Soil carbon markets – are they a good fit for apple and pear growers?

Short-term gain or longer-term asset improvement? Michele Buntain and Marguerite White from the PIPS 4 Profit team weigh up the opportunities presented by increasing soil carbon. 

“Climate change has been described as the greatest challenge facing humanity in the 21st century. So, we’re all scrambling for ways to remove carbon dioxide and methane and nitrous oxide out of the atmosphere or avoid producing it. One way is to increase soil carbon.” – Associate Professor Matthew Harrison, 2024 

Is generating income from storing and selling soil carbon a worthwhile pursuit for apple and pear growers? 

To find out more, we spoke to Professor of Sustainable Agriculture at the University of Melbourne and Director of the Primary Industries Climate Challenges Centre, Richard Eckard and Associate Professor of Sustainable Agriculture at the Tasmanian Institute of Agriculture, Matt Harrison. 

Our conversation leads us from potential short-term monetary gains of creating carbon credits for accounting markets, to a more productive, profitable and sustainable future. The alternative: keeping soil carbon within the business enterprise as a legacy for future generations that promotes apple production as a carbon-friendly, sustainable industry. 

Carbon markets – what’s the driver? 

The Paris Agreement, adopted by the United Nations Framework Convention on Climate Change (UNFCCC) in 2015, is driving the world’s climate change charter of decarbonisation or, more correctly, defossilisation, for a net zero future by 2050. Many governments’ response to this – including Australia’s – is a carbon credit system which includes offsetting greenhouse gas emissions, which means purchasing carbon credits from elsewhere to balance emissions. 

How do soil carbon credits work? 

In Australia we have the Australian Carbon Credit Unit Scheme, a government-run system that gives Australian carbon credit units (ACCUs) to projects that store, reduce or avoid greenhouse gas emissions. 

Soil projects in the Australian Government scheme are required to store additional carbon for a minimum of 25 years, with options up to 100 years. With ACCUs, projects earn one carbon credit for every tonne of carbon dioxide or carbon dioxide equivalent (CO2e) stored or avoided by a project. A project issued with carbon credits, can either sell them back to the government or to businesses needing to ‘offset’ their emissions.  

Other international voluntary schemes include Verra and Gold Standard, which have fluctuating carbon prices. These schemes operate differently, where carbon producers can sell to anyone, usually determined on price.  

Some key points: 

• To qualify for carbon credits, you need to undertake a new management activity to increase soil carbon above a 5-year baseline level, for example, by applying additional fertilisers or growing cover crops. This can actually reward historically poor management or low baseline soil carbon levels, while historically good management puts you at a disadvantage as your baseline carbon levels will be higher. 

• If you end your project, stop land management activities or carbon stocks decline before the 25-year cut off, you are generally obliged to pay back carbon credits. This means that activities to maintain soil carbon stocks on your land will need to be continued even if the land is sold, unless the project is revoked and ACCUs relinquished. 

Carbon offsets – ‘robbing Peter to pay Paul’ 

A carbon-emitting business, such as a fuel-hungry airline, can technically reduce or offset its carbon footprint by buying carbon credits as compensation for putting CO2 into the atmosphere. As an apple and pear grower, the additional carbon you store in the soil and receive ACCUs for is used to balance or ‘offset’ the emissions of big business. But the key is, at best, this is only maintaining a status quo with no real climate gain. 

Richard describes how not only is there no real climate gain from the grower’s additional stored carbon, but also, by selling the carbon credits, the business has lost an asset while still being responsible for maintaining it. 

“Unlike a livestock producer who reduces methane emissions by sending livestock to market earlier, selling soil carbon is tied to your farm. In fact, the bank wants to know that your asset is being depreciated. Once you’ve sold the carbon as an ACCU, there is still this ongoing obligation to manage the stored carbon and keep it there. A problem with this is if you want to sell your farm after you’ve taken the profit. The new buyer must then take on the responsibility of retaining the stored carbon.” 

Think of it as a bit like selling your whizz-bang farm tractor but still having to maintain it and be audited on this for the next 25 years. You can still use it, but you don’t own it and, if you sell your farm, the new owner has to take over maintenance. 

To inset or offset? 

‘Insetting’ is a newer term used to describe the situation where a landholder undertakes a project that stores carbon on their farm. But rather than selling the credits for someone else to ‘offset’ emissions, the landholder keeps those credits as an ‘inset’ against their own emissions. The auditing and processes required for insetting are more inclusive of the whole farming system, typically more comprehensive than the Australian Carbon Credit Unit Scheme, which often only accounts for the part of the system that has changed. Insetting is a really important consideration for any farmer or industry collective wanting to produce a carbon-neutral product. 

Richard describes the tug of war happening with two arms of government having two different agendas, offsetting carbon with ACCUs versus insetting carbon on your farm. 

“On one hand you have the Clean Energy Regulator saying we want as many Australian carbon credit units as possible for the big end of town to offset their carbon emissions and buy their way out of trouble. Then you have Climate Active saying inset or keep those carbon credits on the farm to reduce your own carbon footprint and reap the benefit from increased productivity.” 

What is Climate Active? 

Climate Active is a federal government-backed program to certify organisations that have reduced their emissions to achieve carbon neutrality. It is the carrot to encourage emissions reduction rather than just buying offsets. Businesses or products are independently audited to provide legitimacy to their claims. 

Doing the maths on soil carbon credits 

There are finite limits to how much carbon can be stored in soil. If you are starting from a low soil carbon level the potential is reasonably high. But most productive orchards would have moderate to relatively good levels of soil carbon for their soil type. 

To calculate the dollar benefit, for every tonne (T) of soil organic carbon sequestered, we multiply it by 3.67 to get tonnes of carbon dioxide equivalent (CO2e) sequestered. Based on the latest spot price for ACCUs at $35/T of CO2, increasing your soil carbon by 0.1 per cent is equivalent to 2.8 T/ha CO2 and would net $501/ha or $20/ha/year over 25 years.  

Table 1: Example dollar benefit for every tonne (T) of soil organic carbon sequestered. 

Source: Determined using a tool of the Primary Industries Climate Challenges Centre’s Carbon Neutral Agriculture Training Program 

Balance this against the cost of the practice change needed to increase soil carbon, the property depreciation and the ongoing administration to maintain this for the next 25 years and you should have a fairly clear idea as to whether this is going to be a winner for you. Of course, there is potential to increase soil carbon by more than 0.1 per cent but it will take time and has a finite limit.  

Carbon – a win-win with co-benefits 

The co-benefits of building soil carbon are many, whether you also take part in a carbon credit scheme or promote your own carbon neutral production system. The co-benefits of improving soil organic matter levels and soil carbon are associated with increased productivity and fruit quality with increased resilience to extraordinary climatic events such as excessive rainfall, drought and heat, through improved physical, chemical and biological soil properties. In fact, building soil carbon is a win-win, as soil carbon increases (up to a point), productivity increases which increases soil carbon. 

For example, research has shown that for each 1 per cent increase in soil organic matter, the available water-holding capacity in the soil increases by 3.7 per cent. That means less frequent irrigation and better rain harvesting. 

“Co-benefits will return more profit to your farm over a decade than selling soil carbon credits will,” Richard said. 

Increasing soil carbon cost efficiently 

Matt commented on building soil carbon efficiently to maximise profitability: “If you want to build up soil carbon you have to get more plant growth. And building plant growth through ground cover either between the rows or the trees is building up a whole bundle of nutrients, not just carbon. 

“What we are really talking about is building soil organic matter, which locks up about 80kg of nitrogen, 20kg of phosphorus and 14kg of sulphur. If these are not supplied as fertiliser then organic matter will not be built and soil carbon just decays to CO2. So, you have to feed the cycle. 

“Using legumes is a good way to improve productivity and carbon capture, particularly of living mulches and cover crops, without increasing emissions by adding nitrogen fertiliser.” 

It sounds simple and what orchardists have been doing forever, but it now comes with the potential to validate the healthy carbon status of apple and pear orcharding as a system. 

The PIPS 4 Profit Building sustainable soils (AP22003) project is looking at ways to get the most co-benefit from living mulches and cover crops, with different plant species and mowing strategies. Most importantly, they are looking at which strategies give you the best bang for your buck in terms of productivity, fruit quality and improved soil health. 

Future thinking – the whole system 

While carbon credits and carbon sequestration are a current focus, Richard encourages us to look to the future. 

“If you step back and look at the big picture and keep biodiversity and water in mind with carbon, I think you get a more balanced perspective of where we are going and can make the right management decisions for the long-term future rather than just short-term gain,” he said. 

By building biodiversity into your farming system in partnership with soil organic matter, you will be one step ahead of the game in 10 to 20 years’ time. 

This is an investment in the next generation that will come onto the farm, that will say, ‘We want this farm and we want to come back to the farm because it’s a more pleasant environment, a more sustainable environment, an environment that is more benign to the atmosphere and it is more predictable than the farm next door that has not built soil carbon into their system’. 

PIPS 4 Profit’s Building sustainable soils (AP22003) and Coordinator (AP22005) projects would like to thank Professor Richard Eckard and Associate Professor Matt Harrison for their contributions and their passion for positive climate change solutions. 

Resources 

Visit this link to listen to the full podcast: buzzsprout.com/2240977/14915568

Clean Energy Regulator: cleanenergyregulator.gov.au 

Climate Active: climateactive.org.au 

Australian Agricultural Sustainability Framework: nff.org.au/programs/australian-agricultural-sustainability-framework 

Acknowledgement  

The PIPS 4 Profit program’s Building sustainable soils (AP22003) and PIPS4 4 Profit Coordinator (AP22005) projects have been funded by Hort Innovation, using the apple and pear research and development levy, contributions from the Australian Government and co-investment from the Tasmanian Institute of Agriculture and ICD Project Services. AP22003 is supported regionally by Pomewest, Lenswood Apples and the NSW Department of Primary Industries. Hort Innovation is the grower-owned, not-for-profit research and development corporation for Australian horticulture. 

This article was first published in the Winter 2024 edition of AFG.