The Costs and Benefits of Approved Methods for Sequestering Carbon in Soil Through the Australian Government’s Emissions Reduction Fund

Abstract

<p class="1Body">This paper investigates the net benefits of sequestering carbon in soil from a biophysical and economic perspective. This study is important because sequestering carbon (C) in soil is a key component of the Australian government’s Direct Action Policy to offset the nation’s greenhouse gas (GHG) emissions. The biophysical potential for sequestering C using one of four permitted project management activities (new irrigation, managing soil acidity, stubble retention and converting cropland to permanent pasture) was calculated according to the Methodology Determination - Carbon Credits (Carbon Farming Initiative) Estimating Sequestration of Carbon in Soil Using Default Values, 2015. The economic prospects of those activities that show a net C abatement were then evaluated to determine whether they were profitable for a farmer to implement. Finally, the costs and benefits from society’s perspective of those activities found to be profitable were calculated. Of these activities only stubble retention and liming provided net benefits to a farmer, although there were limitations as to how widely these activities could be implemented nationally. We estimated a cost to government of approximately $35 M annually to achieve a net abatement of 2.84 M t CO<sub>2</sub>-e. Because this represents only 0.52 percent of Australia’s annual GHG emissions of 549 M t CO<sub>2</sub>-e, the policy is both expensive and relatively ineffective as a C offset policy alone. However, if viewed as an investment in farmland sustainability, this payment to farmers could be good public policy.</p>