Carbon offsets research to support the State Carbon Sequestration Strategy

The Goyder Institute for Water Research initiated the Carbon Offsets Research to Support the State Carbon Sequestration Strategy project to assess South Australia’s potential to offset emissions through land-use change and increase participation in the national Emissions Reduction Fund (ERF). The ERF has recently transitioned to the Climate Solutions Fund (CSF).

The ERF/CSF is one of the main mechanisms in Australia’s climate change policy. Funding is allotted through a reverse auction process, where prescribed actions that reduce or offset CO2 emissions can be offered in tender rounds. Funding is offered for the least cost per tonne CO2 offset offers. Most credits issued through the ERF have involved avoided deforestation and assisted natural regeneration of native vegetation, but other activities like building energy efficiency and reducing landfill methane emissions could receive credits. Only a fraction of one per cent of credits came from South Australia intensive agriculture areas (i.e. areas cleared for broadacre cropping/grazing), which represents approximately 10 million hectares (11 per cent of South Australia’s area).

The Institute brought together independent experts from UniSA, The University of Adelaide, SA Water, and the Department for Environment and Water (DEW) in the Carbon Offsets Research project, led by Professor Jeff Connor (UniSA). The team worked together to understand the economics of land-use change for carbon abatement across SA’s intensive agricultural zone and assess the potential of co-benefits from carbon plantings to contribute additional incentives and improve the economic viability of land-use change. The team also assessed policy context and stakeholder perceptions to understand what might be limiting landholder participation.

The team found that large-scale change to the primary carbon-sequestering land uses is unlikely in SA’s intensive agricultural zone at current and foreseeable carbon credit prices. Even at three times the current ERF auction price for credits, the economically-viable land-use change driven by carbon credit benefits alone is likely to provide only a small fraction of CO2 offsets relative to South Australia’s emissions.

South Australian study area and current land use categories.

In three case studies, the co-benefits of land-use change (including improved pollination, shelter belts to improve lambing yields, or riparian revegetation to improve water quality) showed possibilities of achieving economic viability. Pollination and reduced lamb mortality from strategic plantings provided some valuable farm production benefits but not enough for combined carbon and co-benefit values to offset implementation costs. Water quality benefits, in the form of avoided chemical water quality treatment costs, were closer to justifying carbon credits and co-benefits, and could be achieved through biodiverse carbon plantings along creek lines supplying the Happy Valley water treatment plant. 

The research suggests that the role of carbon credits in incentivising additional revegetation over broad swaths of South Australia’s intensive agricultural zones is likely to remain economically challenging at current carbon prices. However, there are a number of bespoke and niche opportunities – where the opportunity cost of current land uses are low, additional co-benefits from the land use change are valued as substantial by the landowner, and where carbon sequestration potential is high.

Environmentally-beneficial carbon emissions abatement from land-use change in the state could also be improved by providing landholders with better information about ERF requirements, the economics of participation, and the potential value of co-benefits. More research is also recommended to understand how stacking multiple benefits, and developing methods to accurately account for variable carbon sequestration rates, can help improve the economic viability of land-use change.

Read on for more detailed information about our research or click to view our research reports:

Economic Methods for Assessing Carbon Offset Supply Cost, Assessing South Australian Carbon Offset Supply and Cost, and Assessing South Australian Carbon Offset Supply and Policy for Co-beneficial Offsets: Technical Estimation of Carbon Supply.

Economics of land-use change for carbon abatement

The economics of land-use change were assessed based on the actual methods that farmers must apply to participate in the Australian ERF. The ERF includes a number of different ‘methodologies’ in the vegetation management category and three were chosen to be assessed based on their applicability to SA:

  • mixed environmental plantings (eligible across the state)
  • monoculture mallee eucalypt (tree plantation) revegetation (eligible in drier areas with less than 600 mm rainfall)
  • regenerating existing native vegetation by changing management (e.g. removing stock).

The official ERF Full Carbon Accounting Model (FullCAM) was used to estimate the annual and cumulative carbon sequestration over a 100 years (Richards and Evans, 2004) for a five kilometre GIS grid. Then, the carbon price needed to increase land-use change carbon credit returns above the expected future returns of current agricultural land use (plus establishment costs) was computed for each grid cell.

Results confirm that near zero carbon abatement supply can be expected with recent ERF prices of around $14 t CO2e when the most economical ERF method was considered (environmental plantings). At $50 t CO2e only 48 Mt CO2e is estimated over 100 years, less than 2% of emissions that could be expected from the State cumulatively over that period. Emissions reduction scenarios developed for the South Australian Government for a low emissions future (Hewson et al., 2015), showed that 12.7 Mt CO2e of residual emissions would need to be offset in that year to achieve neutrality by 2050. The research shows that it is not until prices reach approximately $124 tCO2e that residual emissions in 2050 could be offset by local economically-viable land sector abatement given actual ERF crediting requirements. This would require land use change in about 10% of SA’s eligible area.

Potential for additional benefits from land use change to improve economic viability

The project also investigated the potential value of co-benefits from carbon plantings across three case studies: pollination, shelterbelt, and riparian revegetation. Co-benefits could act as additional incentives to encourage wider adoption of land use change.

A pollination co-benefit was assessed for carbon-sequestering trees bordering lucerne paddocks in the State’s southeast, where high value lucerne seed is produced. The research showed that the additional economic value of pollination was only a small fraction of the land-use conversion cost gap after carbon credit payments were accounted for, under nearly all scenarios. Under the most optimistic assumptions, the value of additional lucerne seed yield from pollination was estimated to cover 40% of the cost gap. While increasing pollinator habitat is beneficial, the team found that it was not in itself enough to offset the cost of land use change, even when the sequestered carbon could be sold at recent ERF carbon prices.

A shelterbelt case study in current sheep farming land-use areas showed that significantly higher than recent ERF carbon prices would be required for the combined economic value of shelterbelt carbon and lamb mortality reduction to justify implementation costs. The economics varies across the state depending on wind chill and rainfall, assumptions about proportions of twin versus single lamb litters, and the impacts of wind chill on mortality.

Price required for carbon credits and shelter belt plantations to achieve positive net present value (NPV) across the Emissions Reduction Fund eligible regions of South Australia ($/tCO2e).

Riparian revegetation
A final co-benefits case study evaluated revegetation of cleared riparian areas to improve water quality and reduce water treatment costs in the Mt Lofty Ranges Happy Valley drinking water catchment. The value of carbon credits and avoided water treatment costs resulting from steam buffer plantings were calculated and compared to implementation costs and the team concluded that:

  • Water treatment cost saving from strategic creek line revegetation may exceed the cost of the land use change.
  • Summed values of water treatment cost saving and carbon make stream buffer tree plantings in water supply catchment even more economically viable.
  • Strategic planting locations to improve water quality also yield high carbon and are good for biodiversity.

Stakeholder insights on impediments to land use change for carbon abatement

The project team interviewed landholders, government policy officers, and carbon credit brokers who were involved with or were contemplating land-use change for carbon credits. Interviews identified key issues related to the relative reticence of South Australian landholders to participate in the ERF. Important impediments included the perceived complexity of the ERF contracting process and the need for relatively large bundles of land-use change. These two requirements in combination have led to carbon brokerage services that provide program knowledge and smaller land-use change bundling services. This can be positive for landholders as it provides a viable market that is approachable, but commissions for the service can represent a substantial part of the credit payment value. Landholders also identified some conservative assumptions around carbon sequestration rate crediting, built into ERF guidelines, that would significantly reduce the economic viability of their participation.

Contact Professor Jeff Connor (UniSA) for more details about the project or get in touch with Goyder Institute Director Dr Kane Aldridge for more information about projects within the Institute’s Climate Action Impact Area.

Tags: Carbon Neutral Carbon Sequestration Climate Action Climate Change Department for Environment and Water (DEW) Modelling SA Water South Australia University of Adelaide University of South Australia

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Chris Wright

Manager Water Science, DEW

Chris Wright holds significant experience in public sector senior leadership, having led policy, scientific and operational business units over the last twelve years in both State and Commonwealth government agencies. Chris has excellent experiences in leading policy and strategy formulation. He is skilled in building and maintaining networks across the public and private sectors to facilitate business delivery; leading and negotiating with others to achieve outcomes; and in bridging the science-policy gap, drawing on earlier roles in geospatial information systems (GIS) consulting. Chris’s formal qualifications include a Bachelor of Social Science, a Masters of Spatial Information Science and graduation from the AICD Company Directors course in 2019.

Dr Ilka Wallis

Senior Lecturer, Flinders University

Dr Ilka Wallis is a hydrogeologist with areas of expertise in quantitative hydrogeology and geochemistry. Ilka focuses on the development of reactive geochemical transport models which integrate fundamental processes that are normally studied in isolation (hydrogeological, mineralogical, geochemical and biochemical).

Ilka is also an Adjunct Professor, Department of Civil Engineering, University of Manitoba, Canada since 2017.

Peter Goonan

Environmental Science Branch, EPA

Peter Goonan is the Principal Aquatic Biologist in the Environmental Science Branch of the EPA. He has over 30 years’ experience monitoring the condition of aquatic ecosystems in SA and assessing the environmental effects caused by discharges, deposits and contaminants entering inland and coastal waters. He specialises in aquatic invertebrate identification and their responses to contaminants and water quality stressors. He also provides expert professional advice relating to water quality risks, regulation, policy, and strategic directions, and represents the EPA as an expert witness in court.

Dr Paul Monis

Manager, Research Stakeholders and Planning, SA Water

Dr Paul Monis is a technical expert within SA Water’s Business Services group, which provides scientific expertise to support the delivery of water and wastewater services to SA Water’s customers. He has specialist expertise in the areas of biotechnology and microbiology, with almost 20 years’ experience applying DNA-based and other technologies to address water quality challenges posed by microorganisms, especially enteric pathogens. Dr Monis also holds title of Adjunct Associate Professor at Flinders University, the University of Adelaide and UniSA.

Jennie Fluin

Principal Advisor Research Partnerships, DEW

Jennie’s role in the Department for Environment and Water (DEW) allows her to foster and strengthen opportunities for researchers to better connect with government to enable evidence-based decision making. Jennie has extensive experience working in both universities and government, allowing her to bridge the divide between the two sectors. She is focused on connecting natural resource researchers with natural resource decision makers, and facilitating fit for purpose partnerships.

Dr Tanya Doody

Principal Research Scientist, CSIRO

Dr Tanya Doody is a Principal Research Scientist working on high impact spatial eco-hydrological projects within CSIRO’s Land and Water Business Unit. Dr Doody leads the Managing Water Ecosystems Group, based in Adelaide, Albury and Canberra and has significant experience in quantifying the water requirements of vegetation and at times, their impact on water resources. This involves ecophysiological field-based research to underpin remote sensing tools to scale regionally to improve our understanding of the effect of flood regimes on the health of water-dependent ecosystems on the Murray-Darling Basin floodplains. Additional research includes investigating the ecological response of vegetation to water availability and environmental water to inform integrated basin water planning and management.

Professor Lin Crase

Dean of Programs (Accounting & Finance), UniSA

Professor Lin Crase is Professor of Economics and Dean of Programs (Accounting & Finance) at UniSA. He joined UniSA in February 2016 as Head of School of Commerce. Prior to commencing at UniSA, Lin was Professor and Director of the Centre for Water Policy and Management at La Trobe University.

Lin’s research has focused on applied economics in the context of water. He has analysed water markets and the property rights that attend them, water pricing and numerous applications of water policy. Whilst his expertise includes the Murray-Darling Basin in Australia, he has also worked on projects in south Asia, Japan and Europe. Lin has published over 100 journal articles, numerous book chapters, four books and a range of other papers and opinion pieces.

Professor Justin Brookes

Director, Water Research Centre, University of Adelaide

Justin has broad research interests in limnology and water treatment with a primary focus on coupling between hydrodynamics, biology and water quality contaminants such as cyanobacteria and pathogens. He is a founding member of the management committee of the IWA Specialist Group on Lake and Reservoir Management and member of the Steering Committee for the Global Lakes Ecological Observatory Network.

Justin has a PhD and a Bachelor of Science degree with Honours from the University of Adelaide.

Daniel Flaherty


Daniel Flaherty is the Accountant for the Goyder Institute for Water Research.

Daniel has extensive experience in higher education having worked in senior financial management roles at the University of South Australia, Flinders University and the University of Adelaide over the past 26 years. Daniel has also been a Board Director on a number of university related entities. Prior to that, Daniel has worked in a range of agencies in the Commonwealth and State Governments.

Daniel is a Fellow of CPA Australia and has a Bachelor of Economics from the University of Adelaide.

Dr Alec Rolston

Interim Director

Alec Rolston joined the Institute in 2021 as Research Program Manager of the Goyder Institute’s research projects in the Healthy Coorong, Healthy Basin program. He has extensive experience in integrated water resource management, integrated catchment management, drinking water source protection and wetland ecology, conservation and management across Europe and Australia.

Alec holds a PhD from the National University of Ireland Maynooth and has worked with An Fóram Uisce|The Water Forum and the Dundalk Institute of Technology in Ireland as well as the MANTEL Innovative Training Network across Europe.

Alec spent his early career in Adelaide working with Flinders University through the Coorong, Lower Lakes and Murray Mouth (CLLAMM) Ecology Research Cluster and within the Department for Environment and Water.

Daniel Pierce

Research and Development Officer

Daniel Pierce has managed research projects at the Goyder Institute for Water Research since November 2017 under both the second and third terms of the Institute.

Daniel brings experience in project management and knowledge transfer and application from 4 years working as a Senior Hydrogeologist in the Department for Environment and Water (DEW) in South Australia and from 13 years of private sector work in environmental management, science and engineering in Australia and the South Pacific. His work with DEW has included providing technical advice to the development and revision of Water Allocation Plans around South Australia in collaboration with researchers and policy makers, and managing a team of groundwater modellers and hydrogeologists involved in an assortment of water resource management issues.

Daniel has a Bachelor of Engineering (Hons, Environmental) and a Bachelor of Science (Geography) from the University of Western Australia.

Professor Enzo Lombi

Dean of Research, UniSA STEM

Professor Lombi’s main contributions to environmental research cover various aspects of contaminant risk assessment, biogeochemistry, ecotoxicology and waste management. Furthermore, the methodological development he has pursued in his research has provided the basis for collaborative efforts in a variety of research areas ranging from soil fertility and plant physiology to human health issues related to contaminant uptake via occupational exposure and diet. In the last few years he has been increasingly focusing on the transformation and toxicity of manufactured nanomaterials in the environment.

Dr Carmel Pollino

Research Director Land and Water, CSIRO

Dr Carmel Pollino is a Research Director for Land and Water at CSIRO. She has 20 years of experience working on water issues in Australia and throughout Asia. Carmel has degrees in science and environmental law and works across the science and policy interface. Significant areas of research in Environmental Flows, Hydrology, Ecology and Integrated River Basin Planning. Carmel is the lead and also a contributor to global working groups on water and has published widely in this domain.

Professor Bronwyn Gillanders

Head of School of Biological Sciences, The University of Adelaide

Professor Bronwyn Gillanders is interim Head of School of Biological Sciences at the University of Adelaide. Prof Gillanders completed her BSc at the University of Canterbury, MSc at the University of Otago and her PhD at the University of Sydney. She has a research background in environmental science focused predominantly on freshwater and marine ecology.

Her research interests include integrated marine management; coastal carbon opportunities; multiple use activities and cumulative impact assessment; biology, ecology and fisheries of cephalopods; stocking and provenance of fish; plastics in the marine environment including in seafood; use of fish bones (and other calcified structures) for assessing ecological and environmental change. She has trained and mentored ~70 Honours and Higher Degree Research students and shaped the future of 1000s of students through her undergraduate teaching. She is passionate about encouraging capable women to enter and remain in science careers.

Dan Jordan

Director, Water Security, Policy and Planning, Department for Environment and Water (DEW)

Dan Jordan is the Director, Water Security, Policy and Planning, Department for Environment and Water (DEW). Dan is also the Basin Officials Committee Alternate Member for South Australia.

Professor Okke Batelaan

Dean, School of the Environment, Flinders University

Professor Okke Batelaan is a graduate of the Free University of Amsterdam, Netherlands (MSc – Hydrogeology) and of the Free University Brussels, Belgium (PhD – Engineering). He worked for more than 20 years at the Free University Brussels and also led the hydrogeology group at the KU Leuven, Belgium since 2006. He was chairman of the Interuniversity Programme in Water Resources Engineering.

Since 2012 Okke Batelaan is Strategic Professor in Hydrogeology and currently Dean of the School of the Environment, Flinders University. Okke has broad experience in teaching groundwater hydrology, groundwater modelling, GIS and remote sensing for hydrological applications. He was supervisor of more than 140 MSc and 25 PhD students. He has extensive research experience and a publication record in shallow groundwater hydrology and modeling, recharge-discharge estimation and modeling, urban hydrology and distributed modelling, ecohydrology and impacts of land use and climate change on groundwater systems. He coordinated and participated in a large number of projects in Europe, Africa, South America, Asia and Australia. He is editor-in-chief of Journal of Hydrology: Regional Studies and of MDPI-Hydrology.