Trading Carbon in Australia

Philip Mulvey

March 22, 2021

Trading Carbon in Australia as per the law Carbon Credits Methodology 2018

The following process applied to Australia and is acceptable under Paris 2015 for carbon trading.

Unfortunately, for the farm sector, there is no easy way to present what you need to do to trade carbon that has or will be sequestered into soil.  

As a result of Paris 2015, an organisation was set up called 4/1000 (four per thousand) which is the average amount of carbon that has been estimated as been capable of being sequestered into agricultural soil per year and could account for all anthrogenic greenhouse gas emissions. Australia is a signature of the 4/1000 organisation and has become the first country under the Kyoto agreement to legislate the trading of carbon that has been avoided or mitigated by land-based practices.

The most common practices include avoidance by preventing clearing or destocking and mitigation by changing practices associated with the burning of pasture or crop trash.  Sequestration of carbon dioxide into soil has only begun to occur recently. There is no easy way to calculate net carbon emissions sequestered per farm.

In Australia the government purchasers via the Clean Energy Regulator, carbon mitigation or sequestration of carbon via an auction system in which they buy Australian Carbon Credit Units (ACCUs) via the Emission Reduction Fund Project.  Exactly what the government can purchase is strongly regulated via legislation to ensure compliance with Paris 2015 International Convention.  

It is required that the abatement or sequestration is genuine.  To do so a project report and an independent audit is required.

Eligibility of trading carbon sequestration to soil

Since 2014 carbon sequestration to soil has been allowed for a limited number of agricultural management uses in Australia and was increased in 2018.  

Thus in Australia there are three Emissions Reduction Fund soil carbon methods:

The first method, Sequestering carbon in soils in grazing systems, is based on the direct measurement of changes in soil carbon stock over time, in response to changes in grazing systems management ONLY. Collection and analysis of soil samples over time generates the data to estimate soil carbon stock change.   The first trade under this legislation was completed in March 2019.  

The second method, Estimating sequestration of carbon in soil using default values, is based on the use of default rates for soil carbon stock change over time.  No trades have yet occurred under this method.

In 2018 with the introduction of unequal area strata as part of the sampling and measurement strategy, and, a better understanding of systems in cropping, horticulture and mixed farms that sequester soil carbon, a method for almost all agricultural enterprises to have the opportunity to participate in carbon trading was legislated.

New maths had to be developed for the third method which was largely written with input from members of our Team and University of Sydney’s Carbon Sequestration Research Team, headed by Professor Alex McBratney.  The new maths overcome inherent spacial variability and uncertainty of organic matter (roughly 60% carbon) system by using pre-existing data to split the farms up into unequal areas to reduce sampling error.  This new sampling protocol meant that all farm enterprises regardless of location, size and type could be considered, however, to demonstrate an improvement under the method the farm practice to be subject to an activity known to sequester carbon.

Eligible Changes to Farm Practice

For the method, a management activity is an eligible management activity if it involves one of the following land management activities that is undertaken at or after the baseline measurement:

  • Applying nutrients to the land in the form of a synthetic or non-synthetic fertiliser to address a material deficiency;
  • Applying lime to remediate acid soils;
  • Applying gypsum to remediate sodic or magnesic soils;
  • Undertaking new irrigation;
  • Re-establishing or rejuvenating a pasture by seeding;
  • Establishing, and permanently maintaining, a pasture where there was previously no pasture, such as on cropland or bare fallow;
  • Altering the stocking rate, duration or intensity of grazing;
  • Retaining stubble after a crop is harvested;
  • Converting from intensive tillage practices to reduced or no tillage practices;
  • Modifying landscape or landform features to remediate land;
  • Using mechanical means to add or redistribute soil through the soil profile;

The first dot point can refer to apply compost, manure or inoculum to address a material deficiency in soil organic matter or living matter.  It does not have to be a material deficiency in minerals only.  However the correction of the material deficiency has to result in an increase of soil carbon.

Baseline Measurement prior to integrating the Eligible Management Activity

Over a period of time the baseline emissions prior to the change have to be recorded.  These emissions include all emissions from every activity of the farm including natural emissions and farm management activities. This will include emissions released by by the land or animals as a result of fertilisers application, lime application, grazing, tilling as well as emissions released by machinery to do the activity. During the baseline period carbon is measured in the soil and in trees (if agriforestry or avoidance is part of the measure).


Re-measurement can occur either as a point at a significant time event to get an annual change or a series of shorter time periods to get a trend.  Only once the trend in soil carbon increase is established can a trade be undertaken. The trade will be the differences in the increase of soil carbon after consideration of changes in farm carbon emissions from farm operations and livestock between the two time measurements.

Thus there are significant measurement and administration costs incurred before a trade can be undertaken.  Consequently improving profitability or environmental outcomes tends to be the prime reason for undertaking the change in management practises with carbon trading be a secondary driver.

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