Current carbon prices do not stack up to much land use change, despite bundled ecosystem service co-benefits

Abstract

Biological sources of carbon sequestration such as revegetation have been highlighted as important avenues to combat climate change and meet global targets by the global community including the Paris Climate Agreement. However, current and projected carbon prices present a considerable barrier to broad-scale adoption of tree planting as a key mitigation strategy. One avenue to provide additional economic and environmental incentives to encourage wider adoption of revegetation is the bundling or stacking of additional co-beneficial ecosystem services that can be realized from tree planting. Using the World's largest land-based carbon credit trading scheme, the Australian Emissions Reduction Scheme (ERF), we examine the potential for three pairs of ecosystem services, where the carbon sequestration value of land use change is paired with an additional co-benefit with strong prospects for local tangible benefits to land owners/providers. Two cases consider agricultural provisioning values that can be realized by the landowners in higher returns: increased pollination services and reduced lamb mortality. The third case examined payments for tree plantings along riparian buffers, with payments to farmers by a water utility who realizes the benefit from reduced treatment cost due to water quality improvements. Economic incentives from these co-benefit case studies were found to be mixed, with avoided treatment costs from water quality paired with carbon payments the most promising, while pollination and reduced lamb mortality paired with carbon payments were unable to bridge the economic gap except under the most optimistic assumptions. We conclude that the economics case for significant land use change are likely to be geographically dispersed and only viable in relatively niche landscape positions in high establishment, high opportunity cost areas even when carbon payments are augmented with the value of co-benefits classified as providing direct and local benefits.

Keywords: bundles; carbon prices; carbon sequestration; co-benefits; ecosystem services; payment for ecosystem services; reforestation.