Due to the depleted carbon levels of many soils across Australia, opportunities exist to sequester carbon in soils through changes in land management. Under stable management, soil carbon levels can be expected to fluctuate around a steady-state equilibrium that is primarily determined by rainfall levels. Changes in land management can transition soil carbon levels to a new steady state, with any increases in soil carbon potentially being eligible for the creation of carbon credits.
Opportunities exist in relation to both grazing and cropping systems. Under the ERF’s soil carbon methodologies (as of October 2022), landholders need to adopt at least one new practice to generate credits for soil carbon. Some of the eligible practices relate to grazing, such as altering stocking rates or establishing pasture, while others relate to cropping, such as retaining stubble or reducing tillage. Many practices relate to both grazing and cropping, such as applying nutrients, undertaking irrigation or modifying landscape features.
Soil carbon outcomes vary depending on the practice change involved, as well as location and management history. Research from across Australia has shown that conversion of cropland to pasture offers some of the highest potential increases in soil carbon, followed by sustainable intensification of grazing. By comparison, stubble retention in cropping systems offers fairly modest increases in most situations.
Done well, enhancing soil carbon can be a win-win for global climate action, agricultural productivity, the local environment and regional communities. Some landholders are motivated by the income they could earn by selling carbon credits, while others want to retain credits to offset their own emissions and become carbon neutral. Others still are motivated primarily by the benefits for their on-farm productivity or the local environment, with any creation of carbon credits being a secondary concern.
Aside from the direct income that landholders can earn from carbon credits, enhancing soil carbon has the potential to generate a range of ‘co-benefits’ such as:
- Improved ground cover (and reduced erosion)
- Improved water-holding capacity of soils
- Improved pasture growth and/or nutritional value
- Improved farming productivity, profitability and resilience
- Biodiversity benefits (including soil biota)
- Water quality benefits and flood mitigation
- Social and economic benefits for the broader community
Despite these opportunities, there are also many barriers for landholders seeking to increase their soil carbon and generate soil carbon credits. Key barriers include:
- The complexity of carbon credit rules and processes
- High set-up costs (obtaining advice, measuring current carbon levels, registering projects and implementing the planned practice change e.g. new fencing)
- Carbon service providers requiring a large share of future carbon credits in return for covering set-up costs
- Low price for carbon at present relative to other farm produce
- Uncertainty about the level of sequestration that is possible
- Uncertainty about future market and policy changes
- Potential loss of flexibility around future land use
- Past sequestration being ineligible for credit generation
Carbon service providers can help landholders to overcome these barriers, particularly those relating to complexity, uncertainty, monitoring and transaction costs. However, they typically take a 20-30% cut of the credits generated in return for their service, which can act as a barrier to entry into carbon farming for some landholders. While some of the people we interviewed for this guide saw a 30% commission as reasonable compensation for the expertise that service providers bring and the risk they take on, for other landholders it is seen as too high a cut, especially compared to the commissions that agents charge to help farmers get their products to market in more established industries.
Approaches to carbon farming can operate across a spectrum from highly individualistic to highly collaborative. Carbon service providers may be involved across this spectrum. Equally, DIY or fee-for-service models may be employed as part of either individualistic or collaborative approaches. While recognising that the majority of landholders at present take an individual-property approach to engaging with carbon farming, the remainder of this guide is dedicated to how collaborative approaches might enhance some of the benefits described above and reduce barriers to entry.