Sugarcane bagasse biochar in Brazil can break even in roughly 7.5 years with an 18% internal rate of return, but only on large farms of 20,000 to 50,000 hectares, only when the biochar is applied to soil rather than sold, and only when carbon credit prices exceed $120 per ton of CO2 equivalent. Below that price threshold, the economics fall apart for nearly every farm size. That’s the central finding from Sebastian G. Nosenzo’s scenario-based economic modeling study, published in the Journal of Power and Energy Engineering and recently posted to arXiv.

Why it matters

Brazil produces enormous quantities of sugarcane bagasse, the fibrous residue left after juice extraction. It’s one of the most abundant agricultural waste streams on the planet. Converting it to biochar could theoretically address two problems at once: waste management and carbon dioxide removal through long-term soil carbon storage. But “theoretically” has been doing a lot of heavy lifting in biochar economics discussions. This study puts actual numbers on the question of whether bagasse biochar pencils out in the Brazilian context, and the answer is a heavily conditional “yes.”

The details

Nosenzo’s approach uses scenario-based economic modeling across different farm sizes and biochar deployment strategies. The key variables include farm scale, whether biochar is applied to the farm’s own soil or sold externally, carbon credit pricing, and the percentage of available bagasse that can actually be diverted to biochar production.

The headline numbers for large farms (20,000 to 50,000 hectares) look decent on paper: a ~7.5-year payback period and 18% IRR on average. For context, 18% IRR is competitive with many agricultural investments in Brazil, where the Selic rate has hovered around 10-13% in recent years. So the risk-adjusted return isn’t absurd.

But the picture degrades quickly as you move down the scale:

  • Large farms (20k-50k ha): Viable with soil application. The 18% IRR and 7.5-year breakeven hold up under favorable assumptions.
  • Medium farms: Viability is “questionable” without soil application. With it, the numbers improve but remain sensitive to input costs and credit pricing.
  • Small farms: Only viable when biochar is applied directly to the farm’s own soil. Without land application, there is essentially no economic case.

The soil application finding is striking. In every scenario Nosenzo modeled, applying biochar to the farm’s own land was “the more profitable practice by a large margin” compared to producing biochar for sale. This makes intuitive sense: soil application captures both the carbon credit revenue and the agricultural productivity gains (improved water retention, nutrient availability, soil structure), while selling biochar only captures the sale price minus transport costs.

Two sensitivity thresholds stand out. First, carbon credit prices need to exceed $120/tCO2e. Current voluntary carbon market prices for biochar credits vary widely, but many transactions happen well below this level. Puro.earth has seen biochar credit prices in the range of $100-$150, so $120 is not fantasy, but it’s not guaranteed either. Second, at least 60% of available sugarcane bagasse needs to be redirectable to biochar production. That’s a real constraint, since much of Brazil’s bagasse is already burned for cogeneration electricity at sugar mills.

Implications

The scale dependency here is the most important takeaway for CDR practitioners and investors. Biochar from agricultural residues is often pitched as a distributed, smallholder-friendly carbon removal pathway. This study suggests the opposite in Brazil: it’s a large-farm play, at least economically. That has real consequences for how biochar projects get structured, financed, and scaled in one of the world’s largest agricultural economies.

The $120/tCO2e threshold also sets a clear floor for what carbon credit buyers need to be willing to pay to make this work. For corporate buyers looking at Brazilian biochar as part of their removal portfolios, this is the number to internalize. Anything significantly below it, and the supply side of the equation doesn’t function.

There’s also an interesting tension with Brazil’s existing bioenergy infrastructure. Sugarcane mills already use bagasse for power generation. Diverting 60%+ of that feedstock to biochar production means those mills need alternative fuel sources or need to be compensated for lost energy output. Nosenzo’s model accounts for bagasse availability but the political and logistical reality of competing with an entrenched bioenergy sector deserves more attention.

Caveats

Nosenzo is transparent about a significant limitation: biochar production at the scales modeled in this study doesn’t really exist yet in Brazil. The economic models are grounded in literature, but they’re projections, not observations from operating facilities. Real-world costs for pyrolysis equipment, logistics, and quality control at 20,000+ hectare scale could diverge meaningfully from modeled assumptions.

The study also doesn’t deeply address permanence monitoring or MRV (measurement, reporting, and verification) costs, which can be substantial for biochar carbon credits. And the agricultural yield benefits assumed from soil application are drawn from existing literature rather than site-specific field trials in Brazilian sugarcane systems, where soil types, climate, and management practices vary enormously.

Finally, the 18% IRR assumes carbon credits are actually sold at $120+. If the voluntary carbon market softens, or if biochar methodology standards tighten and reduce creditable volumes, that return compresses fast. The model is a useful framework, but it’s built on assumptions that each carry their own uncertainty bands. Watch for field-scale validation data from Brazil before treating these numbers as bankable.

Source: arXiv