Nature to the rescue: past drivers and future potential of the Australian land-based carbon offsets market

Abstract

ABSTRACT Large quantities of ‘negative emissions’ will be required to meet the 1.5°C temperature target under the Paris agreement. As nations consider more ambitious emissions reductions goals, policy makers, carbon market participants and environmental advocates need to estimate the potential scale of nature-based climate solutions (NCS), against the opportunity cost of current land use. In this study we construct a simple linear regression model of the relationship between carbon abatement potential and agricultural profitability, the latter a proxy for opportunity cost, to describe the total set of options for NCS on the Australian continent. Sampling these same two variables at the sites of over 800 land-based offset projects accredited since 2015 shows how the market selected from these abatement options. The model demonstrates that offset projects, under a range of crediting methodologies, were typically selected where the ratio of abatement potential to opportunity cost is maximized. These results, produced from two readily available spatial variables, provide an empirically derived framework for those with an interest in the structure of the long-run supply curve for land-based carbon abatement. This modelling approach could be applied in any geographic region where similar spatial variables for agricultural profitability and abatement potential are available.