Selling soil carbon – an easy win?

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What does the term soil carbon mean?  

Soil carbon has been in the limelight lately due to its potential to reduce the impacts of climate change. While soil carbon exists in two forms (organic and inorganic), soil organic carbon which includes decaying plant matter, soil organisms and microbes is largely the focus of discussions around soil carbon and climate change. This is due to its potential to be increased through a variety of land management practices. 

It is thought that increasing levels of organic carbon in our soils will draw carbon dioxide (a heating greenhouse gas) from the atmosphere, and that maintaining higher levels of soil carbon will keep this carbon dioxide sequestered (or stored) in the soil. This has led to many emissions trading schemes such as Australia’s Emissions Reduction Fund offering payments for ‘carbon credits’ generated by demonstrating increases in soil carbon through a range of land management or project activities.

These types of carbon reduction or carbon farming projects are often sold as a ‘win – win’ for farmers and the environment offering a revenue stream in exchange for reducing levels of atmospheric carbon dioxide. However, carbon and particularly ‘soil carbon’ is a difficult product to package and sell and there are many factors you need to consider before committing to selling your soil carbon.

How do soil carbon projects work?

In Australia, carbon farming projects need to be registered with the Emissions Reductions Fund and follow one of the fund’s prescribed methods to be eligible to earn Australian Carbon Credit Units (ACCUs). One ACCU is equivalent to one tonne of carbon dioxide stored in the landscape and once earned can be sold either to the Australian Government or a secondary market.

The basic process laid out in the Measurement of Soil Carbon Sequestration in Agricultural Soils method is:

  • Baseline sampling to establish current soil carbon levels
  • Project mapping and planning
  • Conduct soil carbon land management activities
  • Subsequent soil sampling to measure changes in stored soil carbon
  • Calculate and report on your ‘net abatement amount’ (net amount of carbon removed from the atmosphere)
  • Claim ACCUs you are eligible for based on your net abatement amount
  • Continue land management activities, sampling and reporting for the length of the project crediting period (25 years)
  • Continue land management and reporting activities for the length of the project permanence period (25-100 years).

See Understanding your soil carbon – simple method guide for further information. 

What are crediting and permanence periods?

The crediting period is the 25-year period of the project during which you are eligible to earn carbon credits based on your net abatement amount calculated during each sampling/ reporting period.

Note: your sampling will need to demonstrate an increase in net abatement amount between each reporting period in order to generate further carbon credits. 

The permanence period of your project is the period that you must maintain the level of soil carbon stored by your project. You can choose either a 25- or 100-year permanence period.

A percentage discount will be applied to all carbon credits generated by soil carbon methods due to the risk of loss of stored carbon that is unable to be replaced. Projects with a 25-year permanence period will receive a 25% discount and those with a 100-year period will receive a 5% discount.

What do I need to think about before getting involved?

The basic idea of soil carbon farming sounds appealing – you could enjoy the productivity benefits (increased water holding capacity and ability to store and exchange nutrients) of increased soil carbon and create a new revenue stream. However, it is important to consider the downsides associated with selling the carbon stored in your soil before embarking on the complex and lengthy process. 

It is important to know there is a maximum limit to how much carbon can be stored in a hectare of soil (depending on climate, rainfall and soil type). Once the maximum limit of carbon is stored in your soil there is no further potential to generate carbon credits or associated income from the project.

Due to soil carbon and any carbon credits generated from it being a finite income stream it is also important to consider the impacts selling your carbon may have on future generations. Carbon prices are likely to increase into the future and selling carbon now at lower prices may create liability in the future if the farm needed to purchase some or all of that carbon back at a much higher price.

You should also consider that carbon credits cannot be ‘double counted’. Meaning you cannot sell a carbon credit to generate income and use it as a means of offsetting on farm emissions to demonstrate carbon neutrality or low carbon production.

There are also a range of contractual and operational implications of entering into a soil carbon project that should be considered including:

  • Profitability impacts resulting from land management changes 
  • Cost of setting up and running the project (upfront, legal, operational etc.) 
  • Amount of labour associated with setting up and running the project 
  • Contractual risks associated with loss of soil carbon including from natural events such as bushfire, drought and a changing climate 
  • Land value or property title impacts.

Where to next?

There is a lot to consider before embarking on a soil carbon project. This article may have got you thinking about some of the key benefits and risks that might be involved but it is advisable to gather as much research and advice as possible before you commit. Here are some further resources you might wish to consult: 

If you are looking at contracting a private carbon project developer to deliver an emissions reduction project make sure they are a signatory to the Australian Carbon Industry Code of Conduct

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