At 27.3 tonnes [i], Australia's annual per capita emissions of greenhouse gases (CO2 equivalent) are the highest among the Organisation for Economic Co-operation and Development (OECD) nations. Along with Canada, Australia also combines a large land area with a low population density. This provides scope for the nation to achieve a portion of its CO2 abatement through agricultural sequestration.
While forestry is the most obvious and easily calculated carbon sink, it is the sequestration of CO2 in agricultural soils that has received particular attention in the current political debate about our national response to climate change. While it is more expensive, and less secure, than forestry, it has the advantage of allowing the land to continue to be used for crops or pasture.
Carbon stored in soil includes both short lived crop residues and long lived humus. The latter is of particular significance to the current debate on soil carbon transience, as it cannot be lost from soil during droughts or fires. Humus is a gel-like substance fixed in the soil by mycorrhizal fungi, which obtain dissolved organic carbon from the roots of plants. Once carbon is sequestered as humus it has high resistance to microbial and oxidative decomposition. A more detailed explanation of these processes can be found in the submission of Dr. Christine Jones to the 2009 Inquiry into Soil Sequestration in Victoria [ii].
In crop lands, soil carbon is increased through adopting no-till or minimal till practices. In pasture lands, it is increased by introducing bio-diverse ground cover, and controlling grazing. In both crop and pasture lands it can be increased by application of biological agents, but at some increased cost.
Article 3.4 of the Kyoto Protocol refers to carbon sequestered through land use other than forestry. It includes pasture, woody vegetation less than 2 metres high, and soil carbon. Its rules cover movement of CO2 both into the soil through photosynthesis, and out of the soil through oxidation. Australia has not yet signed up to this article out of concern about potential carbon loss through drought and bushfires, though the Government is attempting to renegotiate the rules. For carbon credits to hold their value, the CO2 must be permanently removed from the atmosphere. That means there must be no change to land usage that would diminish soil carbon. This creates difficulties in selling affected land, which would be subject to a covenant to protect the stored carbon. Without factoring in the cost of such responsibilities, the voluntary carbon offset market in the Australia and the US understate the true cost of this means of sequestration. Perhaps mindful of this, Dr. Michael Robinson at the Australian Government Healthy Soils Symposium, commented on the cost implications as follows:
Verification costs make soil carbon trading untenable with carbon prices as they are. Most schemes define permanence as 70 to 100 years. A contract will stipulate that carbon must be sequestered for that time period. [iii]
Readers will point that CO2 stays in the atmosphere for centuries, but 100 years may at least give us time to find other solutions. In my view the impact on the sale price of land under covenant depends on the reward for CO2 abatement. Under a low carbon price, the sale price of covenanted land could be significantly discounted unless the soil carbon industry as a whole is profitable enough to maintain or increase the value of all rural land. Permanence also requires periodic testing and verification, with associated costs.
On page 40 of Dr. Jones' submission, she refers to the scheme in Portugal, compliant with Kyoto Article 3.4, which aims to permanently sequester 0.91 million tonnes of CO2 in 42,000 hectares of soil. That equates to 21.7 tonnes per hectare. Dr. Jones states the cost of the scheme is $13.8 million, which works out at about $15.20 per tonne. According to the International Monetary Fund figures for 2010 [iv], per-capita income in Australia is more than 70% higher than in Portugal. Therefore, if we adjust the return to farmers in Portugal to reflect the higher per-capita income in Australia, the result is about $26 per tonne.
I now move on to the report of the Inquiry into Soil Sequestration in Victoria [v], which I expect was made after assessing submissions from Dr. Jones and others. In section 6.3.2, the report quotes a study conducted by the International Energy Agency by Australian and US scientists. A key finding of this study was that a price of $50 per tonne of CO2 would be required to persuade landholders to devote sufficient land to achieve 31% of the potential abatement:
In the zone covering the Gippsland region, the economic potential of adopting no-till practices is 31% of the theoretical potential at a carbon price of $50 per tonne, which increases to 87% at a carbon price of $200 per tonne. The average costs of adopting no-till practices to sequester carbon in south eastern Australia were lower than the average costs of adopting minimum till practices.
Another cost indicator comes from the Australian Farm Institute, which has estimated the cost of building up soil carbon, through changed management and fertilizer application, at "somewhere above $30 a tonne." [vi]
The above sources give us a realistic range of the cost of sequestering CO2 in the most suitable soils of $26 to $50 per tonne. For these soils, my estimate is $35 per tonne (in less suitable soils, or a poorly designed regulatory environment, the cost would be significantly higher). This estimate allows $15 per tonne of CO2 for fixing the carbon in the soil, and a minimum $20 per tonne to keep it there for 100 years. If we use $35 per tonne as a working estimate, we find such a price to be competitive with the premium required to generate electricity from wind, and cheaper than the premium for solar-thermal.
On my website, Climate Change Answers, I compare the relative costs of various methods of sequestering carbon and various methods of generating renewable energy. In the move to a low carbon economy, both solutions will both be needed. Very low cost opportunities for abatement are limited, so it is time for our society to accept the reality that, however the transition is managed, there is going to be a cost.
Note that the above costs are denominated in Australian dollars, in line with the source documents. During the last year, the Australian dollar has risen above parity to the US currency. To compensate for this, I suggest you think of the above costs as denominated in current US dollars.
Political Implications
In Australia, both sides of politics have included soil carbon in their policy mix to respond to the challenge of climate change. However, the Opposition has gone out on a risky limb in its heavy dependence on this solution. In the second part of this post, to be published later this week, I will look at the implications of the cost of soil carbon on the climate change policies of both major parties.
References
[i] Climate Analysis Indicators Tool, Version 8.0, World Resources Institute, 2010
[ii] Dr Christine Jones, Submission to the Environment and Natural Resources Committee Inquiry into Soil Sequestration in Victoria
[iii] As reported by Australian Government Grains Research and Development Coorporation, Ground Cover Issue 70 - September - October 2007
[iv] International Monetary Fund, data from World Economic Outlook Database - April 2011
[v] Parliament of Victoria Environment and Natural Resources Committee, Inquiry into Soil Carbon Sequestration in Victoria, September 2010
[vi] The Australian of 16 August 2010
Posted by alan_marshall on Monday, 15 August, 2011
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