Natural capital emissions

The agriculture, forestry, and land-use sectors contribute 13–21% of global greenhouse gas (GHG) emissions, with broader food systems accounting for up to one-third. In Australia, agriculture emitted 82 Mt CO2-e in 2023, comprising 18% of national emissions. Livestock methane (62 Mt CO2-e) and soil fertiliser nitrous oxide emissions are the dominant sources. Without further interventions, emissions are projected to remain flat until 2030.

Strategies for emission reduction include carbon sequestration through reforestation, soil carbon enhancement, and “insetting” practices that align on-site activities with carbon neutrality. The CEFC stresses early action, as delaying efforts until 2035 would require a 5 Mt CO2-e reduction annually, compared to 3 Mt CO2-e if started immediately.

Investment potential

Australia’s agriculture sector is valued at $80 billion in 2023-24 and is a major export driver, with 72% of production destined for international markets. Key export partners include China, Japan, and South Korea. The CEFC has invested over $440 million in agriculture and forestry, focusing on scalable opportunities that align financial returns with environmental outcomes.

Farmland transactions totalled $11.7 billion in 2022, reflecting increased investor interest in natural capital assets. Investments in carbon farming and biodiversity conservation not only generate economic returns but also mitigate climate risks. CEFC recommends integrating sustainability metrics to ensure investments deliver measurable environmental and financial performance.

Measurement approach

The CEFC advocates for robust measurement frameworks to evaluate natural capital investments effectively. Metrics should align with international standards like the GHG Protocol and SBTN to ensure consistency and comparability. A grading matrix evaluates feasibility, data quality, and maturity of metrics, enabling prioritisation of impactful activities.

The CEFC’s approach incorporates spatial mapping, emissions modelling, and soil testing to capture accurate data. These methods help investors assess productivity, emissions reductions, and biodiversity outcomes, facilitating strategic decisions that align with decarbonisation goals.

Decarbonisation activities

Key activities to reduce emissions include optimising livestock management, improving fertiliser efficiency, and adopting renewable energy. Practices like no-till farming, crop rotation, and cover cropping enhance soil health while reducing nitrous oxide emissions. Integrating agroforestry, such as shelterbelts and riparian zones, supports biodiversity and carbon storage.

Australian agriculture’s emissions reduction potential lies in increasing organic carbon in soils, reducing methane from livestock, and improving water management. The CEFC highlights scalable actions like reforestation and waste-to-energy conversion as critical to achieving net-zero emissions by 2050.

Guide to natural capital frameworks

Frameworks like the GHG Protocol, SBTN, and TNFD provide methodologies for measuring emissions, biodiversity, and other natural capital metrics. CEFC evaluates these tools based on their applicability, maturity, and alignment with global sustainability targets. For example, the GHG Protocol offers standardised approaches for land-based emissions, while the SBTN extends to biodiversity and water systems.

Standardising frameworks across sectors will improve transparency and comparability, encouraging greater investment in sustainable activities. The CEFC underscores the importance of aligning investments with these frameworks to achieve measurable, impactful outcomes in natural capital projects.