The current agricultural systems of broad areas of Australia are unsustainable, with large projected increases in salinization, decreases in water quality, wind erosion, and losses of biodiversity. It is well known that these problems can be partially resolved by farmland reforestation; however, a major issue is financing the scale of activity required. The international response to global warming, the United Nations Framework Convention on Climate Change and its Kyoto Protocol, includes provisions that enable greenhouse sinks (sequestration of carbon in soils and vegetation) to be used by parties to fulfil their obligations. The Kyoto Protocol also allows for trading in emission reductions, and this opens the possibility that investment in carbon sinks may help underwrite broader natural resource management objectives. This paper examines the possibilities for improved land management in Western Australia arising from the development of carbon sinks by considering: (a) the likelihood of a carbon market developing and the likely depth of that market as a result of current national and international policies, (b) the data available to provide estimates on different types of sinks, and (c) the likely benefits of wide-scale sink investment.It was estimated that the total amount of carbon that could be sequestered by reforesting 16.8 Mha of cleared farmland is 2200 Mt CO2 -e, and between 290 and 1170 Mt CO2-e by destocking 94.8 Mha of rangelands. There were insufficient data to produce estimates of sequestration following changes in tillage practice in cropping systems or the revegetation of already salinized land. We conclude that carbon sinks are only likely to become profitable as a broad-scale stand-alone enterprise when carbon prices reach AUD$15/t CO2-e, with this threshold value varying with carbon yield and project costs. Below this price, their value can be significant as an adjunct to reforestation schemes that are aimed at providing other products (wood, pulp, bioenergy) and land and water conservation benefits. Irrespective of this, carbon sinks provide an opportunity to both sequester carbon in a least-cost fashion and improve soil and watershed management. (c) 2006 Elsevier B.V. All rights reserved.