Biochar Economics for Private Landowners With Payments From Carbon Markets and Federal Incentives

ABSTRACT Considering biochar's potential for carbon sequestration and healthy soils, this study evaluates the economic viability of biochar projects for private landowners in the southeastern United States. Our analysis incorporates biochar manufacturing (as a co‐product) in existing paper mills, its transportation and application costs, along with federal incentives and carbon credit revenues (via carbon offset transactions with profit‐sharing for landowners). Baseline economic analysis, with average parameters, found a modest net profit of approximately $242.5 per hectare (or about $12 per metric ton of biochar applied) for landowners. Economic simulations of 10000 scenarios incorporating randomized +/20% variability in key parameters demonstrate that the highest costs arise from biochar manufacturing and transportation. At the same time, significant revenue sources include federal support and carbon market income. Sensitivity analysis reveals that net profit is most associated with manufacturing costs (correlation of −0.64), federal incentives (correlation of 0.68), carbon credit pricing (correlation of 0.32), and transportation costs (correlation of −0.1). Findings indicate that 95% of simulated scenarios yield positive profits for a hypothetical property of 1 ha, with 73.8% and 38.29% of the scenarios showing a net profit of more than $500 and $1000, respectively. On the other hand, the current average values of manufacturing costs, federal support, and carbon prices are very close to the limits when landowners do not make any profit. This emphasizes that lower manufacturing costs, more federal support, and higher carbon credit prices are essential for landowners' profitability. This study's insights into the economic dynamics of biochar can guide policymakers and other stakeholder groups, especially private landowners, in creating more resilient, profitable biochar markets.