Using trees to sequester carbon in low-medium rainfall areas has high potential because those areas are not widely used for agriculture and often are in need of regeneration.
However, which species can be planted will depend on the amount of water available and how specific species react to factors such as long drought periods, sudden floods and random cycles of wet and dry periods.
The main species used for sequestration are eucalypts, most of which have various adaptations to Australia’s unpredictable weather patterns but a tree that is stressed due to lack of water will stop growing, thus stop sequestering carbon, and may even die.
A study done by Walsh et al (2008) found that E. globulus and E. botryoides are both highly suited to sequestering carbon, but while both species can sequester during short periods of little or no rainfall neither can handle extended drought, which is all too common in low rainfall areas during el Niňo years. This makes those species suitable but not ideal.
The same study found that while E. camaldulensis, E. sideroxylon and C. maculate are not as efficient in sequestering carbon they can handle long periods of drought far better than the above two and so are better suited to low-medium rainfall conditions. This shows that while it is not ideal to plant in such conditions compromises can be made.
Above all, it is important that these planted forests are not competing for land with agriculture or pre-existing forests.
Of course, unlike plantations, these forests need not be in one big clump; they can be spread along fence lines or creeks, they can be a patchwork across paddocks or public land, anything so long as they are large enough (≥0.2 ha) to qualify as a forest. Spacing plantings like this can also minimise water needed in any one place (Battaglia, 2011).
If you want to learn more about eucalyptus plantings, the NSW Department of Primary Industries has a lot to say on the issue.