Prime Carbon Soil Enhancement and Carbon Sequestration

Program

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Presentation Overview

Why Soil Carbon Sequestration is a key solution to Climate Change issues

About Prime Carbon and the Prime Carbon “Soil Enhancement and Carbon Sequestration” program

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A message from Professor Tim Flannery2007 Australian of the Year and

Chair of the Copenhagen Climate Council

Tim Flannery 19th May, 2008

“Regardless of what happens to emissions in the future, there is already far too much greenhouse gas in the atmosphere. Cutting emissions is not enough. Mankind now has to take greenhouse gases out of the air.”

"The current burden of greenhouse gas in the atmosphere is in fact more than sufficient to cause catastrophic climate change. It's extremely urgent."

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A message from Professor Tim Flannery2007 Australian of the Year and

Chair of the Copenhagen Climate Council

Tim Flannery 30th October, 2008 at the Carbon Market Conference Broadbeach

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“within 15 years we could see our first iceless winter unless action is taken to address the legacy emissions currently in the atmosphere”.

Why Carbon Soil Sequestration is the answerWhy Carbon Soil Sequestration is the answer

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What would an iceless world mean?If all of the Antarctic ice melted, sea levels around the world would rise about 61 meters (200 feet). If all of the ice covering Greenland melted sea levels would rise about 6 or 7 meters (20 feet). If all of the Antarctic ice melted, sea levels around the world would rise about 61 meters (200 feet). If all of the ice covering Greenland melted sea levels would rise about 6 or 7 meters (20 feet). If all of the Antarctic ice melted, sea levels around the world would rise about 61 meters (200 feet). If all of the ice covering Greenland melted sea levels would rise about 6 or 7 meters (20 feet).

If all of the Antarctic ice melted, sea levels around the world would rise approximately 61 metres (200 feet).

If all of the ice covering Greenland melted sea levels would rise between 6 and 7 metres (20 feet).

Why Carbon Soil Sequestration is the answerWhy Carbon Soil Sequestration is the answer

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Why Soil Carbon Sequestration is the solution

Slide courtesy of Slide courtesy of Michael KielyMichael Kiely

Why Carbon Soil Sequestration is the answerWhy Carbon Soil Sequestration is the answer

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What does Soil Carbon Sequestration Mean?

Soil Carbon Sequestration simply means the capture of carbon—generally from the air – and the return of this carbon back into the soil.

In reality this happens continually in all sorts of ways. However, one of the most important methods is by photosynthesis.

Why Carbon Soil Sequestration is the answerWhy Carbon Soil Sequestration is the answer

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What are the benefits of Soil Carbon Sequestration?

The benefits of restoring carbon levels in our soil are numerous and include:• Improved soil structure• Better water use and storage• Buffering against drought and plant heat stress • Less erosion• Increased soil fertility• Improved biodiversity• Healthier ecology• Improved agricultural performance

About Prime Carbon

Prime Carbon Pty Ltd is a North Queensland company which exists to a make a real difference to our future by: • Providing a simple and practical solution to improve the quality of our soil and waterways by encouraging behavioral change that results in sustainable conservation agriculture land and farm management practices. • Linking Australian and International Green House Gas emitters with Landholders and Farmers who capture carbon.

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About Prime Carbon

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About Prime Carbon

Prime Carbon undertakes two main activities.

1.We offer our “Soil Enhancement and Carbon Sequestration” program to Landholders. This Program encourages conservation agriculture practices to capture carbon from the atmosphere and return it to the soil by the process of photosynthesis.

The Program generates Carbon Credits for the Voluntary Carbon Market.

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Broker of Carbon Credits

2. We then act as a wholesale broker and sell these Carbon Credits to emitting companies.

Carbon Credits issued by Prime Carbon are listed on the National Environment Registry (NER)

Prime Carbon is registered as a broker with the National Stock Exchange (NSX) and in this capacity Prime Carbon is

able to sell/trade the carbon credits.12

What is a Carbon Credit

A carbon credit is a commercial term used to assign a value to a metric tonne of greenhouse gas emissions. Carbon credits are measured in tonnes of carbon dioxide, where 1 credit = 1 tonne of CO2.

The Prime Carbon Program forecasts that soil carbon will increase by 1% over a 2 year term.

A 1% increase equates to the removal of 15 tonnes of Carbon from the atmosphere per hectare.

This equates to 55 Carbon Credits per hectare.13

About the Program

The Program has been operational since July, 2008.

Seven Landholders are currently under contract representing 900 hectares/50,000 carbon credits.We are in final negotiations with a further 4 Landholders representing 14,500 hectares/800,000 carbon credits.

Our first sale of carbon credits within Australia was completed in September and we are currently negotiating our first international sale.

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Voluntary Market

Currently in Australia there is a Voluntary Market in operation and companies can voluntarily purchase carbon credits through carbon credit brokers. Eg QANTAS, Jet Star and Virgin Blue.

Prime Carbon operates in this Voluntary Market.

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Compulsory Market

The Federal Government’s “Carbon Pollution Reduction Scheme” also known as the “Emissions Trading Scheme” is currently under development. It is unclear if Soil Carbon will be included within the Compulsory Scheme.

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The money cycle for60% of

Australia’s Emissions

The money cycle for60% of

Australia’s Emissions

1000 Top Polluters

Two main reasons why Soil Carbon should be included In the Carbon Trading Discussion

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Two main reasons why Soil Carbon should be included in the Carbon Trading discussion

2008 2010 2015

2008 Aust Emissions Deficit = 630 Million Tonnes Per Annum

“Allowed” and covered by

Pollution Permits

2050

10% or 63 m t

75%

65%

Cap Target for ETS: Permits issued to reduce to 10% by 2050?

50%

Best Possible reduction by ETS Companies from Efficiency and Abatement (30% of current emissions)“Not Allowed” Only options

are Penalties, JI’s or CDM’s

Forgotten

63 Million Tonnes pa in 2010 rising to 252 Million Tonnes pa in 2050

158 Million Tonnes rising to 315 Million Tonnes IF WE HAVE NO GROWTH IN ACTIVITY AT ALL

Proposed ETS Capture level

473 m t

410 m t

The Not Allowed and Forgotten emissions will cost Aust $8.8b pa in 2010 rising to $22 b pa in 2050

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Just some of the other benefits of including Soil Carbon

1. Soil is improved2. Potential for significant financial rewards to be paid to

Australian Farmers for improving their soil3. Australia’s agricultural soils continue to be available for

producing food for our growing future population4. Improved agricultural soil means less runoff which will

improve our major waterways and reduce future damage to the Great Barrier Reef

5. Importantly soil carbon represents the ONLY AVAILABLE buffer against the impacts of climate change already being experienced.

6. Buffering against drought – what other options are there?

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What is the likelihood of Soil Carbon Sequestration being included within a Compulsory Scheme ?

The likelihood of Soil Carbon Sequestration being included in a compulsory scheme for carbon management is directly related to the co-benefits of Soil Carbon Sequestration. Soil Carbon deals with the IMPACTS of climate change not just the REDUCTION of EMMISSIONS 20

What land can be used in the Prime Carbon Program

The following is a quick eligibility checklist:

1.Must be greater than 150 hectares2.The person signing the agreement must have the right to perform activities on the land for the next 2 years3.The land can not previously have been used to sequester carbon which has resulted in the generation of carbon credits.

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What the Program requires Landholders to do

The Prime Carbon’s Program, which complies with the Kyoto rules (as currently interpreted) requires Landholders to:

1.reduce the use of chemical fertilizers by at least 30%2.use approved microbially enhanced Bio-fertilizers and Inoculants3.adopt minimum tillage practices being no more than once annually and then only to a maximum depth of 200 mm4.allow independent measurement of changes in the allocated land to be undertaken and 5.allow independent auditing of the process.

Importantly, there is no restriction oncontinuing to farm or use the allocated landduring the agreement

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Overview of the “On Ground” process

1. The Landholder signs the Agreement2. Initial soil samples are taken to determine the

baseline verification/measurement for carbon in the soil

3. The Landholder then applies the first application of “Approved Products”. A second application is required after 12 months

4. Additional measurements to monitor the soil carbon increase are undertaken over the 2 year term at 3, 6, 12 and 24 months

5. Independent auditing is also undertaken

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Overview of the Cash Flow

1. At the start of the process the Landholder pays to Prime Carbon part of the Deposit of $0.20 for each of the estimated Carbon Credits that will be generated. Assuming there will be a 1% increase in soil carbon over a 2 year term ... 55 carbon credits are generated per hectare. This $0.20 covers Prime Carbon’s costs relating to the NER registration and transaction fees, $0.05 donation to the R&D Fund and operating expenses.

2. Once the results of the Benchmark measurements have been received and the Landholder has applied the first application of the Approved Products, the Carbon Credits are issued and registered with the NER.

3. The Carbon Credits are then offered for sale (alternatively the Landholder may wish to retain the credits)

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Overview of the Cash Flow cont.

4. The Landholder pays the costs associated with undertaking the measurement/verification costs at the start and then at 3, 6, 12 and 24 months.

5. The Carbon Credits are offered for sale at between $8 to $10 each(this price is as at today’s date)

Note: There is no guarantee that a buyer will be available for the Credits and this is seen as a risk with the Program whilst we are operating in a Voluntary Market . If the program was operating in a Compulsory market it is anticipated that demand would be very high.

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Overview of the Cash Flow Cont.

6. At the time the Credits are sold the funds are distributed as follows:• 15% of the sale price is paid to the Landholder• 1% of the sale price is paid to Prime Carbon as a

brokerage fee• $0.25 per Carbon Credit is paid to Prime Carbon as the

remaining part of the Deposit ... this is known as the Balance Fee

• The remaining funds are held in a Trust Fund until the end of the 2 year term. If for some reason the soil carbon does not increase by the projected 1% an adjustment is made out of the funds held in the Trust Fund.

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Financial Example

Total Hectares under the Agreement 1000Listing Price Per Credit Unit $8.00

Rate of Commission Payable on Sale of Credit Units 1.00%Estimated Measurement/Verification Costs per Credit Unit $0.23

Estimated Predicted Credit Units per Hectare 55Estimated Number of Credit Units Generated 55000

Estimated Total Value of the Credit Units $440,000.00

Deposit: $0.20 per Credit Unit $11,000.00Estimated total costs associated with Measurement/Verification costs $12,650.00

Balance Fee: $0.25 per Credit Unit $13,750.00Value of Commission Payable on Sale of Credit Units $4,400.00

Estimated Gross Profit if all Credit Units are Sold $398,200.00

How funds are distribution if all Credit Units are soldInitial allocation of up to 15% paid to the Landholder $66,000.00

Broker Commission is paid to Prime Carbon $4,400.00Balance fee is paid to Prime Carbon ($0.25 per Credit Unit) $13,750.00

Final Distribution is paid to the Landholder (min 1% increase in soil carbon) $355,850.00Total Distributed $440,000.00

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Not a Cash Crop

Land contracted under this Program can only be used once for the general of soil carbon credits.

The land details are recorded with the NER.

This is not a cash crop that will generate profits for Landholders repeatedly.

It is a once only program.

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Carbon Credits are not the most important benefit from increased soil carbon

The main benefits to Landholders are:

• Much greater water retention in soils resulting in reduced need for irrigation. Indications are that a 1% increase in carbon in the soil equates to an additional 8 inches of rainfall per annum

• Much improved water quality in river catchments due to reduced chemical fertilizer/nutrient run off

• Cost savings and greater efficiencies in nutrient use

• Improved buffers against disease outbreaks in plants

• Improved sustainable land productivity

• Most importantly soil carbon buffers against drought, heat stress and uncontrolled erosion which are key impacts of climate change

 

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The Approved Products

Products from the following companies have been approved as at Sep, 2008. 

• Microsoil Pty Ltd• Soil Care Pty Ltd• VRM Pty Ltd

Prime Carbon actively encourages applications from other providers of products to be included as Approved Products.

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Other Programs

Will Prime Carbon expand it’s offering in the future to include other programs that result in Carbon Soil Sequestration or that reward the generation of co-benefits?

We are interested and keen to expand our offering ... However at this early stage our focus is solely on our current “Soil Enhancement and Carbon Sequestration Program”.

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Summary

The legacy emissions currently in the atmosphere must be addressed.

Carbon Soil Sequestration provides a simple and practical solution to address the legacy emissions together with addressing the impact of Climate Change.

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Summary

Soil Carbon Sequestration is not only a simple and practical solution but it is also a win win solution ...... as it benefits:

Landholders ..... By improving their soil, their produce and their profits whilst contributing to a cleaner greener sustainable world.

Companies... By economically offsetting their carbon emissions whilst supporting Australian Farmers.

The Environment...By improving soil and water quality

The Economy ... By providing an economically viable and politically acceptable method to offset Australia’s carbon emissions

The Community ... By working together with communities and developing initiatives to support a sustainable future.

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Summary

If we all work together to increase the Federal Government's awareness of the benefits of Soil Carbon Sequestration .... Soil Carbon Sequestration may be included as offsets in a Compulsory Emissions Trading Scheme. 34

Summary

We have covered a brief overview of the Prime Carbon “Soil Enhancement and Carbon Sequestration” program.

We welcome discussions with:

• Landholders interested in joining the program• Product Suppliers interested in having their product included as an “Approved Product• Program Providers interested in having their programs included (noting that at this early stage our focus is solely on establishing the current SECS Program • Community Groups interest in forming their own Carbon Community Cluster

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Contact us

Prime Carbon Pty Ltd

P: 07 4772 5431F: 07 4772 6064E: enquiries@primecarbon.com.auW: www.primecarbon.com.au

Address:No 4 The StrandTownsville Qld. 4810

PO Box 5600Townsville. Qld 4810

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