Designer policy for carbon and biodiversity co-benefits under global change

Carbon payments can help mitigate both climate change and biodiversity decline through the reforestation of agricultural land. However, to achieve biodiversity co-benefits, carbon payments often require support from other policy mechanisms such as regulation, targeting, and complementary incentives. We evaluated 14 policy mechanisms for supplying carbon and biodiversity co-benefits through reforestation of carbon plantings (CP) and environmental plantings (EP) in Australia's 85.3 Mha agricultural land under global change. The reference policy - uniform payments (bidders are paid the same price) with land-use competition (both CP and EP eligible for payments), targeting carbon - achieved significant carbon sequestration but negligible biodiversity co-benefits. Land-use regulation (only EP eligible) and two additional incentives complementing the reference policy (biodiversity premium, carbon levy) increased biodiversity co-benefits, but mostly inefficiently. Discriminatory payments (bidders are paid their bid price) with land-use competition were efficient, and with multifunctional targeting of both carbon and biodiversity co-benefits increased the biodiversity co-benefits almost 100-fold. Our findings were robust to uncertainty in global outlook, and to key agricultural productivity and land-use adoption assumptions. The results suggest clear policy directions, but careful mechanism design will be key to realising these efficiencies in practice. Choices remain for society about the amount of carbon and biodiversity co-benefits desired, and the price it is prepared to pay for them.

Previous land use and climate influence differences in soil organic carbon following reforestation of agricultural land with mixed-species plantings

Reforestation of agricultural land with mixed-species environmental plantings (native trees and shrubs) can contribute to mitigation of climate change through sequestration of carbon. Although soil carbon sequestration following reforestation has been investigated at site- and regional-scales, there are few studies across regions where the impact of a broad range of site conditions and management practices can be assessed. We collated new and existing data on soil organic carbon (SOC, 0-30 cm depth, N = 117 sites) and litter (N = 106 sites) under mixed-species plantings and an agricultural pair or baseline across southern and eastern Australia. Sites covered a range of previous land uses, initial SOC stocks, climatic conditions and management types. Differences in total SOC stocks following reforestation were significant at 52% of sites, with a mean rate of increase of 0.57 ± 0.06 Mg C ha-1 y-1. Increases were largely in the particulate fraction, which increased significantly at 46% of sites compared with increases at 27% of sites for the humus fraction. Although relative increase was highest in the particulate fraction, the humus fraction was the largest proportion of total SOC and so absolute differences in both fractions were similar. Accumulation rates of carbon in litter were 0.39 ± 0.02 Mg C ha-1 y-1, increasing the total (soil + litter) annual rate of carbon sequestration by 68%. Previously-cropped sites accumulated more SOC than previously-grazed sites. The explained variance differed widely among empirical models of differences in SOC stocks following reforestation according to SOC fraction and depth for previously-grazed (R2 = 0.18-0.51) and previously-cropped (R2 = 0.14-0.60) sites. For previously-grazed sites, differences in SOC following reforestation were negatively related to total SOC in the pasture. By comparison, for previously-cropped sites, differences in SOC were positively related to mean annual rainfall. This improved broad-scale understanding of the magnitude and predictors of changes in stocks of soil and litter C following reforestation is valuable for the development of policy on carbon markets and the establishment of future mixed-species environmental plantings.

Analysis of trade-offs between biodiversity, carbon farming and agricultural development in northern Australia reveals the benefits of strategic planning

Australia's northern savannas are one of the few remaining large and mostly intact natural areas on Earth. However, their biodiversity and ecosystem values could be threatened if proposed agricultural development proceeds. Through land-use change scenarios, we explored trade-offs and synergies among biodiversity conservation, carbon farming and agriculture production in northern Australia. We found that if all suitable soils were converted to agriculture, habitat at unique recorded locations of three species would disappear and 40 species and vegetation communities could lose more than 50% of their current distributions. Yet, strategically considering agriculture and biodiversity outcomes leads to zoning options that could yield >56,000 km2 of agricultural development with a significantly lower impact on biodiversity values and carbon farming. Our analysis provides a template for policy-makers and planners to identify areas of conflict between competing land-uses, places to protect in advance of impacts, and planning options that balance agricultural and conservation needs.

The state of legislation and policy protecting Australia's mangrove and salt marsh and their ecosystem services

Saline coastal wetlands, such as mangrove and coastal salt marsh, provide many ecosystem services. In Australia, large areas have been lost since European colonization, particularly as a result of drainage, infilling and flood-mitigation works, often starting in the mid-19th century and aimed primarily towards converting land to agricultural, urban or industrial uses. These threats remain ongoing, and will be exacerbated by rapid population growth and climate change in the 21st century. Establishing the effect of wetland loss on the delivery of ecosystem services is confounded by the absence of a nationally consistent approach to mapping wetlands and defining the boundaries of different types of coastal wetland. In addition, climate change and its projected effect on mangrove and salt marsh distribution and ecosystem services is poorly, if at all, acknowledged in existing legislation and policy. Intensifying climate change means that there is little time to be complacent; indeed, there is an urgent need for proper valuation of ecosystem services and explicit recognition of ecosystem services within policy and legislation. Seven actions are identified that could improve protection of coastal wetlands and the ecosystem services they provide, including benchmarking and improving coastal wetland extent and health, reducing complexity and inconsistency in governance arrangements, and facilitating wetland adaptation and ecosystem service delivery using a range of relevant mechanisms. Actions that build upon the momentum to mitigate climate change by sequestering carbon – ‘blue carbon’ – could achieve multiple desirable objectives, including climate-change mitigation and adaptation, floodplain rehabilitation and habitat protection.

Terms of trade shocks and monetary policy in India

Central banks in emerging market economies often grapple with understanding the monetary policy response to an inter-sectoral terms of trade shock. To address this, we develop a three sector closed economy NK-DSGE model calibrated to India. Our framework can be generalized to other emerging markets and developing economies. The model is characterized by a manufacturing sector and an agricultural sector. The agricultural sector is disaggregated into a grain and vegetable sector. The government procures grain from the grain market and stores it. We show that the procurement of grain leads to higher inflation, a change in the sectoral terms of trade, and a positive output gap because of a change in the sectoral allocation of labor. We compare the transmission of a single period positive procurement shock with a single period negative productivity shock and discuss the implications of such shocks for monetary policy setting. Our paper contributes to a growing literature on monetary policy in India and other emerging market economies.