• If the Government’s 43% emission reduction target for 2030 takes into account
voluntary corporations carbon neutrality commitments, then 100% of Climate
Active’s offsets should be sourced from ACCUs (rather than the current
requirement of 20%). This helps ensure the national ambition is not undermined.
However, we note this may also discourage voluntary action which will be
important to exceed the 43% target and place Australia on a trajectory to meet the
1.5C Paris commitment.
• If the Government’s 43% target does not include Climate Active carbon neutral
commitments, then there is less imperative to mandate the use of over 20%
ACCUs in any Climate Active certification. However, any other eligible units able
to be used under the Climate Active standard should be carefully screened to
ensure they meet a similar integrity benchmark to ACCUs.
• Refer to our separate submission to Climate Active on the proposed land standard
and harmonise review recommendations.
• Provide a clear policy position on how and when other international voluntary
standards can be applied in Australia, to ensure there is no double counting of
abatement.
Attachment A – Existing controls ensuring adequate management of weeds, pests and fire risk

Requirements for management and reporting of weed, pest and fire risk are already addressed directly or indirectly via at least nine existing provisions in the CFI Regulatory Framework and accompanying guidance.

• concurrence of state and territory laws: all carbon farming projects must comply with
state and territory laws, including in relation to weed, pest and fire management (CFI Act
s294)
• Non-compliance with an environmental law is also a consideration in relation to fit and
proper person test to enable an entity to become or remain a project proponent (CFI
Rule s61(1)(e)(i))
• compliance with relevant National Resource Management (NRM) Plan: all carbon
farming projects must be implemented consistently with NRM plans, which commonly
include provisions related to management of pest, weeds and fire. This must be
confirmed as part of the project application and is also commonly reviewed as part of
project audits (CFI Act s23(1)(ga)(ii)).
• implementation of relevant management changes related to weed and pest control: two
of the five eligible management changes in the HIR and NFMR methods include
management of pests and weeds - ‘the management, in a humane manner, of feral
animals’; and ‘the management of plants that are not native to the project area’. (HIR
Method s7(2), NFMR Method s1.4(2)).
• permanence plan, including addressing fire risk and management actions: all HIR and
NFMR projects must have permanence plans covering the applicable 25 or 100 year
period, which must be submitted to the Regulator at legislated intervals. (CFI Rule
s13(1)(p) & s70(4A))
• notification requirements in the event of a natural disturbance or fire: in addition to the
fire plan, proponents must notify the Regulator within 60 days of ‘a natural disturbance
that causes a reversal of the removal’. (CFI Act s81)
• Eligible interest holders in the land are required to give consent to the project: common
interest holders include state & territory governments, Traditional Owners and financial
institutions. These entities commonly request information around permanence
obligations and broader land management plans, including in relation to compliance with
any relevant state- based laws, lease requirements or lending requirements. (CFI Act s
43-45A)
Given the existing multiple layers of legislation that already seek to address the objectives described in the consultation paper, we question the utility of adding additional administrative processes. This is contrary to efforts underway by the Regulator to streamline administration, reduce scheme complexity and enable more land managers to participate in carbon farming.
Attachment B – Co benefits on drought resilience survey

Key findings:
1. 65% of survey respondents were net promotors of carbon farming as a drought mitigation
tool
2. The projects have helped improve their preparedness for drought and helped most meet
their loan repayments during periods of drought.
3. The revenue provided from carbon farming helped support and enhance their traditional
agricultural enterprise.

Introduction:
In 2021, Climate Friendly received an NRM drought resilience grant from the Australian
Government’s Future Drought Fund. The purpose of the grant was to understand the impacts of carbon farming on drought resilience.
Method:
As part of the project activities, Climate Friendly worked with Charles Sturt University to conduct a survey of 200 farmers from across Australia.
The research looked at the impacts of carbon farming in relation to the farm business’ financial and environmental performance before, during, and after a drought. We surveyed farmers engaged in carbon farming and carbon farming-like activities,4 and those not engaged in any carbon farming activities. By contrasting responses between these different cohorts, we gained an understanding of the impact of carbon farming on drought resilience, as distinct from other background effects. The survey participants came from across Australia.
Results:
Key findings from the survey were:
1. 65% of respondents were net promotors of carbon farming as a drought mitigation tool
(Figure 1)
2. 73.3% of respondents that had a registered project or were engaged carbon farming-like
activities, strongly agreed that carbon farming had improved their preparedness for
drought. Similarly, when asked if the carbon farming activities had reduced the severity
of drought, 71% of respondents agreed or strongly agreed. This enhanced drought
resilience was attributed to both the environmental benefits of carbon farming and the
financial benefits.
3. Interestingly, those farmers implementing more than one carbon farming activity scored
higher in response to questions about carbon farming improving their drought
preparedness and reducing its severity. This suggests that more holistic carbon farming

4
Participants were mostly engaged in soil management (29.8%), Human-induced Regeneration (HIR) (22%) and environmental plantings (19%). Some participants were engaged in multiple activities. Those with a registered project were mostly engaged in HIR
(66.7%).
frameworks such as the Integrated Farm Management Method might further enhance
the drought resilience benefits of carbon farming.
4. Of the carbon farming participants that had been paid for their Australian Carbon Credit
Units (ACCUs), all but one respondent had reinvested the carbon farming revenue back
into their farm. The one respondent that did not reinvest back into the farm, used the
carbon farming revenue to purchase another farm. This data suggests that carbon
farming revenues are used by farmers to support and enhance their traditional
agricultural enterprise.
5. 75% of carbon farming respondents indicated that the carbon farming revenue helped
them meet their loan repayments during drought. Those respondents indicated they had
stronger business stability during drought, as compared to those engaged in carbon
farming like activities.
6. The speed with which decisions could be made relating to drought were also impacted
by the carbon farming revenue, with those receiving revenue indicating they were better
able to make quick decisions to better manage and recover from because of the revenue
safety net.
7. Farmers with a carbon farming project and those implementing carbon farming-like
activities had a 6.5% increase in their locus of control over drought, as compared to non-
carbon farmers. This is despite the majority of respondents with carbon farming projects
coming from regions that are at higher risk of drought.
8. Those engaged in a carbon farming project and receiving carbon credits also reported
they experienced reduced stress during drought as compared with before having the
carbon farming project.
Figure 1 Promotor score for carbon farming as a drought mitigation tool

Submission: Independent Review of Australian Carbon Credit Units
September 2022
About Climate Friendly
Founded in 2003 by a CSIRO scientist, Climate Friendly is a profit-for-purpose company with a vision for a productive, sustainable land sector that contributes to a zero net emission Australia by 2050. We achieved our first target to support 20 million tonnes of greenhouse gas reductions at the end of 2020, and our purpose is to scale up to 100 million tonnes by 2025. We are one of the longest operating and most experienced carbon extension service providers in Australia. Our growing team of 65+ expert staff has supported registration of over 150 carbon projects since 2014. We partner with agricultural producers, foresters, Traditional Owners, conservation organisations and governments to design and implement these projects across approximately 10 million hectares of land.

Part 2: Technical rigour and integrity of ERF methods & projects
Each carbon farming method has its own set of detailed technical rules and guidelines. In this part of our submission, we provide an assessment in relation to the Human-Induced
Regeneration (HIR) method and the HIR projects that we service, as these projects form a significant portion of our project portfolio and an important component of the ACCU Review
Terms of Reference. The data presented in this submission demonstrates that the HIR method has high integrity, rigour and an independent scientific basis, and the ACCUs issued to HIR projects we support have been credited on a conservative basis.
Firstly, we note that commercial viability of land management practice changes has been the key driver of ERF project locations to date. This is shown below by reviewing Figure 1 and 2.
Figure 1 shows projects overlaid with average land values (Data source: Rural Bank,
Australian Farmland Values 2022). This highlights that land-based ERF projects have to date predominately been located in regions with lower land values (i.e. below $1000/per hectare, noting values for WA are not all available but in our experience also fall into this category in the regions were ERF projects are located). Figure 2 shows the ACCU price since 2015 (ERF Fixed & Optional Auctions, plus ACCU spot trades), compared to the New
Zealand and European carbon credit unit prices. This highlights that the emerging ACCU market has been conservatively priced to comparable international markets, and that it only started to modestly increase in the later part of 2021 to spot prices consistently above $27.
Some commentary on the ERF has inferred that the fact that most ERF projects are located outside high rainfall and biodiversity regions is due to the low integrity methods. However, in our view, low ACCU prices are the driver of project locations. At lower prices, it is only commercially viable to make land management practice changes on lower productivity and lower value agricultural lands. The increase in ACCU prices in 2021 also coincided with an increase in registrations of projects in higher value land areas (refer Figure 1 and increase of registrations in higher value lands in eastern Australia). As such, we suggest that a well- functioning carbon market underpinned by strong emissions reductions targets and comparable international carbon prices is the key to incentivising greater uptake of ERF methods in higher value land and higher biodiversity regions.
Figure 1: ERF project registrations pre and post July 2021 compared to median property values per hectare

Figure 2: ACCU and international carbon price comparisons since 2015
Detailed analysis on Human-Induced Regeneration (HIR) Method
This section provides detailed analysis related to:
1. Recent claims raised about the HIR method; and
2. An assessment of the HIR method in relation to the offsets integrity standards.
Climate Friendly summarises the key concerns raised and our responses to these concerns through an analysis of the below questions:
1. Does grazing management suppress vegetation (woody biomass) in the rangelands?
2. Can vegetation in the rangelands achieve forest cover or are the rangelands regions
unable to support forest cover?
3. Do HIR projects provide adequate evidence of suppression pre-project and evidence
of the removal of suppression following project commencement?
4. Is removal of suppression leading to increase in forest cover in HIR project areas?
5. Are HIR projects over credited or conservatively credited when compared to actual
abatement? Specifically, are pre-existing trees being credited, or does their presence
in the project estimation areas create a risk of over-crediting, or are their sufficient
controls to ensure pre-existing trees are accounted for and crediting is conservative?
Our analysis and the information provided in this submission demonstrates the following:
1. Grazing causes degeneration and suppression of palatable vegetation.
§ Livestock (e.g. sheep & cattle) and goats eat palatable woody vegetation.
§ This is supported by an extensive body of peer-reviewed science, as well as
auditable project-specific data, and results in suppression of woody biomass.
§ 89% of projects involve multiple management changes to remove multiple forms
of suppression which collectively have prevented forest regeneration in the past.
2. The Australian Rangelands can form and sustain acacia forests and acacia
open woodland forests which have greater than 20% tree canopy and store
carbon
3. HIR carbon projects provide extensive evidence of project level suppression
and regeneration following the removal of suppression to independent
auditors and the Regulator.
4. There is a clear detectable trend of increasing forest cover in project areas that
is correlated with management change to remove suppression factors (over-
grazing, clearing and uncontrolled feral animals).
§ Carbon projects should be viewed as facilitating the ongoing growth and survival
of trees that has in fact been triggered by rainfall and other environmental
conditions. They involve removing suppression agents which were stopping
forests from regenerating (i.e. rain makes trees grow, land management changes
remove inhibitors to growth).
§ There is no discernible difference in the rate forest regeneration between projects
with avoided clearing compared to grazing management as the key practice
change. This suggests that both are equally valid ways to sequester carbon.
5. HIR projects are being issued ACCUs conservatively, and pre-existing trees are
appropriately accounted for in abatement calculations.
§ The quantum of issued ACCUs to projects we support is less than ground
measurements of actual carbon stored carbon in the regenerating forest
conducted by CSIRO.
§ FullCAM was calibrated with pre-existing trees in the calibration sites and the HIR
method has several controls that restrict the possibility of any risk of over-crediting
Recommendations:
1. Note the evidence of grazing, feral animal, clearing and other suppression of
vegetation in the rangelands region where human-induced regeneration projects
commonly occur
2. Note the evidence of land management practice changes and the consequent
regeneration of the project implementation areas that has occurred in human-induced
regeneration projects. Confirm that there is no evidence of fraudulent conduct, and
that ACCUs issued from human-induced regeneration projects are based on credible
science, have rigorous technical safeguards, and passed independent audits.
3. Note the conservative crediting of carbon abatement compared with actual carbon
stored in HIR projects as verified through ground measurements
4. Note the substantial risk of plantation forests being cleared and not replanted,
releasing carbon (refer Appendix 5, further information available on request)
5. Note the potential of the Integrated Farm Management method to scale up land-
based carbon sequestration using the latest science and technology, informed by
lessons from implementation of land-based carbon projects to date, and support
finalisation of this method as a priority.
1. Does grazing management suppress vegetation in the rangelands?

Summary:
§ Livestock (e.g. sheep & cattle) and goats eat palatable woody vegetation.
§ This is supported by an extensive body of peer-reviewed science, as well as auditable
project-specific data, and results in suppression of woody biomass.
§ 89% of the projects we support were subject to multiple forms of suppression in the project
baseline and implement two or more management changes as part of the project to
facilitate regeneration.

Rangelands properties in Australia are primarily used for grazing, with the main land tenure type in the region for NSW, QLD, WA, SA and NT being pastoral leases. Sheep and cattle are the predominant form of grazing, although more recently, there has been increasing presence of feral and domestic goats in southern QLD, NSW, SA and WA. There are a broad range of palatable tree species in the rangelands, as outlined in Appendix 1 and 2.
When examining the feasibility for a HIR project, Climate Friendly’s expert team assesses these palatable species for signs of suppression from grazing and feral animals.
Mulga, Acacia aneura, is one of the primary palatable native trees present in the semi-arid
“mulgalands” which compose part of the Australian rangelands. Appendix 1 and 2 outline that the palatability of mulga to cattle is rated as “A” (Department of Agriculture and
Fisheries, Queensland, 2022), and “High” for goats (Meat and Livestock Australia, May
2007). As the region is semi-arid, there is not consistent pasture or herbage during dry periods. Mulga has been known as the “standing haystack”, as it is eaten by stock when the intermittent pasture diminishes or when there is insufficient pasture compared to total grazing pressure.
Continuous and/or heavy grazing of palatable species that are within reach causes a
“hedging” or even a “bonsai” effect and can supress and even kill the plant. When the availability of palatable species runs out during drought periods, fodder harvesting, mechanical pushing, pulling, felling or lopping of higher trees commonly occurs to provide drought tolerant feed for cattle, particularly in QLD and NSW.

Peer reviewed science on grazing suppression:
There is an extensive body of peer reviewed scientific literature studying the degradation and suppression of native vegetation in the rangelands from grazing (refer to Appendix 3).
A unique 90+ year case study of Koonamore Station in South Australia provides an extensive body of peer reviewed literature on both a) the ability of grazing to suppress vegetation growth and b) how changing practice to remove grazing suppression can deliver forest restoration. Below is a remote sensed image of the impacts of removal of suppression from Koonamore Station, where the profound change to vegetation is clear compared to the surrounding landscape which has continued to be grazed.
Figure 3: Satellite imagery showing the long-term (90yr) effects of grazing management on the vegetation of the TGB
Osborne Vegetation Reserve, Koonamore; SA. Materially more vegetation can be observed within the fenced area than in neighbouring properties. Sinclair R. and Facelli, J.M. (2019) Ninety years of change on the TGB Osborn Vegetation Reserve,
Koonamore: a unique research opportunity. The Rangeland Journal 41(3): 185-187.

The practice changes implemented on Koonamore are akin to changes being undertaken as part of many HIR carbon projects, and this shows the potential long-term ability of these projects to regenerate the landscape.
Climate Friendly’s approach to assessing grazing suppression:
At a project scale, Climate Friendly assesses the effect of grazing on the vegetation by integrating several data sets to compile and assess vegetation growth patterns compared to management practices and climatic drivers of regeneration (e.g. rainfall). Prior to assessing whether specific tree species are being suppressed, staff assess a range of key evidence to assess whether there has been consistent high grazing pressure that is likely to have resulted in suppression and degradation of forest cover. Our approach includes:
1. High level satellite data: Analysis of NCAS & SLATS datasets as well as aerial
imagery to provide a broad indicator of forest cover change and/or suppression, to
guide field data collection.
2. Stock, trapping and sales records: Project proponents provide third-party auditable
evidence of historical numbers of stock and feral animals/pests through sales and
stock rate records. These records are compared to safe grazing calculations to
determine how frequently the stock rates have exceeded pasture availability.
3. Safe-grazing calculator: Climate Friendly has developed a ‘Safe Grazing Calculator’
to evaluate and monitor the likelihood of suppression occurring due to sheep and
cattle grazing based on records of stock numbers compared to pasture availability.
Pasture availability varies overtime according to rainfall and other factors. This
indicates periods where livestock are likely to have supressed palatable vegetation.
See discussion on question 3, provision of auditable evidence, for more information
on our safe grazing calculator approach.
4. Lack of ground cover: High grazing pressure can be visible from satellite imagery of
ground cover on properties in periods of low rainfall where the pasture body and
herbage cover appears heavily grazed or largely absent.
5. Browse lines: Browse-lines manifest as uniformly top-heavy vegetation, where the
absence of lower branches or foliage indicate that the specimen is being eaten but
has reached a height that is out of browsing reach.
6. Lack of young palatable species: Properties with clear browse lines also often
have a general lack of young age palatable species. This is an indicator of ongoing
suppression.
7. Sightings and density of ferals: Site visits record the numbers of ferals (goats)
sighted on properties, as well we evidence in scat densities or goat harvest and sales
receipts.
8. Heavy use of feed supplements: Graziers often use feed supplements to promote
digestion of less palatable species by livestock. A heavy reliance on feed
supplements can therefore be a good indicator of suppression by livestock.
9. Tree species: the palatability of the tree species present in a region and on a
property is considered to ensure the species have the potential to be suppressed and
to form forest cover (refer to next section for further information on forest potential)
Cumulatively, these data and analyses provide important information needed to assess project eligibility and whether or not there has been historical grazing pressure that may have resulted in degradation and suppression. Where high grazing pressure is deemed likely, Climate Friendly then supplements this data and analyses with auditable property specific evidence of grazing impact on regeneration. This commonly includes photographic evidence of grazing suppression on the property. A collection of examples of photographic evidence of grazing-based suppression is presented below. This is a small set of photos from our portfolio to help visualise how grazing suppression looks on the ground. This includes evidence of:
1. Hedging: Hedge mulga (and less commonly other tree species) is formed by close
and repeated grazing on the young mulga. This results in the trees being clipped into
a consistent height, or hedge, from cattle or goats. The hallmarks are a very even
height of the young shrub-formed mulga.
2. Snapped or trampled stems: Tall stems are often snapped where goats or cattle
have reached up on their hind legs and brought down the stem to access the feed at
the top. Or smaller trees are commonly trampled for easier access to the palatable
vegetation. This is not just suppression on young regeneration, but also active
degradation of trees that can contribute to forest cover.
3. Other stunted growth formations: the type of suppression commonly varies
according to livestock type. Signs in thickened stems and ‘bonsai’ like growth of
suppressed palatable vegetation are more commonly associated with sheep and
goats. These formations show stunted growth forms with thick base stems, indicating
browsing is suppressing regeneration.
4. Grazing of bark: Some species have palatable bark, such as Cypress. Eating of the
bark can result in suppression or death of the tree. Signs of ringbarking of these
species is an indication of degeneration and suppression of forest cover.
5. Pushing and fodder harvesting: In periods of drought, mature trees are often used
by graziers as a feed stock. This is more prevalent on properties with high grazing
pressure and suppresses forest cover.
6. Fence line comparisons: photographic evidence of suppression can also include
comparisons of the condition between two different paddocks or properties which are
separated by a fence. In this instance, the effects grazing management on one side
of the fence leading to ongoing suppression is evident compared to an adjacent area
of land that has different grazing and/or clearing patterns.
Photos 1 & 2: examples of “hedging” are identified in blue boxes. Palatable woody biomass in a paddock is kept at a consistent height. Shrubs are suppressed from regenerating to become trees due to constant grazing, typically by cattle and goats

Photos 3 & 4: examples of snapped stems are identified in blue circles. These are typically caused by goats and cattle breaking higher stems to access growing tips, or through physical trampling.

Photos 5 & 6: examples of “Bonsai and thickened stems” are identified within the blue circles. This growth form is caused by continual grazing of individual trees, typically by sheep, keeping them in a ‘bonsai’ form with highly thickened stems
Photo 7: example of “Ring barking” identified in the below blue circle. This is generally caused when goats eat the bark off palatable trees.

Photo 8 & 9: example of “pushing trees and fodder harvesting” are identified in the below blue boxes. Mulga is often pushed to provide feed for livestock in drought periods, or to increase pasture.

Photos 10 & 11: examples of fence line comparisons in rangelands properties where HIR projects occur are identified in the below blue boxes. They highlight the impact of – different management regimes in regions that otherwise have the same ecosystem and climate conditions. One side of the fence is suppressed relative to the other forested region.

7.
Projects typically involve multiple management changes to remove suppression:
Recent criticisms of the HIR method have focused on whether or not grazing is a valid suppression agent. However, in most HIR projects there are multiple suppression factors prior to project commencement. 89% of the projects we support involve two or more management changes, and over 70% of the projects also including changes to clearing practices. Typically, it is a combination of several interconnected historical factors and a package of management changes that combined lead to positive regeneration outcomes.
Table 1. Management change activities for 124 of Climate Friendly’s projects.

Activity No. Projects Proportion of CF projects
exclusion of livestock 3 2%
manage feral animals 79 64%
manage timing and extent of grazing 114 92%
cease mechanical or chemical suppression 88 71%
Note that 89% of projects are undertaking two or more management activities.

2. Can vegetation in the rangelands achieve forest cover or are the rangelands
regions unable to support forest cover?
Summary:
§ The Australian Rangelands can form and sustain acacia forests and acacia open woodland
forests which have greater than 20% tree canopy and store carbon

The definition of forest has been considered at length (IPCC Special Report on Land Use,
Land-Use Change and Forestry 2000). The current use of a cover-based characterisation provides an objective and consistent definition of ‘forest’ that can be applied globally. The use of crown projective cover (CPC) above 20% was chosen to include both dense forests
(closed canopy), in which virtually the entire land surface is covered by tree canopies, and woodlands (open canopy), in which the crowns of scattered trees or groups of trees may cover only some of the land surface. The inclusion of open woodlands is particularly important in the Australian rangelands context.
Acacia forests and Acacia open woodland forests, commonly found in the arid and semi-arid rangelands of Australia, have “forest potential”, being composed of a number of species that attain height in excess of 2 m tall and canopy cover greater than 20%. Dominant species include lancewood (Acacia shirleyi), bendee (A. catenulata), mulga (A. aneura), gidgee (A.
cambagei), brigalow (A. harpophylla), western myall (A. papyrocarpa) and blackwood (A.
melanoxylon). Canopy species also include members of the box group of eucalypts
(Eucalyptus section Adnataria) that exceed the 2 m height criteria. Many of these species are long lived and sequester substantial quantities of carbon, even as open canopy forest woodland1.
There are many checks and balances to ensure that land which does not attain forest cover does not get credited. Coinciding with the 2019 HIR Method review conducted by ERAC, the
Federal Government legislated an additional key regulatory change in 2019 required each project to attain forest cover by a specified date. If a project does not meet this requirement

1
Roxburgh, S. H., Karunaratne, S. B., Paul, K. I., Lucas, R. M., Armston, J. D., & Sun, J. (2019). A revised above-ground maximum biomass layer for the Australian continent. Forest Ecology and Management, 432, 264-275.
no further credits will be issued on the portion that has not performed, and it will have to be removed from the project. In parallel, the Clean Energy Regulator introduced new technical guidelines on stratification, evidence and records for HIR projects. This included the introduction of gateway checks to ensure that projects were transitioning towards attainment of forest cover, in line with the intents and purposes of the HIR method. The threshold for the first regeneration check is ≥7.5% crown canopy cover (or crown canopy cover increases 5% over 5 years). Figure 4 below provides an illustrative example of forest cover transition in the rangelands towards “forest cover”.
Figure 4: canopy cover stages and comparison to HIR carbon project gateways

Source: CMI Working Paper: Response to Research on HIR Method, HIR Method Review Sub-Committee, April 2022.

3. Do HIR projects provide adequate evidence of suppression pre-project and
evidence of the removal of suppression following project commencement?

Summary:
§ HIR carbon projects provide auditable evidence of project level suppression and
regeneration following the removal of suppression to independent auditors and the
Regulator.

Every HIR carbon project is audited by a National Greenhouse and Energy Reporting
Scheme (NGERs) auditor. These auditors are approved by the Clean Energy Regulator and underpin the integrity of not just carbon project compliance, but also corporate emissions under the National Greenhouse and Energy Reporting Scheme. The auditors are themselves audited at regulator intervals by the Clean Energy Regulatory to ensure they are auditing correctly. The Clean Energy Regulator audit framework is also audited by the ANAO from time to time.
Every rangelands HIR project is audited at least three times over its life by these independent auditors to assess compliance with the legislation, with the first audit occurring prior to the first issuance of ACCUs. This includes assessing that there is evidence of suppression, including Climate Friendly’s safe grazing calculator, field verification data and associated stocking records (see Box 1), and that there are enough juvenile and/or suppressed trees to grow to attain forest cover. This includes assessment of spatial mapping
which must meet stringent map accuracy assessment requirements, field data, site visits and/or equivalent high-resolution data to validate the status and extent suppression and regeneration of specific areas delineated within projects. It also includes technical reviews of abatement calculations and an assessment of legal documentation, consents and management plans.

Box 1: Climate Friendly’s Safe Grazing Calculator
Climate Friendly developed a ‘safe’ grazing calculator to monitor the impacts of grazing in
both the 10-year baseline period and throughout project implementation. This calculator is
used to assess stocking rates relative to pasture availability. The calculator uses inputs
from stocking numbers and simulated pasture biomass, which is based on site-specific
environment and climate data and calibrated to remotely sensed data. Stock data is
obtained from quarterly monitoring reports provided by the land manager, and evidenced
through auditable datasets, such as receipts. Stock classes are converted to a ‘dry sheep
equivalent’ (DSE) figure based on standard conversion factors.

Safe grazing levels refer to the stocking of the property that will ensure sustainable
pasture production, given the climatic and other conditions. Periods above “safe grazing
pressure” indicate potential for suppression of vegetation, as livestock and goats will
utilise the palatable vegetation in periods of limited pasture availability. By monitoring the
likely availability of pasture, this enables us to advise land managers to alter stocking
rates to prevent grazing from having a suppressing impact during the project period. This
calculator, with accompanying third-party evidence and records related to stock, is used
as to provide one part of the evidence base to demonstrate that vegetation was impacted
in the baseline period and that management changes which comply with the HIR method
have been implemented since project commencement.

While the safe grazing calculator uses environmental data specific to the project area, the
calculator should still be considered an indicative model. Supplementary actions, such as
purchase of feed, are not considered. The grazing calculator is just one input and source
of integrated information used to both assess project eligibility and monitor ongoing
impact.

Figure 5. An example of a safe grazing timeseries for a project. In the baseline period, actual grazing pressure (dry sheep
equivalent) exceeds safe grazing capacity, indicated by the red shading. This results in the depletion of pasture and
grazing suppression of regenerating trees. In the project period, actual grazing pressure remains below safe grazing
capacity and pasture levels are not depleted, ensuring that livestock do not graze regenerating trees.

The grazing calculator was initially derived from the following source: Johnston PW, Tannock PR, Beale IF (1996)
Objective `Safe' Grazing Capacities for South-West Queensland Australia: Model Application and Evaluation. The
Rangeland Journal 18, 259–269. It has been subsequently updated based on emerging datasets and research.
4. Is removal of suppression leading to increase in forest cover in HIR project
areas?

Summary:
§ There is a clear detectable trend of increasing forest cover in project areas that is
correlated with management change to remove suppression factors (over-grazing, clearing
and uncontrolled feral animals).
§ HIR projects facilitate the ongoing growth and survival of trees that has in fact been
triggered by rainfall and other environmental conditions. They involve removing
suppression agents which were stopping forests from regenerating (i.e. rain makes trees
grow, management changes remove inhibitors to growth).
§ There is no discernible difference in the rate forest regeneration between projects with
avoided clearing compared to grazing management as the key practice change. This
suggests that both management changes are an equally valid way to sequester carbon.

Analysis of carbon estimation areas (CEAs) in similar properties with different project commencement times

Carbon projects should be viewed as facilitating the ongoing growth and survival of trees that has in fact been triggered by rainfall and other environmental conditions. The interplay between management changes and variable climate conditions can make it challenging to demonstrate the impact of project implementation.
Climate Friendly has attempted to account for these climatic conditions by assessing the performance of HIR projects over three La Niña periods with heavy rainfall. Our analysis includes a comparison of changes in sparse woody vegetation and forest cover within early and later projects in response to high rainfall periods (La Niña) and changes in management practice. The early projects implemented practice changes in the period of 2010-2013, following announcements from the Australian Government of their intention to create land- based carbon farming methods and to include provisions to recognise early action. Evidence of suppression and management changes, as previously described, are collected on both early and late projects, supporting that that suppression has been removed in early projects and continued in later projects. This evidence information has been subject to third party independent audits as part of project implementation. The early projects are in the same regions and rainfall bands as later projects that commenced carbon farming between 2017 and 2021.
This analysis based on NCAS forest and sparse woody classifications is detailed in
Appendix 4. The figure below provides an overview of the results. The chosen time scale covers the three main La Niña periods from 1996 (see Appendix 4, Figure 6).
Figure 6: A comparison of forest regeneration in CEAs for ‘early’ and ‘later’ HIR projects supported by Climate Friendly shows a clear trend of increasing forest cover corresponding to the change in management for the early projects, and long term suppression during both multiple high rainfall La Niña periods and drought periods for later projects.

Note that NCAS “forest pixels” do not equate to "forest area” but are isolated forest pixels that can contain some larger pre-existing paddock trees. Pixels are classified as forest against a threshold of at least 20% crown canopy cover in the pixel.
There must be at least three contiguous pixels for an area to constitute a “forest area” in line with internationally approved definitions of forest in Australia. All forest areas are removed from carbon estimation areas. We also note that Climate Friendly currently utilises Sentinel-2 satellite data which are higher resolution (10x10m pixels) for our human-induced regeneration project mapping, but these datasets are only available back to 2015. For the purposes of time series analysis, we have utilised two different versions of NCAS datasets (25x25m pixels) which are the only long run change datasets available. Further, the above analysis shows that carbon estimation areas contain less than 10% forest pixels at project start. We are not credited for these pre-existing paddock trees. All existing carbon stocks are removed from crediting and the presence of scattered trees is accounted for in the FullCAM model calibration.

The project CEAs of early projects display a clear increase in the growth of forest and in conversion from bare land to sparse woody vegetation, that aligns with the change to management practices. The rate of forest conversion seen here (to around 20% CEA on average) is aligned regeneration check guidelines (which require ~5% increase in canopy over 5 years or supplementary field evidence of regeneration and forest potential) and estimated forest attainment for this cohort of early projects, with some variation between individual projects expected depending on the initial conditions and degree of degradation.
The areas of later projects which are now CEAs show a lack of regeneration over the same period, despite these areas being deemed as having ‘forest potential’, and despite there being sufficient rainfall through successive La Niña periods for these areas to transition to sparse woody or forest area in the earlier decades. This analysis indicates that CEA mapping is correctly targeting vegetation which has long-run suppression.
We acknowledge that current restrictions on data access mean that this analysis is not easily undertaken by external third parties. Refer to Part 1 of our submission which details our proposal to establish a National Integrated Land Database to help facilitate better analysis in the future, while providing appropriate privacy protections for individual land managers.

Comparison of different management changes: cessation of clearing vs changes to grazing management
Recent commentary on HIR projects has suggested that projects which involve changes in clearing practices are valid, while projects that involve changes in grazing management are problematic. Climate Friendly has completed a comparison of forest growth in carbon estimation areas that included cessation of mechanical or chemical clearing, and projects that only included changes to grazing management. The analysis concludes that there are very similar positive trends in forest regeneration rates in both projects with cessation of clearing and projects that include changes to grazing. The change in forest growth aligns with beginning of management change. This analysis suggests that the impact of grazing practices on suppression and restoration are in fact comparable to restoration due to ceasing land clearing. Further details on this analysis and the selection of projects can be found in Appendix 4.

Figure 7: The rate of forest restoration is consistent between HIR projects which involve changes to grazing management alone, when compared to projects that include a cessation of clearing.
Changes in land clearing practice, alongside changes in grazing management
Rangelands land managers commonly use a combination of grazing and land clearing to suppress the growth of woody vegetation. Land clearing can take many forms including broad scale conversion of forest to pasture, selective clearing within forest areas, repeated clearing of shrubs that have re-grown from past forest clearing and fodder harvesting. Some of these forms of clearing are readily detected with remote sensing, such as the conversion of forest to non-forest, while others are more cryptic and harder to detect remotely.
Land clearing as a suppression agent is relatively common in the rangelands of QLD and
NSW, and less common in SA, NT and WA
Figure 8: Example of extensive land clearing in the rangelands (QLD)

Recent commentary on the HIR method has also suggested that prevalence of clearing in the rangelands regions was low. Our analysis shows that prior to project commencement, there was a material volume of land clearing. It also shows that following project implementation, land clearing within project implementation areas (CEA) has ceased, in contrast to broader regional trends associated with clearing. Further, there is no evidence of within project leakage of clearing, instead rates have reduced across properties with carbon projects even in areas outside the implementation area. Carbon projects are required to commit to store sequestered carbon for a period of 25 or 100 years. This permanence obligation is in contrast to grazed properties not covered by carbon projects and eliminates risks of land clearing in future years.
Climate Friendly completed this analysis of the loss of woody canopy cover within our QLD projects. We used the Statewide Landcover and Trees Study (SLATS) mapping data which detects the location and extent of woody vegetation loss each year. While SLATS mapping data exist for NSW, the detection of disturbance to woody vegetation in NSW appears to be sensitive to changes in the technology and data over time (i.e. it is difficult to conduct time series analysis comparing changes across years in NSW). This means that a consistent comparison of disturbance patterns over long timespans is more difficult to achieve in the rangelands in NSW, hence the focus on QLD.
Registered HIR projects include carbon estimation areas (CEAs) and exclusion areas.
Exclusion areas include baseline forest and non-implementation areas that either don’t have forest potential or that were excluded from the management change at project start.
Assessing clearing rates within project boundaries tests for “leakage” to ensure that any clearing on exclusion areas does not offset changes made in the project. It is important to note that some clearing and thinning is allowed to continue in excluded areas within HIR projects area provided that the levels are not greater in those areas than had generally occurred during the baseline period. Such clearing is often undertaken to maintain fire breaks and road access infrastructure.
When assessing change in clearing rates, we compare two broad time periods: 1988-2009 prior to the implementation of carbon farming projects, and 2010-2019, during which project activities progressively occurred (noting projects had different start dates, which means some clearing in project areas is attributable to the fact that projects had not yet begun to be implemented). We compare the relative change in clearing rates of project and non-project areas over time. The maximum annual clearing rate of all non-project areas declined by 42% between the periods of 1989-2009 and 2010-2019 (Figure 9). A larger reduction of 66% was observed in HIR project areas. Further, the maximum observed clearing rate in non-project areas remains higher (1.1% p.a.) than in HIR project areas (0.3% p.a.).
Figure 9. Comparison of the maximum annual rate of clearing before and after HIR projects commenced.

2.0%

1.5%

1.0%

0.5%

0.0%
non-project areas Climate Friendly HIR project areas

1988-2009 2010-2019

We note that while a regional clearing level in non-project areas of 1.1% or a pre-project clearing level of 0.8% may sound small, this constitutes a material volume of clearing potential over a 25-year project period. If conducted on an annual basis, this could result in up to 25% of a property being cleared over the life of a project. We note that maximum clearing rates tend not to occur on an annual basis, but are more cyclical based on periods of drought. As such, a range of 5-15% is more likely to represent the historical clearing risk in the rangelands region. While reductions in clearing provide a clear benefit maintaining mature forest and stored carbon in the landscape, these avoided emissions from cessation of clearing undertaken as part of HIR project management changes are not credited.
5. Are HIR projects over credited or conservatively credited when compared to
actual abatement? Specifically, are pre-existing trees being credited, or does
their presence in the project estimation areas create a risk of over-crediting, or
are their sufficient controls to ensure pre-existing trees are taken into account
and crediting is conservative?

Summary:
§ FullCAM was calibrated with pre-existing trees in the calibration sites and the HIR
method has several controls that restrict the possibility of any risk of over-
crediting
§ Modelled carbon stocks reported for HIR projects focus on a narrow set of eligible
carbon pools and are discounted before crediting, following the Offsets Integrity
Standard of Conservativeness.
§ HIR projects are being issued ACCUs conservatively, and pre-existing trees are
appropriately accounted for in abatement calculations.
§ The quantum of issued ACCUs to projects we support is less than ground
measurements of actual carbon stored carbon in the regenerating forest
conducted by CSIRO.

Concerns have been raised that pre-existing trees are resulting in an over-estimate of abatement due to how FullCAM and the method is applied.
Carbon projects CEAs do include pre-existing mature trees. In fact, without these trees, the
CEAs would generally not have the viable seed bank required for regeneration to occur. This was well known when the method was written. If all areas with any existing trees were ineligible, human-induced regeneration would not be ecologically possible. Equally, the method requires that there is evidence of forest potential in the form of regenerating trees that are suppressed from growing towards maturity for land to be eligible to generate carbon credits.
The calibration process of FullCAM is well documented2,3. Sites used to calibrate the sequestration rate of natural regeneration included pre-existing trees (median carbon stocks of 6.3 tC/ha). Therefore, the application of FullCAM on sites with pre-existing trees that do not meet the definition of forest is valid.
The key question is whether the impact of pre-existing mature trees on estimates of abatement are accounted for within method deductions and modelling equations. Our analysis shows that there are multiple restrictions in the method and FullCAM application mitigate any concerns that the presence of mature trees might lead to over-crediting.

2
Paul & Roxburgh (2021) Verification of FullCAM’s Tree Yield Formula for Regenerating Systems. CSIRO.
3
Paul & Roxburgh (2020). Predicting carbon sequestration of woody biomass following land restoration. Forest Ecology and
Management, 460, 117838.
Are models of abatement conservative?

FullCAM is the key modelling tool used to estimate abatement for HIR projects. The method only credits abatement from a narrow range of carbon pools on these projects that are known to store carbon. The method also includes a range of discounts from calculated abatement, to ensure conservatism. Climate Friendly believe the narrow range of eligible carbon pools, coupled with discounting prior to crediting, results in substantial under crediting when compared to the actual volume of carbon sequestered or emissions avoided on these projects that result from the management change.
When considering the claims of over-crediting, we feel it is important to note the range of abatement sources on the ground that are presently not eligible to generate carbon credits.
Present sources of on the ground abatement that are not eligible for carbon credits under the
HIR method include:
1. Regeneration of suppressed trees in the project areas that have over 20% tree cover
at project commencement,
2. Regeneration of shrublands that are unable to attain forest cover.
3. Standing deadwood is not currently included in modelled abatement.
4. Decay rates of dead wood are assumed to be 7-11 years, when field research
suggests they are in fact many decades. This reduces eligible abatement.
5. Soil carbon stored in projects is ineligible.
6. Reduced methane emissions from lower stock densities is ineligible for most
properties.
7. Avoided emissions from changes in clearing practices, as covered in the section
above.
The reason these additional forms of abatement were ineligible in the HIR method is in large part due to when the rules where developed. The HIR method was developed during the
Kyoto Protocol period which had a detailed set of accounting rules based on specific activities. This led to the development of discrete methods covering a sub-set of carbon pools and specific activities. These rules have been updated the Paris Accord, which takes a more holistic approach to carbon accounting across a landscape.
Carbon projects also are also generally deducted another 25% of modelled abatement due to a 5% risk of reversal buffer and a 20% permanence discount for projects with a 25-year permanence period (Figure 10).
Combined, the HIR method leads to highly conservative crediting of abatement compared to on ground management changes and impacts. While consistent with the Offsets Integrity
Standards, it is likely that the current crediting approach is overly conservative and in our view in fact leads to under-crediting of changes implemented by land managers.
Figure 10. Example of the Tree Yield formula underpinning FullCAM models of natural regeneration. Maximum attainable biomass (M) is converted from tonnes of aboveground biomass to tonnes of total carbon stored in trees. The eligible abatement of HIR projects is calculated at the end of the 25 year crediting period. Eligible abatement is calculated as the predicted 25 year carbon stock, less any initial carbon stocks, risk of reversal buffers or permanence discounts. In this example, the eligible abatement is 34% of M. Growth toward M is shown to asymptote (i.e. slow down) over the long-term.

Does FullCAM and its application under- or over-credit abatement on the ground?

Climate Friendly notes the proposed inclusion of an option for validation measurement in the
Integrated Farm Management method which is currently under development. We support the inclusion of this option, which will enable land managers to receive credits in line with actual impacts of their management changes, which we believe are currently in excess of the abatement modelled by FullCAM.
Our analysis in Figure 11 below demonstrates this conservatism using measurements taken by CSIRO on a sub-set of our projects and comparing the measurement to carbon abatement modelled on the same projects using FullCAM.
CSIRO collected 81 validation transects in 2021 located within carbon estimation areas on three HIR projects in Climate Friendly’s project portfolio. Plots were chosen by CSIRO to reflect a range of suppression, clearing and regeneration histories. Following the calibration protocol of the Tree Yield Formula, remnant or pre-existing trees are excluded to obtain a measurement of carbon stocks associated with regeneration following project management change. The upper size limit for regeneration is described in Paul et al (2021)4.

4
Paul & Roxburgh (2021) Verification of FullCAM’s Tree Yield Formula for Regenerating Systems. CSIRO.
Figure 11. Comparing measured and modelled carbon stocks associated with regeneration demonstrates that modelled carbon stocks are conservative, even before discounting is applied. Error is calculated as the measurement minus the modelled carbon stock for each of 81 transects across three projects. The point is the mean error and the lines show the range of errors within each project. Values above zero show that measured stocks are above modelled stocks.

FullCAM models were created by Climate Friendly following the HIR FullCAM Guidelines to calculate the eligible project abatement. These models reflect the project stratification, management history and the ecosystem dynamics of rainfall driven episodic recruitment.
Climate Friendly’s abatement modelling has been reviewed by an external auditor. We consistently observe measured biomass is greater than the modelled biomass used to calculate eligible carbon credits under HIR.
Pre-existing or remnant trees are not included in transect observed biomass. Therefore, this comparison demonstrates that FullCAM is conservative when used to estimate carbon stocks associated with regeneration. Presence of remnant vegetation within CEA areas does not appear to result in over-crediting.

Are management changes being modelled correctly?

In the analysis of Paul et al (2021) a second set of FullCAM models were generated that assuming regeneration occurred without suppression. The purpose of this model was to locally validate the Natural Regeneration calibration of FullCAM, but it is illustrative to demonstrate the importance of including auditable, time series management data in modelled estimates of abatement.
Figure 12. Comparing two different approaches to modelling – one with (dark blue) and one without (light blue) detailed management information on a single property. The last known clearing event was in 2001. The model without management information assumes that trees grew unsuppressed following clearing, using a model commencement date (MCD) of 2001.
The model with management information assumes an MCD of 2010, following the first major rainfall event following clearing. The black point and lines show measured carbon stocks taken in CSIRO transects. The model with management information is a good and conservative fit compared to measured carbon.

This analysis demonstrates how detailed, site specific local management information is key to appropriately modelling eligible abatement. Detailed management data is submitted as part of every project offset reports but is unavailable to external researchers and analysts.
See Part 1 of our submission for further information on how this might be rectified through a
National Integrated Land Database with appropriate land manager privacy protections.
In Figure 12, the model with management information is an example of how Climate Friendly models carbon abatement using FullCAM and detailed timeseries management and rainfall data across our HIR portfolio. Because the CEA was heavily stocked during the baseline period (until 2017) the growth of regenerating trees was suppressed. Growth pauses are applied in the model to reflect this. The land manager decided to commence a carbon project in 2017 and made management changes to remove the suppression of regenerating trees, allowing the vegetation to then grow unsuppressed.
The measurements of regenerating biomass, taken by CSIRO in 2021 correspond with our modelling approach showing that the modelled abatement is conservative compared to the actual regenerating carbon stocks. The model assuming unsuppressed regrowth since last clearing event is inconsistent with observed regenerating carbon stocks.
Are pre-existing trees adequately accounted for in calculations of eligible abatement?

MacIntosh et al. (2022) Integrity and the ERF’s Human-Induced Regeneration Method: The
Measurement Problem Explained; Australian National University use the following graph to communicate their concern regarding potential risk of over crediting projects due to existing woody vegetation at the commencement of projects.
Figure 13. Reproduced from MacIntosh et al.

Lamour et al. (2018)5 cite the theoretical maximum biomass corresponding to forests with over 20% cover. Stands are found to have carbon stocks between 3.6 and 5.5 tC / ha at forest attainment.
The HIR method requires that areas of baseline forest are excluded. This means that HIR carbon estimation areas must have less than 20% cover. By logical extension, CEAs must have less than 5.5 tC / ha. Figure 14 overlays these constraints on Figure 13 to highlight the overstatements around any potential over-crediting risk.
Figure 14. Key data points overlaid, with reference to measured carbon stocks in Climate Friendly Carbon Estimation Areas.
Concerns raised regarding over crediting due to pre-existing trees do not appropriately factor in existing scheme controls.

Area of invalid concerns
Upper limit (5.5 tC/ha) of carbon
Lower limit (3.6 tC/ha) of carbon

stocks in non-forest vegetation
stocks in forest vegetation

Actual carbon stocks measured by
CSIRO in Climate Friendly CEAs
post project commencement

5
Larmour, J., Davies, M., Paul, K., England, J., Roxburgh, S. (2018) Relating canopy cover and average height to the biomass of the stand. Report prepared for the Department of the Environment and Energy. CSIRO Land and Water, Canberra.
The first key point missed by MacIntosh et al. is that all areas with greater than 20% canopy cover at commencement are ineligible and must be removed from the CEA. This is ensured via stringent technical guidelines outlining required accuracy of mapping forest areas.
Analysis of maximum biomass (M) in the regions where Climate Friendly supports HIR projects show that areas below the forest cover threshold must be below 24% of M. This is the line represented as the Upper Limit (5.5 tC / ha) of carbon stocks in non-forest vegetation in Figure 14. We stress that this is the absolute theoretical maximum potential for over-claims and would require every project CEA to have 19.99% canopy cover and have the most carbon dense relationship between canopy area and total carbon stocks possible.
In our experience, a project with this level of canopy cover would not pass independent audit. A less dense canopy area-to-carbon stock relationships, which would be common in the rangelands, would mean that areas just below the forest cover threshold would be at most 15% of M. Again, this is a theoretical maximum and this is represented as the Lower
Limit (3.6 tC / ha) of carbon stocks in forest vegetation in Figure 14.
In fact, actual regenerating carbon stocks measured and reported on Climate Friendly CEAs are significantly lower. The dots overlaid on the graph show actual CSIRO measurements of regenerating biomass, estimated using tree size inventory and allometry. These observations were made after project commencement, with some of the sites measured already having several years of project implementation. All measured stocks were still below
5.5tC threshold at this point in project implementation and, as per analysis in the above section, there has been no over-crediting of biomass compared to actual carbon stored.
Future method development
Summary:
§ Note the potential of the Integrated Farm Management method to scale up land-
based carbon sequestration using the latest science and technology, informed by
lessons from implementation of land-based carbon projects to date, and support
finalisation of this method as a priority.

Tackling climate change will require significant scale up of carbon storage in the land sector, as identified by the IPCC in its latest report. New methods should build on experience and successful implementation of land-based carbon method, such as the HIR method, to date.
They should also address barriers to participation.

Climate Friendly believes the continued development of the Integrated Farm Management method, which is currently in early stages of co-design, should be prioritised to achieve this goal. This holistic agricultural production and land management method establishes can establish a Paris-aligned ‘whole-of-landscape’ accounting framework combining vegetation and soil methods to allow land managers to implement multiple carbon farming activities on a single property. This would enable increased participation of smaller land managers in the
ERF, scale up participation in higher rainfall regions which typically have smaller farm sizes and mixed-farming enterprises, and in general significantly scale up carbon abatement and
ACCU supply nationally.
This method should be informed by the Blueprint which was developed with input from carbon, agriculture, technology, resources and conservation sectors, with inputs from
Traditional Owner groups, State and Federal Government and researchers and is available here: https://carbonmarketinstitute.org/app/uploads/2021/08/AL-MAP-Method-
Blueprint_final.pdf.
Appendix 1: Palatability of rangelands species to cattle

Excerpt from (Department of Agriculture and Fisheries, Queensland, 2022), showing the palatability of various native vegetation to cattle.
Appendix 2 Palatability of rangelands vegetation species to goats
Palatability of an excerpt of “weeds” to goats (Meat and Livestock Australia, May 2007).
Appendix 3: Key references related to grazing suppression in the rangelands

Brown, R.F. (1985). The growth and survival of young mulga (Acacia aneura F. Muell) trees under different levels of grazing. Australian Rangeland Journal 7(2): 143-148.
Crisp, M.D. (1978). Demography and survival under grazing of three Australian semi-desert shrubs. Oikos 30: 520-528.
Cunningham, G.M. and Walker, P.J. (1973). Growth and survival of mulga (Acacia aneura F.
Muell. Ex Benth) in Western New South Wales. Tropical Grasslands 7:69-77.
Daryanto, S., Eldridge, D. J., & Throop, H. L. (2013). Managing semi-arid woodlands for carbon storage: Grazing and shrub effects on above-and belowground carbon. Agriculture,
Ecosystems & Environment, 169, 1-11.
Fensham, R.J., Fairfax, R.J. and Dwyer J.M. (2012). Potential above ground biomass in drought prone forest used for pastoralism. Ecological Applications 22(3): 894-908.
Moore, J.L., Howden, S.M., McKeon, G.M., Carter, J.O. and Scanlan, J.C. (2001). The dynamics of grazed woodlands in southwest Queensland, Australia and their effect on greenhouse gas emissions. Environment International 27: 147-153
Pressland, A.J. (1975). Productivity and management of mulga in south-western
Queensland in relation to tree structure and density. Australian Journal of Botany 23:965-
976. Pressland, A.J. (1976). Possible effects of removal of mulga on rangeland stability in southwestern Queensland. Australian Rangeland Journal 1:24-30
Sinclair, R (1996) Mulga regeneration at Koonamore. In: Proceedings of the 9th Australian
Rangeland Society Biennial Conference. 2 Pages. (Australian Rangeland Society: Australia).
Tiver F, Andrew MH (1997) Relative effects of herbivory by sheep, rabbits, goats and kangaroos on recruitment and regeneration of shrubs and trees in eastern New South
Wales. Journal of Applied Ecology34, 903–914.doi: 10.2307/2405281
Walker, P.J. (1976). Growth and regeneration of trees and shrubs. In: (Cunningham, G.M.,
Walker, P.J. and Green, D.R. Eds). Rehabilitation of Arid Lands; 10 years of research at
Cobar, New South Wales 1964-1974. 8.1- 8.29. (Soil Conservation Service of New South
Wales).
Waters, C.M., Cowie, A., Orgill, S.E, Melville, G., Garland, F., Simpson, M., Chappell, A.,
Paul, K., Cockfield, G. and Grant, R. (2017). Assessing the impacts and opportunities from carbon farming in western NSW. In: Proceedings of the 19th Australian Rangeland Society
Biennial Conference. 5 pages. (Australian Rangeland Society: Australia).
Witt, G. B., Noël, M. V., Bird, M. I., Beeton, R. B., & Menzies, N. W. (2011). Carbon sequestration and biodiversity restoration potential of semi-arid mulga lands of Australia interpreted from long-term grazing exclosures. Agriculture, Ecosystems &
Environment, 141(1-2), 108-118.
Appendix 4 – Detailed analysis on how management changes to remove suppression agents have impacted forest regeneration in carbon estimation areas

Purpose: to assess the impact of removal of suppression agents on forest regeneration in early HIR projects supported by Climate Friendly.

Summary:

• Regeneration of woody vegetation in CEAs is related to management change, not
rainfall alone.
• Indicative evidence of regeneration and suppression is broadly consistent with
estimates of safe grazing exceedance.
• Suppression and regeneration of woody vegetation in CEAs was not notably
different for rangeland areas with higher and lower productivity.
• Suppression and regeneration of woody vegetation in CEAs was not notably
different for projects that ceased mechanical or chemical suppression compared
with those that only altered the management of stock or feral animals.

Introduction:
Overview
The CFI has been operating for nearly a decade and there is an increasing body of data and information available to evaluate the on-ground impact of Human-induced Regeneration
(HIR) projects. For an early cohort of projects whose commencement was backdated6, there have now been ten or more years since management changes were implemented. While this is still early to observe trends in rangelands forests systems given their slow growing nature, this time period is likely to be sufficient time for signals of change changes in woody vegetation to be detectable in long-running remote sensing datasets (e.g., products derived from Landsat satellite imagery which is the only long running time series dataset available).
Using the Landsat-based National Forest and Sparse Woody Vegetation dataset, formerly produced under the National Carbon Accounting System7 (hereafter: ‘NCAS’), along with supplementary environmental and management data, the aim of this analysis was to evaluate changes to forest area and sparse woody vegetation in project Carbon Estimation
Areas (CEAs) since project start. The study described below was designed to control, where possible, for the influence of climate and land management on tree growth, among other factors.

6
These projects implemented management changes following announcements from the Australian Government of their intention to create land-based carbon farming methods and to include provisions to recognise early action. These management changes are evidenced by auditable data.
7
Furby, S. (2002). Land Cover Change: Specification for Remote Sensing Analysis, National Carbon Accounting System,
Technical Report No. 9.
The key questions addressed were:

• Is there evidence that management changes in early HIR projects have facilitated
regeneration?
• Are there indications that CEAs in both early and later projects have been subject to
long-run suppression?
• What is the relative impact of suppression from grazing pressure alone when
compared to projects that include clearing suppression (cessation of mechanical and
chemical suppression)?
Hypotheses
It is important to consider what temporal patterns should realistically be expected in relation to project start dates and the influence of climate on tree growth. Three important assumptions are laid out below:
1. HIR CEAs must have forest potential. In accordance with the Government Guidelines
on Stratification, Evidence and Records for HIR Projects, this means that they must
have sufficient regenerating stems per hectare and/or > 5% canopy cover. They must
also not be forest at project commencement, so must have < 20% canopy cover
provided by trees >= 2 m in height. This means that individual Landsat pixels within
CEAs are expected to contain a variety of initial tree densities (see response to
question 5 above for an explanation of why a small number of existing mature trees
does not overestimate carbon abatement).
2. Management changes implemented as part of HIR projects do not cause growth,
they remove inhibitors that were suppressing growth. That is: in the absence of the
carbon project and associated practice changes, continuation of baseline land
management practices reduces tree survival, reduce recruitment of new trees, and/or
prevents woody biomass from growing (suppression). Management changes
associated with the carbon project lead to the removal of these inhibitors or
suppression agents, and therefore allow woody biomass to grow larger and/or live
longer (removal of suppression). So, regeneration can be ‘induced’ by the carbon
project, but this should not be taken to mean the projects are driving tree growth or
recruitment. Rather, the trees grow due to rainfall and other environmental factors,
enabled by management changes. This is an important nuance.
3. When HIR CEAs are initially defined or stratified, suppression is evidenced by
multiple integrated and complementary data sources as outlined earlier in this
submission.
Integrating these discussions of forest attainment, management & climate interactions and
CEA stratification yields the following four hypotheses:
1. Increases in pixels meeting the criteria for ‘forest’ should be moderate in the early
years of a project.
2. Detectable regeneration should be traceable (initially) to suitable rainfall events
combined with or followed by changes to remove suppression agents.
3. Removal of suppression should increase the likelihood of regenerating vegetation
being preserved and possibly continuing to grow through dry periods when pasture is
scarce.
4. Project CEAs should have consistently low numbers of forest pixels over multiple
high rainfall (La Niña) events prior to management changes indicative of long run
suppression.
Hypothesis 1 highlights the importance of a) targeting analyses within CEA boundaries
(which are not publicly available) where incremental amounts of forest gain would be detectable; and b) simultaneously analysing patterns in the sparse woody and non-woody classifications along with forest to obtain a more complete picture of changes within CEAs.
Detailed methods are described at the end of this Appendix.
Results and discussion:
NCAS and safe grazing – overview for early and later HIR projects in NSW and QLD
The cohort of early projects displayed an initial upward trend in forest pixels following implementation of the management change, reaching between ~12-15% above 2009 levels by 2014 (Figure 1). NCAS v5 data suggests that forest area stabilised during the dry periods that occurred after 2013, while NCAS v3 shows a slight continuation of forest expansion (to
~18% above 2009 levels on average by 2018), despite the dry conditions (Figure 1). Rainfall during the 2016/2017 La Niña event apparently did not trigger sufficient growth for many pixels to transition between categories, and the latest NCAS outputs (2018-2020) could not show the impact of very recent rainfall events (mid-2020 onwards). The observed forest attainment in the early project cohort (up to 18% of CEA within a typical project by 2018), is broadly consistent with the expected of rates of forest formation discussed in the introduction.
Figure 1. Top: The annual median proportion of project CEAs in each NCAS category for early projects whose management change occurred from 2010-2013 (indicated by the grey shading). Middle: As for the top plot but instead showing results for later projects whose management change was implemented after September 2017. Bottom: summary of grazing data from a selection of the early and later cohorts, shown as the percentage of each sample that exceeded safe grazing levels within a given year (points) with a five-year moving average shown (lines) to capture the overall trend in grazing pressure.
Note that NCAS “forest pixels” do not equate to "forest area" but are isolated forest pixels that can contain some larger pre-existing paddock trees. Pixels are classified as forest against a threshold of at least 20% crown canopy cover in the pixel.
There must be at least three contiguous pixels for an area to constitute a “forest area” in line with internationally approved definitions of forest in Australia. All forest areas are removed from carbon estimation areas. We also note that Climate
Friendly currently utilises Sentinel-2 satellite data which are higher resolution (10x10m pixels) for our human-induced regeneration project mapping, but these datasets are only available back to 2015. For the purposes of time series analysis, we have utilised two different versions of NCAS datasets (25x25m pixels) which are the only long run change datasets available. Further, the above analysis shows that carbon estimation areas contain less than 10% forest pixels at project start. We are not credited for these pre-existing paddock trees. All existing carbon stocks are removed from crediting and the presence of scattered trees is accounted for in the FullCAM model calibration.

The trend of pixels transitioning to forest was broadly mirrored in a decrease in the proportion of bare/non-woody land. The median proportion of sparse woody vegetation remained relatively stable (Figure 1). The decline in the median non-woody proportion appeared to begin around 2008 (corresponding with a slight uptick in sparse woody) (Figure
1), likely in response to recruitment events in some locations being triggered by healthy rainfall in 2008. The overall trend through the project period indicates that until 2016 bare or non-woody land was converting to sparse woody, while other sparse woody areas were converting to forest, keeping the sparse category balanced. The non-woody category stabilised in the dry period following 2016. There is insufficient data to assess the changes expected to result from rainfall post-2020.
The pre-baseline and baseline period of later projects displayed a small decline in forest pixels during the millennium drought following the 1998-2001 La-Niña event, plus a comparatively smaller increase in forest pixel area around the 2010-2012 La-Niña period
(with a corresponding drop in bare pixels). This trend plateaued around 2012 (at ~ 5% above
2009 levels on average), sooner than the plateau seen in the early project cohort. Non- woody pixels showed a slight increase during the ensuing dry periods (while the same category was stable in the median of earlier projects). This is consistent with the expectation that the protection of woody vegetation under management would be visible during drought periods when woody vegetation would most likely be suppressed.
Considering only forest pixels, the striking contrast between the trends of early (increasing) and later (stagnant) CEAs alone cannot be used to infer that forest conversion was more substantial than it would have been in the absence of a carbon project. This is because, by definition, any areas that might have become forested (including meeting the minimum area of 0.2 ha) through this period would be excluded from the CEAs of the later projects.
However, the data is nevertheless consistent with this picture. Furthermore, the same selection bias does not apply to pixels that transitioned from non-woody to sparse woody.
Thus, the larger net conversion from non-woody to sparse seen in early CEAs compared to later CEAs (Figure 1) supports the interpretation that management changes were impactful.
Stocking records from a subset of the early project cohort (n = 10) showed that grazing pressure ran above safe levels intermittently during the baseline periods (pre-
2010/2011/2012). This occurred less often during the project periods (post-2012) with typical stocking rates being more comfortably within safe levels after project commencement
(Figure 1). Simultaneously, grazing data from the baseline periods of 17 later projects suggested many properties were running above safe grazing limits during the same period, particularly from 2014-2016 (Figure 1).
Thus, collectively this data:
a) Is consistent with and supports the interpretation that management change facilitated
enhanced regeneration in early projects following sufficient rainfall in 2010-2012;
b) Highlights the preservation of sparse woody vegetation during dry periods when
suppression might otherwise be expected;
c) Suggests that CEA mapping is adequately identifying areas with the potential to
reach forest criteria; and
d) Supports the interpretation that suppression by grazing impeded the regeneration of
later projects’ CEAs through their baseline period, despite there clearly being
sufficient rainfall for regeneration across the region, and despite these areas being
identified as having forest potential.
Although the findings presented above suggest that management changes implemented as part of HIR projects have a meaningful impact on the progression of rangeland areas toward forest cover that cannot be explained by rainfall events alone, this has only been a high-level summary of project performance from a sample of Climate Friendly’s portfolio. Each project exists with a unique set of circumstances. As such, project specific analysis which is provided to auditors and the Regulator presents a better perspective of the impact of a specific project.

Accounting for other variables
Considering only the early project cohort, three further analyses were completed by stratifying projects according to:
(a) Whether the HIR management change was managing grazing pressure (from
livestock and/or feral animals) alone, or whether the changes included a combination
of grazing management plus the cessation of mechanical and chemical suppression;
(b) State boundaries – since regional clusters of projects with similar management
change exist (e.g., a high number of projects in NSW are managing feral animals);
and
(c) Areas of higher and lower productivity (indicated by simulated pasture growth from
2000 to 2022)
Neither version of NCAS shows a notable difference in forest cover proportions for the early cohort when properties were split according to whether implementation included the cessation of clearing (chemical or mechanical) (Figure 2). The typical mapped proportion of sparse woody vegetation was higher and more stable in projects managing stock and feral animals only (Figure 2).
Figure 2. Trends in sparse woody and forest pixels in the CEAs of early projects, split according to whether management changes included the cessation of mechanical clearing or else only the management of stock and feral animals. Category proportions were first aggregated within CEAs of specific projects, then summarised across projects with the median value for each year.

Note that management changes and suppression types/figures are reported for entire CEAs and we have summarised changes in land cover at a comparable scale, while noting that changes within CEAs can vary spatially. Furthermore, unlike the grazing data presented, only the presence/absence of suppression from feral animals or clearing was accounted for here, not the extent or degree.

Stratification by state boundaries yielded qualitatively comparable results to stratification by management type, with trends in forest area being broadly comparable between QLD and
NSW (Figure 3). That said, projects in NSW displayed marginally higher forest attainment and higher coverage of sparse woody vegetation. Overall, the results indicated that the recovery of sparse woody vegetation can be induced by management change regardless of the major form of suppression.
Figure 3. Trends in sparse woody and forest pixels in the CEAs of early projects, split according to state boundaries (NSW and QLD only). Category proportions were first aggregated within CEAs of specific projects, then summarised across projects with the median value for each year.
For each project, estimated pasture growth was averaged between 2000 and 2022. Projects were partitioned into ‘higher’ or ‘lower’ productivity groups (Figure 4). This was to test whether differences in woody biomass regeneration could be caused by differences in productivity (rather than the management change) by re-analysing early projects in lower and higher productivity sub-groups.
Trends in forest, sparse woody and bare/non-woody were broadly consistent between the higher and lower productivity groups (Figure 5). This analysis suggests that differences in average productivity do not explain the trends in the broader analysis above.

Figure 4. Histogram of average simulated pasture growth for the period of January 2000 to July 2022, shown for the early project cohort (see methods). The dashed line is placed halfway between the maximum and minimum values and was used to split projects into lower and higher productivity groups.

Figure 5. Trends in sparse woody and forest pixels in the CEAs of early projects, divided into lower and higher productivity groups, determined by simulated pasture growth, averaged from 2000 to 2022 (see Figure 4). Category proportions were first aggregated within CEAs of specific projects, then summarised across projects with the median value for each year.
Methods:
Study sites:
This analysis focused on the subset of HIR projects that Climate Friendly supports in NSW and QLD (n = 90). Analyses of remote sensing data focused solely on the CEAs of these projects, which are the areas within projects that are subject to abatement calculations.
Projects were repeatedly subsampled to undertake several analyses that control for factors such as project start time, climatic conditions and productivity, and suppression type. This subsampling is described further below.

Datasets:
NCAS
We use the National Forest and Sparse Woody Vegetation dataset., To assess the change in vegetation over long time periods (>20yrs). The technical approaches used in each version of NCAS are described in detail8,9. Although specific classes are detected with different accuracy, it is unlikely that these differences would affect this comparative analysis of early and late projects
Both NCAS versions 3 (up to 2018) and 5 (up to 2020) were analysed. These products are three-class classifications of Landsat pixels into either forest (>=20% crown cover), sparse woody vegetation (5-19%), or non-woody (0-4%) pixels. (Note: non-woody referred to in the figures as ‘bare’). NCAS products are subject to post-processing after the initial allocation of cover classes. This is done in hindsight, with the most recent classifications being used to test the plausibility of previous outputs. This implies that the last 1-2 years of data shown could be subject to revision in future releases. NCAS v5 involved a change in the classification algorithm applied to the 2019 and 2020 imagery, which has implications for outputs in the preceding years due to time series post-processing10. It is important to note that when the category ‘forest’ is applied to a single Landsat pixel, this differs from the definition of forest area used elsewhere in the HIR method and in this submission, which includes a minimum area of 0.2 ha (or approx. 3.2 NCAS pixels). Unless stated otherwise, references to forest area or forest pixels in this appendix should be taken to refer to the
NCAS pixel category, irrespective of the minimum area.
The proportion of CEA covered by each NCAS class was aggregated for individual projects.
CEA parts, stored as polygon features, were buffered inwards by 20 m and overlapping
NCAS pixels were extracted. Inward buffering ensures that only the NCAS pixels falling completely within the CEA were sampled. Given that woody vegetation thickening is more likely to occur near the boundary of existing forest (where seeds are more abundant and conditions are more favourable for recruitment, etc.), this inward buffering process provides a conservative estimate of the change in CEA forest area.
We summarised the change of each group of projects by their median project values for each year. Thus, projects were effectively treated as individual data points, and the results

8 Department of Industry, Science, Energy and Resources (2018). National forest and sparse woody vegetation data. Version 3. Commonwealth of Australia, Canberra.
9 Department of Industry, Science, Energy and Resources (2021). National forest and sparse woody vegetation data. Version 5. Commonwealth of Australia, Canberra.
10
Department of Industry, Science, Energy and Resources (2021) National Inventory Report Volume 2. Commonwealth of
Australia, Canberra.
were not weighted by the size of each project’s CEAs. The annual values presented should be interpreted as what were ‘typical’ aggregated CEA proportions for each NCAS class.
AussieGRASS
Spatial and temporal variability in productivity (and, implicitly, climatic conditions) was evaluated using the simulated pasture growth (kg/ha) provided by the AussieGRASS environmental calculator11. This is an estimate of growth (driven by photosynthesis) and not
‘total biomass’, which would require accounting for rates of consumption by grazing12.
Temporal variability in simulated pasture growth typically follows rainfall patterns, but the absolute values are also influenced by soil attributes, estimated ground cover and tree basal area. This product gives a holistic picture of the climate variation relevant to agricultural productivity and can be used to infer when regenerating trees are likely to be targeted as feed (whereby low levels of simulated pasture growth may increase pressure on trees as fodder sources). AussieGRASS data is provided on a coarse grid (5 x 5 km pixels) and was summarised at the property scale.

Grazing pressure
Where available, project-specific data on grazing pressure in relation to an estimated ‘safe grazing’ level (informed by the pasture growth estimates described above) was used to indicate the likelihood of suppression by stock grazing (or lack-thereof). Further detail on the calculation of safe grazing levels can be found in discussion on Question 3, Box 1 earlier in this submission. The collation of Climate Friendly’s historical project grazing and management data into a common format across all projects that can be used for portfolio level analyses is ongoing and while the sample was substantial, it was not a complete sample of projects due to this ongoing process.

Study design:
Comparing ‘early’ and ‘late’ groups of projects
The interplay between management changes and variable climate conditions makes it challenging to test the impact of project implementation at scale.
A cohort of projects whose implementation was backdated to between July 2010 and
January 2013 provided a useful test case to explore the impact of management changes through multiple wet and dry periods. A total of 47 ‘early’ projects were included. These projects had the following attributes:

• Growth stimulated by good rainfall in the 2010-2012 La Niña event(s) (in some cases
as early as the 2007-2009 La Niña event(s)) (see Figure 6).
• Successive droughts (2013-2015 and 2018-2020) through which the effect of
removing suppression was expected to have been visible (see Figure 6).
• Sufficient time since project start for regeneration to have been visible in medium-
resolution remote sensing data.

11
https://longpaddock.qld.gov.au/aussiegrass/
12
State of Queensland, Department of Science, Information Technology and Innovation (2015). AussieGRASS Environmental
Calculator – Product Descriptions v1.5
Another perspective was provided by a second cohort of 21 ‘later’ projects, commencing from September 2017 onwards. These projects shared the following attributes:

• Baseline periods where the woody biomass was subject to known suppression, that
temporally overlapped the implementation periods of the early cohort.
• The same period of known suppression also covered a period of time where
regeneration might have been otherwise expected following the 2010-2012 La Niña
event(s)
• Project-facilitated regeneration is not yet expected to have been visible in NCAS data
given some projects commenced as recently as 2021. These data sets would not
have captured a response to the most recent high rainfall events which is the first
period we would anticipate observing regeneration post removal of suppression.

Figure 6. Top: AussieGRASS simulated pasture growth summarised with a mean +/- standard deviation of values from relevant local government areas (Paroo, Bourke, Quilpie, Bulloo, Murweh). Bottom: bar chart showing the number of projects starting in each year with the shaded regions corresponding to the early and later projects used for the analyses presented here.
Figure 7. Distribution of projects within the early and later groups.
Appendix 5 – Risk of plantation forests being cleared and not replanted

The 2022 plantation forestry method has expanded the range of activities that are eligible for abatement. We understand that concerns have been raised about the 2022 Plantation
Forestry Method, particularly Schedules 3 and 4 (which involve re-planting of plantations deemed at risk of conversion to non-forest; and conversion of an existing plantation to a not- for-harvest plantation, respectively).
At the time of writing, there are seven projects registered under the 2022 Plantation Forestry method. According to the ERF project register, it appears that all of these are new plantings
(i.e. they are not Schedule 3 or 4 projects).13 As such, there is insufficient data to provide a direct assessment of the integrity of this project type based on project uptake or implementation to date under Schedules 3 and 4 of the 2022 Plantation Forestry method.
However, Climate Friendly believes that the assumptions underlying Schedules 3 and 4 of the plantation forestry method are sound. That is, plantations on private land appear to be genuinely at risk of conversion to non-forest, with ABARES data14 showing that more than
10% of Australia’s plantation extent has been lost since 2010/11 (Figure 22). This has been particularly evident for hardwood plantations, with some States losing more than 50% of their plantation estate since 2010/11.
Figure 1 The total area of plantations in Australia has been steadily declining since 2010/11

Source: ABARES Plantation Statistics Update, 2022

13
Source: ERF Project Register. Accessed 26 September 2022.
https://www.cleanenergyregulator.gov.au/ERF/project-and-contracts-registers/project-register The type of plantation for all seven projects registered under the 2022 plantation forestry method was described as “establishing and maintaining a new plantation forest for commercial harvesting of wood products.”
14
Source: ABARES (2022). Australian plantation statistics update. Available at: https://www.agriculture.gov.au/abares/research-topics/forests/forest-economics/plantations- update#collapsible_inner_link_plantationstatisticsinfographics
Conversely, the rate of new plantation establishment has dwindled to around 1,500 hectares in 2020/21 (Figure 23).
Figure 2 The total area of plantations in Australia has been steadily declining since 2010/11

Source: ABARES Plantation Statistics Update, 2022

This trend results in loss of carbon from Australia’s plantation estate at a time when there are critical timber shortages, and when the forestry sector is ready and able to play a significant role in delivering on the nation’s climate change targets. Against this backdrop, we believe that the 2022 Plantation Forestry method plays an important role in helping incentivise the establishment of new plantations, and reducing the loss of existing plantations.