Carbon farming and the grains industry

Introduction

The Paris Climate Agreement (COP21) set the goal of achieving “a balance between anthropogenic emissions by sources and removals by sinks of GHGs in the second half of this century”, thereby effectively establishing the target of net zero GHG emissions by 2050 (United Nations 2015). In response, most multinational agricultural supply chain companies have set their own targets consistent with this agreement, thereby signalling a trajectory for agricultural producers towards low emissions or carbon neutral production (Eckard and Clark 2018). With a recent analysis by Oxfam (2016) reporting that of the 100 largest economies in the world, 69 of these are companies not countries, it is more important for the farming sector to take note of these targets set by their supply chains, than government targets. In addition, more than 50% of the agricultural debt market in Australia is managed by two major banks, both of which have set the target of net zero financed emissions by 2050. Another development potentially significant for the agricultural industries is proposed carbon border adjustment tariffs, that will be applied to countries deemed to have insufficient ambition in climate change taxes and policy. These statements have been made by USA president Joe Biden (Financial Review 2021a), saying “failure to curb emissions means America will tax your exports” and “to ensure climate policies do not place U.S. workers and companies at an unfair disadvantage”. The European Union has also introduced a Carbon Border Adjustment Mechanism, with the European Parliament to start taxing imports from countries without a carbon price by 2023 (Financial Review 2021b). With about 70% of Australian agricultural product exported and Australia ranking extremely low on the recent Climate Change Performance Index (CCPI 2021), it is likely our agricultural sector will need to demonstrate low carbon production to avoid border adjustment tariffs on our exports. This would indicate that the agricultural sector will be paying some form of carbon price, and that it would seem more judicious that these funds are spent within the country to better position our industries, than simply paid out as a tax to our target export markets.

Carbon neutral accounting

The currently accepted accounting for carbon neutral agricultural production must align with the IPCC-approved Australian National Greenhouse Gas Inventory method, but in the categories of the Climate Active (2019) framework (previously the National Carbon Offset Standard), based on the following emission categories:

• Scope 1: All the direct emissions of GHGs from the production system, minus the annual change in carbon stored in managed trees and soils on the farm.
• Scope 2: Emissions from the purchase of electricity from the national electricity grid, as a result of consumption on the farm.
• Scope 3: Pre-farm emissions from the production of feed, fertilisers and agricultural chemicals required by the farm.

To develop a farm carbon account requires the Scope 1, 2 and 3 emissions to be accounted for in a pre-farm to farm-gate lifecycle analysis framework, calculated on an annual timestep. There are currently several emerging mechanisms to achieve carbon neutral accreditation, either through Climate Active itself, or through third party accreditors using the same accounting approaches; although a formal audit published in a peer reviewed paper has also proven acceptable by the supply chains as sufficient evidence of integrity in the audit (e.g., the audit of Doran-Browne et al 2017).

Agricultural emissions

The main GHG emissions from agriculture are methane (CH₄) largely from enteric fermentation in ruminants and CH₄ resulting from manure management (DISER 2021). The second GHG of concern is nitrous oxide (N₂O) from all forms of nitrogen in agricultural soils, but also N₂O resulting from manure management systems. Agriculture is also a source of carbon dioxide (CO₂) emissions, mainly from the use of lime, urea fertiliser and the purchasing of fossil fuel energy in the form of electricity and fuels.

Obviously, emissions profiles differ between agricultural systems. Ruminant production systems produce most of their emissions from enteric fermentation, with dairy farms also producing N₂O from higher protein diets and nitrogen fertiliser use (Christieet al 2018). In contrast, grain production systems produce most of their on-farm emissions from N₂O due to nitrogen fertiliser management, crop residues and legume nitrogen fixation (see Figure 1) (AGEIS 2021; DISER 2021).

Nitrous oxide

Nitrous oxide can be emitted from any form of nitrogen cycling through cropping soils — nitrogen fertilisers, legumes fixing atmospheric nitrogen and turnover of soil organic matter. The real challenge is that N₂O emissions are commonly less than one per cent of applied nitrogen fertiliser but have a very large impact on atmospheric warming.

The best way to reduce N₂O emissions from cropping systems is to apply best practice in the rate, source, timing, placement and formulation of applied nitrogen. Nitrification inhibitors and slow-release fertilisers currently cost more than any productivity gains they confer, so incentives for their adoption are required. Incorporating legumes into crop rotations can reduce overall emissions, as nitrogen fertiliser requires large energy inputs in its manufacture as well as releasing some N₂O when applied on-farm.

Nitrous oxide emissions can also be minimised through better soils management, particularly by minimising soil disturbance, but also by reducing periods of saturation and soil compaction.

Soil carbon

Since the Paris climate agreement (COP21), and more recently the Glasgow COP26 meeting, there interest has risen in the role that soils can play in helping Australia meet its greenhouse gas reduction targets. There are two soil carbon offset methods available under the Australian Emissions Reduction Fund and several international voluntary soil carbon methods also exist. To engage in these soil carbon offset markets, farmers must demonstrate they are undertaking activities in addition to their normal practice. For example, a farmer who changes to zero till practices will be rewarded if they have registered the field (i.e., defined a Carbon Estimation Area) and can show a measurable change in soil organic carbon in the top 30cm or deeper. A farmer who has employed zero till for many years is unlikely to be rewarded.

Unfortunately, placing a price on soil carbon has skewed the discussion away from what really matters to farmers, namely soil health and productivity. Soil organic matter, of which only about half (~58%) is soil organic carbon, is the engine room of soils, maintaining nutrient supply and soil structure. Soil organic carbon is usually only about 1 to 5% of the total soil mass, with the higher concentrations normally under long-term grasslands or crop rotations with significant pasture phases.

What is soil organic carbon?

There is some confusion about what constitutes soil organic carbon. Plant residues on the soil surface, roots and buried plant residues (>2 mm) are not soil organic carbon. To be considered soil organic carbon these residues first need to be broken down into smaller fractions, which is why soils are first sieved to two millimetres before analysis, to remove all larger fractions. Fractions considered to be part of the soil organic carbon (as per a soil analysis) are particulate organic carbon (POC; 2.0–0.05mm) and humus (<0.05mm), with resistant organic carbon (ROC) being historic charcoal from fires or burning of stubbles. In other words, we must not confuse roots with soil organic carbon.

For sustained productivity, increasing the relative amount of POC is beneficial as this is readily decomposable and supplies nutrients. To have confidence to sell soil carbon, a significant amount of carbon must be in a more recalcitrant (slowly decomposing) form i.e., humus, so that it is more likely to still be there in 25 to 100 years. Such permanence time frames are required to engage in carbon markets.

The inherent benefits soil organic matter

The inherent benefits of building soil organic matter are outlined in Table 1. In a modelling experiment in western Victoria, we quantified the inherent productivity benefits of two of these attributes; nitrogen mineralisation potential and water holding capacity (Meyer et al2015). In a permanent grassland situation, high soil organic matter (long term grassland) generated between $100–150 of additional productivity value per year per hectare per year, compared with a soil with low organic matter (long term cultivation, converted to grassland). The modelling work also showed soil organic matter was increased by 0.3–0.5t C/ha/year when moving out of long-term cultivation into a permanent pasture phase under high rainfall, indicating this system had high potential to increase soil organic matter. Conversely, under the same soil, temperature and rainfall conditions but with a high soil organic matter status due to long-term pasture, the potential to increase soil organic matter further was largely determined by rainfall.

Building soil organic carbon

Building soil organic carbon is basically an input-output equation. The inputs are crop and pasture residues and roots. The output is CO₂ from microbes actively decomposing carbon fractions for energy and in the process releasing nutrients into the soil to support plant growth. In a good rainfall year carbon inputs increase in response to plant growth, which in turn increases outputs and carbon accumulation of. In this scenario, carbon inputs exceed outputs. In a drought, carbon inputs drop dramatically due to reduced plant growth, but the outputs remain because microbes respond to episodic wetting events, resulting in soil carbon decrease. In this scenario, carbon outputs exceed inputs. Fallow years can also result in significant losses of soil carbon.

In Australia, rainfall determines the majority of soil carbon change in a stable management system (see Meyer et al 2015). Unless there is a dramatic change in management, such as moving out of conventional cultivation into permanent pasture in a high rainfall zone, most of the annual change in soil carbon is a function of rainfall. Changes in soil carbon in mixed cropping systems can often be large and unpredictable, particularly from labile pools (Badgery et al 2020). In a country like Australia, which has 23% more rainfall variability than most countries in the world (Love 2005), banking on selling soil carbon is therefore a high-risk venture given the frequency of drought. For example, Badgery et al (2020) reported that 12 years soil carbon accumulation was reversed in the following three years. They concluded that 12 years was not enough time to be confident that soil carbon sequestration was permanent. Our recent research shows that just two of the co-benefits of high soil organic matter, nitrogen mineralisation and water retention, could confer as much as $150 per hectare per year productivity value in a pasture system in western Victoria, while the trading value of the carbon under the same scenario is less than $20 per tonne per hectare year. This raises the question: “Should farmers focus on trading soil carbon, or just bank the inherent productivity benefits of having higher soil organic matter, as there is no paperwork no contracts no liabilities?” In addition, when the farm needs to demonstrate carbon neutral production within the next decade, this soil carbon will be essential to offset the balance of the farm’s greenhouse gas emissions.

How much soil carbon can be accumulated?

Over the past few years there has been an increasing number of farmers and carbon aggregators making claims of soil carbon accumulation that do not align with the published peer-reviewed science. Although conservative, the values presented in Table 2 show soil carbon estimates in response to management using the Australian Government’s official carbon model (FullCAM). What is also seemingly ignored in claims of soil carbon increase, is the assumption these increases can continue in perpetuity, which defies the law of diminishing returns. The more carbon that is sequestered, the more carbon inputs that are required to maintain it. Where soil has a low organic matter content, but high clay content and good rainfall (i.e., a high potential to increase soil organic matter), it is possible to achieve rates of soil carbon sequestration that exceed those presented in Table 2. The initial high carbon sequestration rates (i.e., the first 5 to 10 years with rates from 0.7 to 1t C/ha/year in the top 30cm when converting cropland to pasture; Meyer et al 2015; Robertson & Nash 2013) will result in a new steady state after 10 years that matches the rainfall and management imposed. In contrast, the same conditions but with a high soil organic matter starting point, will only vary in direct relation to annual rainfall and distribution.

Robertson and Nash (2013) report similar soil carbon sequestration values, with the average change in soil organic carbon in the top 30cm after 50 years across Victoria ranging from 21t/ha under perennial pasture to 6.5t/ha under a zero-till grain rotation without fallow. Any reversion to conventional practices, even for a short period of time, has a significant impact on the magnitude of soil carbon sequestration (Figure 2).

The SATWAGL long-term trial at Wagga (Chan et al 2011) also demonstrated the clear benefits of stubble retention, zero tillage and pasture phases for increasing soil carbon (Table 3). Over a 25-year period, stubble retention compared to burning was 2.2t C/ha higher, zero tillage compared to conventional cultivation was 3.6t C/ha higher, and a pasture rotation every second year was between 4.2 and 11.5t C/ha higher than continuous cropping.

A new approach to soil organic matter in Australia

Perhaps there is a need to consider soil organic matter differently in the Australian context, by managing it more specifically for soil type-by-farming system and managing differently in high versus low rainfall periods. Sandy or granitic soils have very limited capacity to build soil organic matter as carbon is less protected from decomposition by microorganisms in these soil types, whereas clay soils generally have far higher potential to sequester carbon when rainfall is sufficient to maintain carbon inputs from stubble, roots or residual pasture biomass. The key to building soil carbon is to understand the capacity of the soil to store carbon in a specific environment (climate x soil type) and management system. This capacity varies considerably even within the same district. Therefore, we should not treat the landscape with a single sequestration potential but target the areas that are low in carbon but high in sequestration potential e.g., rehabilitation of degraded lands.

We should also be thinking of El Niño versus La Nina years quite differently, in that we have probably built more soil organic matter in eastern Australia during the recent La Nina, than in the previous three years put together. Higher rainfall years should focus on strategies that maximise the sequestration of carbon in soils. Lower rainfall years or drought periods should focus on minimising carbon losses. Rather than focus on building soil carbon year by year, a longer-term approach would aim for a net increase in carbon over a 10-year period.

Selling soil carbon for short-term gain may mean long-term pain

Finally, while carbon neutrality is being strongly supported by the agricultural supply chain companies, there is an inevitable point where farmers will need to demonstrate that their farming systems have made progress towards lower emissions. Any increase in soil organic carbon that is banked as a credit will be negated by on-farm emissions e.g., CO₂ from fuel, N₂O from N fertilisers or CH₄ from grazing livestock. Selling soil or tree carbon means that the asset value leaves the property, but the farmer is still left with the liability of maintaining the asset for the next 25 to 100 years (short-term gain, long-term pain). If the soil carbon is sold internationally, it leaves both the industry and the country, making any industry or national targets increasingly difficult to achieve. Once the soil carbon is sold, the new buyer will be using it against their carbon footprint, which means that the farm will never again be able to use that soil carbon against any future liability and making a carbon neutral target increasingly impossible to achieve. We should encourage farmers to build soil organic matter for the right reasons. Rather than sell soil carbon we should encourage farmers to bank its inherent productivity benefits of improved soil health and retain the carbon asset to table against the balance of the farm’s greenhouse gas emissions in order to meet supply chain demands.

References

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