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WINONA, Australia (Reuters) - On the rolling hills of Winona, a fine merino sheep stud, a quiet revolution is taking place which Australian farmers hope will eventually see them selling soil carbon credits in the fight against climate change.
Winona's Colin Seis is one of the country's leading "carbon farmers" and has for the past 10 years been encouraging the extraction of greenhouse gas CO2 from the atmosphere and increasing the carbon content of his soil to improve pastures.
Seis estimates he has sequestered a total of 73,786 tons of CO2 equivalent, or 7,386 tons each year. As he only emits 2,200 tons farming, he has a credit of 5,186 tons of carbon.
Under Australia's planned carbon emissions trading scheme, if Seis continues sequesting carbon and maintains his credit, he could sell 5,186 tons for A$51,860-A$129,650 ($40,706 -$102,086), depending if the price is A$10 a ton or A$25 a ton.
Australia wants a formal carbon trading scheme running by 2011, with agriculture possibly included in 2015.
Australia's planned Emissions Trading Scheme (ETS) will have a fixed A$10 a ton price in the first year, followed by an open market with an expected price of A$25 a ton. But it is unclear what type of credit farmers would be allocated in a future ETS.
"Soil is the largest carbon sink we have control of. It's a major answer (to climate change) yet it's been overlooked," said Seis. "It's so obvious because plants are the only thing taking CO2 out of the atmosphere."
The Chicago Climate Exchange in the United States has been trading soil carbon since 2005 but it is not an official offset under the Kyoto Protocol. The United Nations food and agriculture organization and conservation farmers are pushing for the rules to be changed at the Copenhagen climate conference in December.
The Chicago Climate Exchange traded contracts worth 18.1 million metric tons of CO2 equivalent in the year to end April 2009, with prices ranging from US$1.55 to US$2.05 per metric ton.
Fifth generation farmer Seis said there are about 2,000 "carbon farmers" now in Australia.
Farmers are turning their backs on centuries-old practices brought from England, where paddocks were continually cropped and plowed and drenched with fertilizer and weed killer, and are adopting eco-friendly farming to repair damaged soils.
Carbon farmers are adopting zero or minimum tillage, which does not plough the soil, increasing stock rotation to allow land to rest, sometimes for years, and avoiding bare earth with year-round cover with crops, native grasses and weeds.
All these measures increase the biomass in the soil, making it more fertile, and in turn increase the carbon in the soil.
Seis "pasture crops" his 840 hectare (2,100 acre) farm near Gulgong in eastern Australia, planting cereals amongst native grasses to ensure paddocks are covered all year round to allow plants to constantly absorb carbon and limit erosion.
"We do not kill the grasslands, we sow the crop when the grass is in its winter dormant phase. When we harvest, the grass comes back," said Seis. "What I have done is encourage nature to function as designed -- to work with nature not against it."
Seis has also reduced the size of his paddocks and rotates his 4,000 sheep regularly, what is called high-density short-duration grazing or pulse grazing, ensuring paddocks are given long periods of rest from grazing in order to revive.
Despite a long running drought, Seis has enough ground cover to last the dry winter and no need to buy in feed. He can also run two sheep per acre, double his neighbor's stocking rate.
Increasing soil carbon allows paddocks to retain more moisture for crops -- a vital advantage for Australian farmers who have been battling decades of drought.
A one percent increase in soil carbon means an extra 144,000 liters per hectare water capacity, says Seis, who has increased his soil carbon from 2.5 to 4 percent, giving him an average of 300,000 liter extra water per hectare.
"It's like putting your farm under a different rain zone. Carbon farming means your farm comes into drought later and comes out of drought sooner," said Louisa Kiely, a fellow sheep farmer and founder of the lobby group Carbon Coalition.
Across the valley from Kiely's homestead stand three tombstones marking the graves of the property's original owners, the Lahys from Tipperary, Ireland. Michael Lahy died in 1859.
But those tombstones, surrounded by rotting, dead weeds, are the only remnants of the old farming ways on Uamby. The Kiely's have turned their property into a pure carbon farm.
"We have turned the farm over to native vegetation and grazing and we can get carbon credits for it. There is a whole new economy developing," said Michael Kiely, surveying his farm from the top of a hill.
Seis and other Australian farmers are being hindered from selling carbon credits due to a lack of a formal protocol for measuring the increase in carbon in their soils and a formal market. Australia has only a small voluntary carbon market.
Australia's annual greenhouse emissions currently total 553 million tons of CO2-equivalent, but it would require only a 0.5 percent increase in soil carbon in two percent of farmland to sequester all the annual CO2 emissions, said Christine Jones, founder of Australian Soil Carbon Accreditation Scheme.
"Australia's single greatest comparative advantage in the battle to reduce CO2 emissions is our enormous land mass -- over seven million square kilometers (770 million hectares)," said opposition leader Malcolm Turnbull, who's Liberal Party supports a policy of biosequestration.
"The opportunities for CO2 abatement here are gigantic."
Australia's carbon farmers argue that the country's depleted soils can be repaired to once again store more carbon.
Since white settlement in Australia in 1788 more than 70 percent of farm land has been seriously degraded, with a loss of 50 to 80 percent of organic carbon from surface soil, says Jones.
Broker Prime Carbon currently lists carbon credit units on Australia's National Environment Registry and aims to convert 1 million hectares into sustainable farming by 2013 and provide wholesale carbon credits for national and international markets.
Prime Carbon has registered 200,000 tons of CO2 in the past 18 months but sold only 10 percent, said founder Bellamy.
Measuring soil carbon gains is difficult as carbon levels vary between different soils and different rainfall areas. Soil carbon can differ from one end of a paddock to the other.
"It is dynamic and always cycling and fluxing and cannot be measured like house bricks," said Michael Kiely.
Another sticking point is how to ensure the carbon credit stays in the ground, as farming emits carbon. Agriculture accounts for 16 percent of Australia's emissions. Farmers argue that if they remain in credit then they are storing carbon.
($1=1.274 Australian Dollar)
Editing by Megan Goldin