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

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.

Key policy insights:

• We find a strong positive correlation between the quantity of abatement potential on a land parcel and its potential opportunity cost, the latter represented by agricultural profitability.

• The lowest cost abatement will be obtained by policies, including market mechanisms, that optimize these two factors rather than prioritizing one over the other.

• Policies that direct projects to ‘marginal’ agricultural land may lead to a more costly emissions reduction pathway.

• Our modelling approach is a key input to the development of a long-run supply curve for land-based abatement, essential to any strategy that relies heavily on negative emissions.

• Understanding the drivers of land-based abatement projects can help to predict the land use policy impacts of a higher offset requirement.

KEYWORDS:

• Nature-based climate solutions
• negative emissions
• offsets

Acknowledgements

This research was conducted as part of a PhD thesis, at Charles Darwin University, with funding under the Research Training Program of the Commonwealth government.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Author contributions

Greg Barber: Conceptualization, Data curation, Methodology, Writing – original draft. Andrew Edwards: Writing – Review & Editing. Kerstin Zander: Conceptualization, Supervision, Writing – review and editing.