Cost–Benefit Analysis of Biochar Production: The Case Study of an Abandoned Rural Site, Borgo di Perolla, in Tuscany, Italy

The transition towards circular economy is now a key strategy to address the environmental issues we are facing. Within this framework, biochar, a carbon-rich material derived from residual agricultural pyrolysis, can represent a sustainable and circular solution. This paper aims at evaluating the possibility of implementing a local biochar-production system as part of an economic and social strategy of the redevelopment of an abandoned rural site, Borgo di Perolla, in Tuscany, Italy. A cost–benefits analysis (CBA) was conducted to evaluate the economic feasibility of three different scenarios of production and strategies: Scenario 1 considers revenues solely from the production and sale of biochar and wood vinegar; Scenario 2 additionally includes potential income from the sale of voluntary carbon credits; and Scenario 3 incorporates biochar credits within the European Union Emission Trading System (EU ETS). For each scenario, three indicators were calculated: Net-Present Value (NPV), Internal Rate of Return (IRR), and Breakeven point (BEP). The most evident result that emerged is that the sale of biochar and its by-products alone is not sufficient to ensure the project’s economic sustainability, mainly due to high production costs. Only through carbon-credit-trading markets biochar becomes not only an environmentally strategic tool but also an economically rewarding one. In this sense, market infrastructures, such as the ETS, are essential for the dissemination of circular models, like biochar, that generate both environmental and economic benefits. Previous studies on biochar have largely focused on its application and associated benefits, while cost–benefit analyses have primarily examined its economic feasibility through the commercialization of biochar as a soil amendment, particularly within the United States context. The present work contributes to this literature in three main ways. First, it provides a site-specific and replicable CBA framework applied to a real territorial regeneration project (Borgo di Perolla), grounded in primary data collected through field surveys, stakeholder interviews, and expert validation. Second, the study explicitly compares multiple market-access scenarios within the same analytical framework, ranging from biochar-only sales to voluntary carbon markets, allowing for a clear identification of the economic thresholds at which biochar becomes financially sustainable. Third, and most importantly, the main contribution of this work lies in the explicit modeling of biochar integration into the EU Emissions Trading System. This paper extends the analysis to a regulated carbon market scenario, assuming the recognition of biochar-based carbon removals within the EU ETS framework. From a methodological perspective, the study quantitatively assesses how ETS price dynamics affect the profitability, internal rate of return, and break-even point of a biochar project over a long-term horizon. From a policy perspective, the analysis anticipates recent regulatory developments, such as the EU Regulation 2024/3012, on establishing a Union certification framework for permanent carbon removals, carbon farming, and carbon storage in products, by showing how biochar could function as a fully market-integrated climate technology.