374. Soil carbon webinar and written Q&A
Here are the video and slides for the webinar I gave on 20 May 2022, called “Could soil carbon sequestration ever be a worthwhile climate policy?”. Below I’ve posted many of the comments and questions from the 258 people who attended, and I’ve provided responses to most of them.
Access the paper that the webinar is largely based on
Questions and comments at the end of the webinar
Dave’s results are consistent across multiple of our studies, which all show that carbon prices will need to be upward of $60 to be worthwhile the effort of participating in the policy
In NZ carbon price >$70 currently
Similar in Canada, Maksym. Currently $50 with a roadmap to keep rising annually.
Current forecasts estimate ACCU prices returning to ~$50/T by 2030
DP: Since the webinar, I’ve been extending my calculations and making them more detailed and realistic in various ways, and exploring some more extreme scenarios. For example, I now look at carbon prices increasing from $25 in 2022 up to $50, $75 or $100 by 2030, and then staying at those levels (adjusted for inflation) for the rest of the 25-year period.
For crop producers, the benefits of participating in the program are still small: no more than $2/ha/year.
For livestock producers, with initial sequestration rates of 1.5 tonnes per ha, the benefits of participating in the program are higher at the higher prices: $24/ha/year for $75 and $33/ha/year for $100. Those results for $75 and $100 would actually be attractive to many farmers in those specific scenarios. It negates the Coalition’s claim that soil carbon is a cheap way to address climate change, but they would get some adoption from livestock farmers if carbon prices reached these levels.
However, there are still two big problems. Once I apply realistic deductions for impermanence (not just the 20% deduction used in the program), the actual cost of sequestering soil carbon blows out, even for livestock producers. e.g., $279/tonne and $354/tonne. This is because the program gives farmers far more carbon credits than they have actually earned once you assess impermanence realistically. Then, when I model non-additionality on top of that (assuming that around 25% of producers would have positive private net benefits without the program but would be paid as if they were additional), the cost of sequestering carbon in the scheme increases to around $3000/tonne (for a particular set of assumptions that I’ll spell out in a future Pannell Discussion). Clearly, even though we would get more farmer participation at these high prices, there would be much cheaper ways of mitigating climate change.
Even if sequestration was possible and profitable, I would still suggest that farmers should not sell their credits because you may need them to offset your own Scope 1 and 2 emissions in the future.
Agree – farmers can’t sell their credits AND double count those towards participation in a supply chain with net zero objectives
I don’t think that scope three emissions should be totally ignored, though I would argue that they will be externally reduced with transition particularly in energy (transport) technologies, this could also apply to scope 1 and 2
When you say pasture do you mean change from crop to pasture?
DP: When I talk about pasture in the presentation, it is permanent pasture. Switching from crop to pasture is a non-starter given the increase in methane emissions. No need to even consider it as an option. It shouldn’t be an option in the program.
Even if we can design a mechanism that can identify additional adopters, given Dave’s figures that may be a small proportion of all farmers and contribution to mitigation is limited anyway. Raising price also brings the issue of cross-sector cost-effectiveness. There may be a lot cheaper opportunities with $150/tonne.
DP: That’s exactly right Chunbo. For croppers, the proportion of additional farmers who would benefit from participation in the scheme is close to zero. For livestock producers it’s a little bit higher, but even for them, given weaknesses in the scheme design, the actual cost to the scheme of delivering sequestration is much higher than $150/tonne. I’ll do another Pannell Discussion on this soon.
Thanks David. Soil carbon policy in Australia is akin to subsidies for upgrading irrigation infrastructure to recover water, exactly same outcomes
DP: Interesting comparison, Sarah. Both are very expensive and ill-advised ways of achieving the policy objective.
You pose a very compelling argument. I do wonder how we might manage an exit strategy and communicate that to pastoralists who we’ve heavily promoted carbon sequestration to.
DP: With the recent change of government, there might be an opportunity. Here is my exit strategy: pay out the five existing contracts with farmers based on reasonable estimates of future sequestration, provide a compensation package to businesses that have made investments on the promise of earning money by helping farmers navigate the program, and then shut down the soil carbon part of the ERF.
Should we be encouraging producers to do a verified Carbon Account as a baseline and work away at reducing net emissions over time and then re-do baseline and using that basis for claims of reduced emissions rather than encouraging people to take up an ERF project?
Mandy – Some secondary (voluntary) carbon markets work this way with whole of farm carbon accounting.
DP: I may not fully understand the question, but here’s a comment that I think is relevant. After a lot of number crunching, reading of the legislation, etc., the position I’ve got to is that there is no milage in soil carbon sequestration as a policy to combat climate change. If the private benefits of adopting the practices are high enough that farmers want to do it to make money, well and good, but any system of paying farmers to adopt is doomed to fail as a climate-change policy.
David, hi excellent presentation. How do you predict the impact of climate change with hotter and drier climate for 2050 predictions will have on carbon sequestration, do you expect that SOC losses will increase or harder to lay down carbon under pastures?
DP: Emphasising that I’m an economist rather than a soil scientist, my impression is that the answer to your questions is yes.
What mechanisms could be available to reward farmers that have already adopted management practices that focus on carbon sequestration? Seems to only be rewarding farmers that have not been focussing on soil health.
DP: My focus is on whether paying farmers for soil carbon is a good idea from the perspective of combatting climate change. Paying farmers who have adopted already and would continue to adopt even if they were not paid makes no contribution to climate-change mitigation. It’s also not very practical. Over 90% of croppers have already adopted no till. Should we pay them? It would be pointless, in my view. Your comment seems to imply a concern for fairness. Have a look at Pannell Discussion 372 for some discussion of fairness in the context of additionality for soil carbon.
Developing a certified carbon neutral product probably has a better ROI than selling ACCU’s for most agri-businesses.
DP: To be honest, I’m sceptical about most certification schemes. I don’t think many of them generate much in the way of a price premium in the market.
Producing food that is ‘carbon neutral’ may ensure market access, but very few buyers willing to pay more, so trading carbon credits is perhaps the only way for farmers to actually monetise good management
DP: I’m inclined to agree with the statement that market premiums are usually not high.
While there is dispute about the ability to sequester carbon in the soil through management, the underlying practices involved are widely agreed upon to be beneficial for productivity, profitability and emissions mitigation (eg. rotational grazing, multispecies pastures). What alternate policy do you suggest to assist in rapid adoption of these practices?
DP: Actually, I don’t think there is a dispute, really. The scientific measurements are pretty clear. My alternative suggestion is trials and extension, relying on private benefits to motivate adoption.
Perhaps we need to accept that agricultural mitigation will be costly in current circumstances. But the alternative, no abatement and being confronted with runway climate change, will be even more costly. The problem then becomes, how to encourage adoption to mitigate future risks.
DP: In my mind, the alternative is not no abatement, but abatement from other more effective and less costly sources. In calculations I’ve been doing since the seminar, I’ve been finding that, in a scenario with non-additionality over 25% of the area, the actual cost of soil carbon sequestration in the ERF is around $2000 per tonne, even if the headline price is $50 or $75.
25 year sequestration is just silly in the geological time frame. All that does is creates an even larger problem for the next generation to deal with.
DP: I totally agree. That is one reason why I strongly prefer a focus on reducing emissions rather than increasing sequestration.
What if an innovation was not going to happen like, no-till is, and was brand new. This would surely be additional. The incentive is for new practices.
DP: Just because a practice is new, it doesn’t mean that it is additional. If a new practice is attractive to some farmers and would be adopted by them in future even without them earning carbon credits, then it is not additional and we should not be given them carbon credits.
The test of additionality is not a before vs after comparison, but a with vs without comparison. The latter compares two patterns of adoption over time.
Your conclusion refers to CH4 capture. What’s the current gov or alternative gov view on that?
DP: I think you’re referring to my suggestion that reducing emissions from livestock would probably be a better option than the current scheme for soil carbon. The existing ERF does include a couple of methods that allow farmers to earn carbon credits for that. However, I think there is scope for developing and proving much better technologies that would reduce the methane emissions by more. By the way, this is not about methane capture, just reduced production of methane in the livestock guts.
Stuart Irvine Brown
Was there any thought as to including different forms of SOC (biochar) which could surpass the current predicted ceiling of SOC sequestration of a soil and improve the ongoing sequestration potential over time, as well as improving the legacy of sequestration given turnover times?
DP: A previous PhD student of mine, Tas Thamo, looked at biochar as an option and came away very negative about its prospects to work as a cost-effective option. I have not looked at it closely myself.
Hi David, do you have a sense of the conflict between increasing SOC as part of a normal management outcome (which allows cycling) to encourage better nutrient availability and water holding benefits and sequestering carbon permanently.
Warwick – not necessarily a conflict. If Total SOC is increased, and a new equilibrium reached, you could assume that there is an increase in all pools i.e. the slow turnover resilient pool and the fast turnover labile pool. The important aspect is that the total carbon is increased and maintained (i.e. it doesn’t have to be the same atom of carbon).
Hi Michael, yes I think that’s right, it does assume at least a maintenance level of carbon which might be conflicted by weather and other events and timing of compliance audits.
You mentioned that methane reduction would be more effective, but with methane cycling back to co2 within even less than 25 years, isn’t that just another distraction when it comes to mitigating climate change?
DP: It’s true that methane has a much shorter half-life in the atmosphere than does CO2, but its climate forcing effect is very much greater. Allowing for those two factors, the CO2-equivalent factor for methane is 25 (i.e. the same mass of CH4 has 25 times the overall impact as CO2). Yes, it’s being turned over, but there is a steady stream of new emissions of it, and it would be very worthwhile if we could reduce those. So, no, I definitely don’t think it’s a distraction.
Does the method require one soil test per hectare?
Luca De Prato
Re under the soil analysis: there is a sampling protocol to follow with preliminary soil sampling and soil sampling from 3rd year onward under accredited laboratories.
DP: that is true. This helps to make sure that the measured changes in CO2 sequestration are genuine and reasonably accurate. My impression is that the protocols used are pretty good.
Additionality seems to be a general issue with any sequestration or mitigation practice with private benefits, how can the policy design be improved in this regard?
DP: That is true, and it’s not specific to climate-related programs. It’s potentially an issue in any program that pays people to do things that generate public benefits, such as biodiversity or vegetation conservation programs. If we could detect non-additionality accurately, that would really help to make these programs achieve more for whatever their budget is, but it’s extremely difficult because it depends on what people would do with and without the program, and one of those is invisible. It gets especially hard when the payments are small relative to other costs and benefits of farming, as they will be in the great majority of cases for soil carbon. I don’t think there is a solution to this problem.
Agree that rather than using ERF (i.e. taxpayers’ funds) to questionably raise SOC, a better use would be publicly and privately funded R&D that helps lower emissions from agriculture.
DP: Thanks Ross.
But to what extent are private farmers’ benefits endogenous to regulations, taxes, policies and incentives?
DP: Yes, these things affect farmers’ returns to some degree. Currently, there are no other regulations, taxes, policies or incentives that would directly incentivise farmers to increase their soil carbon sequestration. There might be some indirect effect through changing input prices a bit.
Great presentation Dave, more a comment. until the value chain I.e., food retailers and consumers are prepared to ‘pay’ in concert with other intrinsic and extrinsic quality parameters; as you clearly have demonstrated, the ERF is fiddling at the edges. Extending other private benefits are worth pursuing.
DP: Thanks John. I guess the carbon price is a reflection of the whole community’s willingness to pay. It just comes through a different mechanism than the market.
It seems increasingly common in public policy narratives for so called ‘win-win-win’ practices to be supported as candidate for public subsidies – seeing this in the ‘drought mitigation’ narratives. Do you think there are similar issues within drought policy?
DP: Yes, I think that is a risk.
A lot of what is being discussed are not mutually exclusive, we can and should do ALL the things. And right now!
DP: My focus is on whether we should be paying farmers to sequester soil carbon through schemes like the ERF. My clear conclusion is that it is not a good idea. So I can’t agree that we should be doing ALL the things.
The emissions projections you show from CIE in 2013 are already wrong (show increasing, when they have actually decreased). Seems hard to trust the projection of +50% by 2050.
DP: I think you are referring to the graph I put up should emissions from different sources in agriculture over time. The point of showing the graph was to highlight that the great majority of agricultural emissions come from livestock. That is still true if their predictions about future trends are wrong (which of course they will be to some degree).
Managing for increased soil carbon has been ‘extended’ to farmers for decades. Isn’t it a good time to try a market mechanism?
DP: It is certainly worth thinking about whether a market mechanism will work. Unfortunately, I think I’ve shown pretty clearly that it will fail to contribute significantly to climate change mitigation in a cost-effective way.
Where practices have been extended to farmers for decades and they still have not been adopted, I suggest that means that the practices are not worth adopting. They have private costs larger than their benefits. Continuing with extension to promote those practices is a waste of time. We need to be selective about which practices are promoted, and where they are promoted, so that the effort goes into things that are actually beneficial to adopt. If they are not beneficial to adopt, extension won’t cause adoption, and the ERF won’t cause adoption, so we need to accept that and give up on pushing them.
Could you please suggest how reducing cost of measurement is not helpful to increase participation on ERF soil carbon project?
DP: Because even if it is successful, the net benefits of participating in the program will still be very small for most farmers, and negative for almost all crop producers. The numbers I show in the webinar are based on an assumption that the government’s stretch target (measurement at $3/ha/year) will be fully and immediately achieved, and even then the benefits from participation are very small benefits for most farmers.
David – you alluded to the uncertainty about quantifying the private benefits of increased soil carbon – is the lack of certainty an argument for additionality? (BTW I agree with you but interested in your reflections)
DP: I’m not sure I understand the question. Is it, does uncertainty increase additionality? There are various parts of the system that could be uncertain, but if we are talking about uncertainty about the magnitude of future payments, I’d expect many farmers to deduct a risk premium from the payments, which would decrease additionally.
Stuart Irvine Brown
Was your modelling extended to reflect scenarios in agro-forestry / silviculture which could also link above and below ground sequestration?
DP: No. It only looks at crop and livestock production.