Plants, vegetation, and soils take carbon dioxide from the atmosphere, convert it into energy and store it as biomass. Increasing biomass to reduce atmospheric levels of C02 is known as carbon sequestration. Australia can make an exceptional contribution to climate action by creating natural systems to store more carbon in soils, pastures, woodland forests and biodiverse plantations, selling the offset carbon to other nations to meet their Paris Agreement targets.

It is now clear to the international community that changes in land use and agriculture will be critical to avoiding the high costs of climate change. If we move too slowly and overshoot the Paris targets, soil- and plant-based sequestration will be the main avenue to achieving negative emissions. 

The changes are also essential for global development, improving human health and maintaining a stable global ecology. There will be one agricultural and land use transformation to serve these four great purposes. 

To capitalise on this opportunity, Australia will need systematic incentives for reducing emissions in agriculture and land. We will also need to restore declining national strengths in research and education on agricultural, pastoral, forestry and related industrial activities. Alongside our industrial opportunity in renewable energy, our strength in growing and using biomass will set Australia up as the superpower of the low-carbon world economy. 

Size, scope, opportunity 

The unusually large endowment of land and woodlands relative to population gives Australia immense advantages in the production of biomass, as well as in the capture of carbon in the landscape. Recent reports from the Intergovernmental Panel on Climate Change (IPCC) have elevated the importance of carbon capture in the landscape. It is estimated that natural climate solutions can provide 37 per cent of cost-effective reduction in global carbon emissions for a two-in-three chance of holding warming below 2°C. These reports indicate that native forest restoration could sequester up to 480 gigatonnes of carbon dioxide in terrestrial ecosystems – sufficient to meet the negative emissions needs of many 1.5°C scenarios. 

However, despite the immense potential for carbon sequestration across the Australian landscape, we still can’t speak definitively on the size of the opportunity as Australian research efforts and funding over the past decade have not matched the economic and environmental importance of the subject. 

Counting carbon 

Climate mitigation in the land sector requires comprehensive carbon accounting. As per the Paris Agreement and subsequent rulebook, adopted in 2015 and 2018 respectively, all countries are required to report emissions under the same United Nations Framework Convention on Climate Change (UNFCCC) framework, applying the latest guidance from the IIPCC, which includes a more comprehensive approach to land-based accounting. 

The Paris Agreement raises an expectation that the long-term mitigation goal will be achieved through a balance between anthropogenic emissions by sources and removals by sinks. 

Such "natural climate solutions" have become much more prominent in international discussions, particularly in Europe and North America. 

My treatment of carbon in the Australian landscape in 2008 and 2011 drew upon pioneering work by the CSIRO and the state departments of agriculture, as well as university research. A CSIRO publication in 2011 highlighted the importance of the opportunity: "Our soils and forest store large quantities of carbon: somewhere between 100 and 200 times Australia’s current annual emissions. We can potentially increase these stores in our rural lands and perhaps store or mitigate enough greenhouse gases to offset up to 20 per cent or more of Australia’s emissions over the next 40 years. 

The decarbonisation of electricity and the electrification of industry and transport can account for about two-thirds of the reductions to net zero global emissions, while land use, agriculture and food transformation can deliver most of the rest. 

A recent research project from the US Academy of Sciences suggested potential for 10 gigatonnes sequestration per annum globally and one gigatonne from US landscapes over the period to mid-century during which the world needs to achieve zero net emissions. Australia should have sequestration potential comparable to that of the United States, and the low agricultural value of most Australian land reduces the opportunity cost of management for carbon sequestration. It is of national economic consequence that we undertake the research to define the scale of the opportunity and the means of unlocking it. 



Australia has two carbon-capture advantages over other nations. The first is our exceptionally large endowment of woodlands, forests and other land relative to population. The second is our expertise in land-based industries – from agricultural and forestry science, through agricultural and resource economics to public and private knowledge and institutional arrangements supporting commercial success. 

The innovative process of transplanting European-style agriculture to a strange and unpropitious physical environment required extensive research, innovation and education from the outset. In 2008, I brought into the mainstream discussion some early work by the CSIRO and state departments on the immense mitigation potential of changes in land use. Nurturing vegetation on dry, degraded mulga country where rainfall was spasmodic in Queensland and New South Wales could be transformative. 

The 2011 Review took the land use mitigation story further, advocating inclusion of agricultural offsets into the emissions trading scheme through what became the Carbon Farming Initiative (CFI). These arrangements were carried into the government’s Emissions Reduction Fund (ERF) – a clunky, truncated and less adequately funded version of the CFI. It required resources from general revenue, rather than from sales of emissions permits. Nevertheless, Abbott’s ERF kept alive the sale of offsets as a way of providing incentives for farm sequestration. The arrangements developed by the Clean Energy Regulator showed how an offsets scheme related to land use could work, and that there was strong private response to incentives. 

The Carbon Farming Initiative (CFI) allowed farmers and land managers to earn Australian Carbon Credit Units (ACCUs). Each ACCU represents one tonne of carbon dioxide equivalent stored or avoided by reducing greenhouse-gas emissions. The ACCUs could be sold to clear obligations under the carbon-pricing rules. In July 2014, the carbon price was repealed. On October 31, 2014, the new Coalition government’s climate strategy, the Direct Action Plan, was passed, which established the Emissions Reduction Fund (ERF). The shift was made from a carbon price to government-purchased abatement, and an expanded CFI, moving eligible projects beyond the land sector to include energy and transport. In the ERF, $2.55 billion was made available for direct purchasing of abatement under the reverse auctions, of which $226 million remained in May 2019. The government’s Climate Solutions Fund was announced on February 25, 2019 to appropriate an additional $2 billion from 2020–21 onwards to fund auctions to 2030. 

Preventing emission reduction displacement

To ensure these emissions reductions are not displaced significantly by a rise in emissions elsewhere in the economy, a safeguard mechanism requires Australia’s largest emitters to keep net emissions below baseline (historical) levels. The voluntary crediting and purchasing mechanism applies to around 140 businesses that have direct emissions of more than 100,000 tonnes of carbon dioxide equivalent a year. 

Projects that meet the requirements under the various methodologies can generate ACCUs for emissions reductions and sell their ACCUs on the voluntary market, or bid to sell them to the government in biannual auctions run by the Clean Energy Regulator. Over the life of the scheme, the average price per ACCU contracted has been $11.92, with individual auction averages ranging between $10.23 (April 2016) and $13.95 (April 2015). 

There is a way forward that does not violate the current government’s electoral commitments. The first step would be to make the whole of the funding for the Climate Solutions Funds available for use now as legitimate carbon credits are certified by the Clean Energy Regulator. This would see the new fund exhausted over a few years. 

The second step would be to require in the next parliamentary term an initial phasing in of full offsetting of fugitive emissions by purchase of ACCUs, to be completed through the 2020s. Demand for credits from the farm sector would be further enhanced by the current requirement for all exceedance of baseline emissions within the Abbott safeguard mechanism to be accompanied by surrender to the Clean Energy Regulator of ACCUs. Alternatively, state governments through their mineral leasing or environmental powers could require offsetting of fugitive emissions by use of certified ACCUs – sourced from their own territory, as the local politics would favour expansion of opportunity for the local farm and station community. This is the approach proposed by the WA Environmental Protection Agency in 2019, in its Greenhouse Gas Assessment Guidelines. 

Later, when Australia’s international climate change mitigation credentials have been restored, linking to the European Union emissions trading system would avoid truncation of the mitigation effort. Time would be needed to negotiate change in European and Australian rules on trade in carbon credits. Australia would need to navigate European scepticism about the legitimacy of our rules on farm credits, make any necessary adjustments, and ultimately persuade European policy-makers of the value of soundly measured and administered carbon farming. 

Our efforts in persuasion would be supported by growing international recognition of the importance of natural climate solutions to the global mitigation effort.

Ross Gregory Garnaut AC is an Australian economist, currently serving as a vice-chancellor's fellow and professorial fellow of economics at the University of Melbourne. 

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