Carbon Sequestration in U.S. Agriculture: The Policy Context

Linda M. YoungMontana State University

Are there incentives? Agricultural soils: a

potential sink for carbon Changing management

practices (no-till) Incentives for

agricultural sequestration of carbon Through the market? Through government

programs?

International Policies Concern over carbon

dioxide levels Atmosphere: public good GHG emissions cause a

global externality Countries/businesses lack

incentives to act alone 1988 Inter governmental

Panel established

                    

     

United Nations FCCC 175 countries signed Nations committed to:

GHG mitigation and adaptation programs

inventory GHG emissions Annex 1 parties:

emissions to 1990 levels by 2000 (non-binding)

Kyoto Protocol

Negotiations concluded 1997 Close to ratification

101 countries, 43.9% emissions• -Russia?• U.S. and Australia UNFCCC

Key: Annex 1 parties reduce emissions to 95% of 1990 levels

Policies to reduce emissions

Kyoto Protocol

Verification of carbon sequestered difficult

Guidelines: agreed 2001 Marrakesh accords

Revegetation, management of crop and grazing lands

Credit for carbon sequestered over 1990 levels

                                  

                     

Forestry and Agriculture Problematic

Flexibility Provisions Joint implementation Clean development mechanism

Not agricultural sequestration Credit trading

Only between ratified parties U.S., Australia cannot participate Market fractured: ratified and not Demand weak for non-ratified credits

U.S. Response to Climate Change, Kyoto

Bush: disagrees with science and responsibilities

Bush Climate Action Plan: Reduce GHG intensity 18%, 10

years From 183 MTCE ($ million) to

151 MTCE by 2012• Voluntary actions• Incentive based measures

                  

                                                                                                      

Criticism of U.S. Plan Total emissions

increase In 2012 emissions

130% 1990 levels If KP ratified, 93% of

1990 Pew Center:

• intensity decrease on trend

• Changing technology

93%

100%

130%Bush Plan

1990 Level

Kyoto Protocol

Administration’s Plan Some firms may act voluntarily Others: incentives not strong

enough Example:failure of UNFCCC goal Bush plan:

Climate change not a serious problem Not requiring international cooperation

Current U.S. Policy Departure from past approaches Acid rain program:

Emissions limits and trading Successful, least cost program

Senators McCain and Leiberman Bill in Congress

U.S. State Policies Many state actions Their role? State programs as prototypes National involvement/international

agreement Businesses facing patchwork of

registries and incentives

The Market for Carbon Credits

Example: energy company emit GHG Purchase offset from

renewable energy company

Why trade? Binding limits Not emissions caps:

• expectations• Environmental ‘good

citizen’• “Learn by doing”

Market for Carbon Sequestration Carbon market determine demand for

agricultural sequestration Limited information, pilot purchases EPA registry (not trades): of 369

sequestration projects, 2 involved agriculture

Transactions costs high Poorly defined terms, detailed contracts Industry wants regulatory body

U.S. Government Agricultural Programs

Bush administration-receptive Directed Secretary of Agriculture 2002 Farm bill- increased funding

Congressional support high 25 bills introduced carbon sequestration

Programs are voluntary Ag. Seq. produces environmental benefits Programs likely compatible with URAA

Cont. pressure to support farm income

How much can agriculture sequester? (in mmtce)

1982-97 17 Management changes

(4.5) CRP 13.2 mm hectraces

Possible 47 No till all cropped farmland

Possible 20 Summer fallow eliminated

Total potential 83 All practices

Source: Sperow, Eve, Paustian

Conclusions Market development hindered by

non-ratification Demand for U.S. carbon credits

weak with implementation of KP Little impetus overcome verification,

monitoring challenges Government ag programs likely

source of demand