Hotspots of threat and opportunity from widespread reforestation for carbon offsets

The demand for carbon permits is expected to increase rapidly with the introduction in Australia of the Carbon Pollution Reduction Scheme (CPRS) in 2010. The CPRS will cap the emission of greenhouse gasses and create a market for carbon trading. Some prediction of the behaviour and impacts of the emerging market will inform potential policy responses. Introduction of a carbon market could result in strong demand for widespread conversion of land in agricultural regions to tree-based production of carbon permits which may pose a number of threats and opportunities for Australia's biodiversity, water resources, and rural environments and communities. This study aimed to quantify the potential generation of carbon permits from reforestation following the CPRS, and the potential conflicts this may cause. Carbon price was considered the main driver of adoption and this study does not consider other factors that may influence adoption. Specific focus was on the Mediterranean-type agricultural landscapes in South Australia. The potential distribution of the supply carbon permits from reforestation in South Australia's agricultural regions was modelled within a Geographic Information System (GIS). Spatio-temporal and economic models of tree growth and productivity, and agricultural profitability were used to estimate the viability of reforestation for carbon permits under various carbon price scenarios. Low diversity monocultures and high diversity native species were considered. Biodiversity conservation values were modelled spatially using a series of landscape ecology metrics and conservation planning principles. Spatially explicit water resource management priorities were modelled based on soil landscape characteristics. The impact on water yields from carbon-driven reforestation was modelled using Zhang curves. The location of threats and opportunities associated with the production of carbon permits were identified and then coupled with economically viable areas for carbon reforestation to identify hotspots where there is high potential for carbon supply that either complements or conflicts with biodiversity and water management goals. The results of this study found that reforestation for the supply of carbon permits under the CPRS may be more profitable than agricultural production over significant proportions of South Australia's agricultural landscapes, depending on future carbon prices. For example, it would be economically viable to reforest approximately 5.3 million ha (50%) of the study area if the carbon price was $20/t of CO2-e. Whilst reforestation using a diverse mix of native species was viable over 4 million ha at $20/t it could potentially cover over 40% of the high priority biodiversity conservation locations. However, significant threats are posed to zones of high priority biodiversity conservation value and high yield water run-off and aquifer recharge. The conversion of shallow-rooted annual cropping systems to deep-rooted tree-based monocultures uses more water and provides minimal biodiversity value. Approximately 1,200 GL would potentially be unavailable for surface and groundwater storage in catchments supplying a large proportion of the South Australian population if the carbon price is $20/t of CO2-e. Various policy options are available to ensure reforestation is steered toward tree species that provide biodiversity benefits (e.g. mixed planting of species with local provenance). For example, a payment for ecosystem services (biodiversity) could be paid to land owners to compensate for the difference in income from the sale of permits generated by high yielding low diversity plantings against the lower yielding diverse plantings. This study suggests those payments would have to be in the order of only $5/ha/yr if carbon price is $20/t of CO2-e, but up to $115/ha/yr if carbon price is $45/t. Regulatory measures could be applied in locations where reforestation threatens aquatic ecosystems and the availability of water resources. Similarly, hotspots could be zoned where monocultures provide high opportunity and no threat to ecosystems