We put our Soil Carbon Feasibility Report to the test in the southern Wheatbelt region of Western Australia.
Using our soil carbon feasibility financial model, we crunched the numbers on a project in the Southern Wheatbelt region of Western Australia. By implementing several new land management activities, this project aims to increase soil organic carbon by 0.29% across the project lifetime, which means drawing down 20 tonnes of carbon per hectare over 25 years. Let’s explore what this means practically and financially.
But first, let’s summarise some key project details and juicy profitability stats produced by our feasibility report:
Project Details
| Region | Great Southern of Western Australia |
| Farm size | 9,700 hectares |
| Project size | 2,000 hectares |
| Farming operation | Sheep & cropping |
| Rainfall per annum | 389.4 mm |
| Soil type | Loamy duplex with some dryland salinity |
| Climate zone | Warm temperate |
| Project goal | Increase soil organic carbon by 0.42% across the project lifetime, drawing down 20 tonnes of carbon per hectare. |
| Project strategy | Planned stubble retention, no-till practices, multi-species perennials, rotational grazing and the application of nutrients across 25 years. |
| DIY opportunity | To reduce costs, the landowner will write their own Land Management Strategy using the CFF template, coordinate the project and keep detailed project records to limit consultant site visits. |
Remind me what a feasibility report is all about?
If you haven’t yet, have a squiz at some of our essential reading to understand a soil carbon project and the value of a feasibility report:
Now that you’ve had a read, you can see that our Soil Carbon Feasibility Report and accompanying Soil Carbon Guide outline all the nuts and bolts involved in a soil carbon project, tailored to your place and operation. In our report documents, we provide financial modelling and practical advice which will help you assess your opportunity, optimise returns, costs and co-benefits, and get you firmly on the path to delivering a successful project.
Now let’s dive into the numbers…
| Average carbon price over 25 years* | $35 | $55 |
| Landowner carbon units over 25 years ** | 95,878 | 95,878 |
| Gross profit at 25 years | $2.5M | $4.4M |
| Gross profit per hectare per annum, over 25 years | $50.17 | $88.52 |
| Cost to produce each carbon credit | $8.84 | $8.84 |
| Upfront cost | $151K | $151K |
| Additional lifetime costs | $696K | $696K |
Project cost & revenue estimates at $35 and $55 average ACCU spot price, across 25 years for a medium-cost project.
* See www.accus.com.au to make your own price assumptions.
** Factors in CFF fee structure at the time of publication.
The numbers are looking strong!
What are the feasibility numbers based on and what do they tell us?
We crunch the numbers for our feasibility reports using a detailed financial model, which calculates a range of possible soil carbon project returns based off some key assumptions. These assumptions include the following, as explained for the context of our WA customer:
- Conservative soil organic carbon (SOC) increases: Working with our customer’s agronomist, we made conservative assumptions that their plans to implement a range of new activities across their 2000-hectare project area would increase SOC by 0.29% on average across a 1-meter soil profile depth (see table above).
- Gross profit is profit after the deduction of direct project costs: Whereby, direct costs are the compliance costs of pursuing a carbon project, as modelled in the feasibility report. The direct costs associated with the implementation of the land management activities, such as inputs, fencing, or agronomic advice beyond the scope of the project, are excluded. These are assumed to be part of farm business operations.
- Project methodology: In this case, we have assessed the feasibility of a project under the Emissions Reduction Fund’s (ERF) Estimation of Soil Organic Carbon Sequestration using Measurement and Models Methodology 2021 (2021 Soil Carbon Method). Modelling in this report is based on the set of rules under which the 2021 Soil Carbon Method awards carbon credits.
Based on these assumptions, we model at least three alternative scenarios from low-cost, high-yield through to high-cost, low-yield. For our WA customer, all scenarios consistently indicated a strong opportunity for a commercially viable soil carbon project.
For instance, even under the low-yield and high-cost scenario, for a 2000-hectare project in the Great Southern of WA, the client could expect:
| Upfront cash layout | $187,790 |
| Additional lifetime costs | $867,400 |
| 25 year gross profit @ $35 per ton | $628,111 |
| 25 year gross profit @ $55 per ton | $1,589,998 |
| Carbon units over 25 years | 48,094 |
What Other Analysis Is Provided?
The feasibility report looks beyond a one-dimensional analysis of projected revenue and costs. Instead, we examine the impact of a range of variable success drivers, making recommendations to help maximise returns and productivity. These factors include the impact of varying project sizes, carbon yields, carbon prices, project permanence options, and service delivery options. For our WA customer’s project, some of our recommendations included:
- A larger project: Project scale provides a clear advantage, particularly when applied at critical mass. A larger project accrues more credits and drives economies-of-scale by spreading fixed costs across more hectares. We recommended the largest project size that was viable within the context of the customer’s broader operation.
- 25-year project permanence: Permanence is the period in which you are prepared to continue your land management obligations. Either 25-years or 100-years permanence can be chosen, with 20% more credits being awarded to projects with 100-year permanence. We modeled the impact of both permanence periods on project returns and explained the impact of project management obligations across these timeframes. As this customer prioritised longer-term land-use flexibility over increased profit, we recommended a 25-year project permanence period.
Our flexible approach
Our fee-for-service model provides farmers with the flexibility to pick and choose from our menu of services to match their project requirements and budget. Through this flexible model, it is very possible to lower the costs of a plantation carbon project. Using our flexible delivery model, it is very possible to lower the costs of a soil carbon project. To achieve this, we recommended the customer:
- Coordinate the on-ground project activities themselves to minimise third-party project management costs.
- Provide detailed site information (soil tests, soil maps, photos, field notes etc.) to limit the need for site visits by consultants.
- Write the Land Management Strategy themselves using our template. This will still need to be reviewed and approved by a qualified third party, however, saves on some consultant fees.
Next Steps
There’s a lot more to unpack in a soil carbon feasibility report, but we hope you’ve enjoyed this quick taster of some of the analysis it can provide you. Check out our sample feasibility report for more tips and tricks
Ready to find out more?
Explore our range of educational resources in our Carbon Farming Education Hub where we frequently publish educational articles, webinars, and guidebooks.
When you’re ready to explore the feasibility of undertaking a carbon project on your property, email us at hello@carbonfarming.org.au or give us a bell at (08) 6835 1140 to be connected with one of our project facilitators.
Disclaimer: The model assumes high-level ROI in today’s values with a static carbon price and no inflation. Fencing costs and land value aren’t factored in. CFF’s service fees at the time of publishing are also included in the calculation. Yields, costs & fees can differ on a case-by-case basis so get in touch to receive a custom back-of-envelope carbon assessment.
