Environmental water allocations are used to improve the ecological health of wetlands. There is now increasing demand for allocations to improve ecosystem productivity and respiration, and enhance carbon sequestration. Despite global recognition of wetlands as carbon sinks, information regarding carbon dynamics is lacking. This is the first study estimating carbon sequestration for semiarid Phragmites australis reedbeds. The study combined aboveground biomass assessments with stable isotope analyses of soils and modeling of biomass using Normalized Digital Vegetation Index (NDVI) to investigate the capacity of environmental water allocations to improve carbon storage. The study considered relationships between soil organic carbon (SOC), carbon sources, and reedbed persistence in the Macquarie Marshes, a regulated semiarid floodplain of the Murray-Darling Basin, Australia. SOC storage levels to 1 m soil depth were higher in persistent reedbeds (167 Mg ha−1) than ephemeral reedbeds (116–138 Mg ha−1). In situ P. australis was the predominant source of surface SOC at persistent reedbeds; mixed sources of surface SOC were proposed for ephemeral reedbeds. 13C enrichment with increasing soil depth occurred in persistent and ephemeral reedbeds and may not relate to flow characteristics. Despite high SOC at persistent reedbeds, differences in the rate of accretion contributed to significantly higher rates of carbon sequestration at ephemeral reedbeds (approximately 554 and 465 g m−2 yr−1) compared to persistent reedbeds (5.17 g m−2 yr−1). However, under current water regimes, rapid accretion at ephemeral reedbeds cannot be maintained. Effective management of persistent P. australis reedbeds may enhance carbon sequestration in the Macquarie Marshes and floodplain wetlands more generally.