The Climate ChangeChallenge for Agriculture

Presentation to the Kyoto Mechanisms Seminar March 14, 2003 by Dr. R. J. MacGregor

Agriculture and Agri-Food Canada

At issue is how the world will manage its carbon and nitrogen stocks sustainably

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InternationalTrade & Development

Food Safety and Food Quality

EnvironmentScience and Innovation

Renewal

Business Risk Management

The APF elements:

The Agriculture Policy Framework (APF) is our basis for moving forward...

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Environment:

• Farm EnvironmentalPlanning

• Managing:- pests,- nutrients- nuisances - land and water

WaterNutrients Pathogens Pesticides

SoilErosionOrganic matter

BiodiversityWildlife habitat Species at risk Wildlife damage

AirParticulatesGreenhousegasesOdours

Innovation

•Biofuels,

• Bioproducts

• Bioprocesses

…to promote sustainable and profitable resource use...

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…where addressing climate change is about contributing to environmental solutions that

are economically sustainable

• Climate change is all about managing the carbon and nitrogen cycles

• Agriculture is based on using energy from the sun for photosynthesis to transform carbon & nitrogen into food, fibre and bio-products consumed by humans

• Agriculture Policy Framework links goals for environmental management and innovation to better manage natural resources, based on carbon and nitrogen cycles

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Climate change is a global challenge…changing how we manage C & N

• All nations, industries and citizens need to learn to sustainably manage carbon, nitrogen and other sources of greenhouse gases

• Agriculture has an important role in these cycles (20% of global emissions)

• The challenge is to learn to profitably recycle rather than extract carbon and nitrogen

• Canada has opportunities to use its leadership in agricultural GHG science to create advantages in world markets

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Reduce

Remove Replace

Greenhouse gasemissions

Innovate to replace fossil fuels with bio-based

energy, chemicals and materials

Atmospheric C to store in soils and perennial

crops

AgriculturalGHG

Management

AdaptUse science, innovation & business risk management to adapt to climate change

Agriculture has many unique opportunities to manage greenhouse gases ...

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Agriculture Emission Sources

18.5

7.17

12.4

16.11

1

0 10 20

Enteric fermentation

Crops

Fertilizers

Manure

Other

Sour

ces

Tg CO2 Equivalent1996

Gas % of Emissions

CO2 3%CH4 41%N2O 56%

Agriculture’s primary energy source is the sun, not fossil fuels.

…because agriculture’s biological processes make us different from

energy users

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We have opportunities to reduce emissions and improve productivity

• Emissions represent inefficient use of resources:– Increasing efficiency can improve the economic

performance and reduce the environmental footprint of agriculture. Some opportunities are to:

• Improve nutrient use efficiency• Improve efficiency of livestock feeding• For 2008-12 -- 1 Mt emissions reductions (mostly N2O &

CH4)

• We can make efficiency gains now, but more science and technology are needed:

• to improve understanding and control of nitrous oxide and methane emissions

• to pave way for better management practices and technologies

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We have opportunities to remove carbon dioxide from the air in ways that

enhance sustainable resource use

• Improve management of soil & grazing lands

• Improve marginal land management– Promote permanent cover/perennial growth,

agroforestry, etc (Greencover is a start providing 1.1 MT)

• Invest in science• improve sequestration techniques & measurement• position ourselves to consider other land bases (eg.

Wetlands) in order to support public policy development

• 10 Mt BAU sink to maintain• For 2008-12 -- 7.7 Mt incremental sinks

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We have opportunities to innovate to replace conventional with renewable feedstocks to

link us with future economic growth• Innovation in biofuels, bioproducts &

bioprocesses– Use ethanol & biodiesel to address current

emissions: • Encourage policies for Canadian ethanol/biodiesel

market and industry development that keeps sourcing, production & benefits in Canada, and builds industrial base for future.

– Put in place building blocks for future technology• Research, technology development, demonstration and

industry development to improve efficiency of grain-based ethanol in short-term and cellulosic ethanol in the medium term

• Invest in research, analysis and industrial development to lay foundation for long-term transition to renewable bioproducts & bioprocesses

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2000 2010 2020 2030 2040 2050

0remove

replace

reduce

Ann

ual i

mpa

ct o

f miti

gativ

e st

rate

gies

(rel

ativ

e to

bus

ines

s-as

-usu

al)

Our strategy must be built on the fact that many Kyotos are required

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BAU withoutSinks

BAU with Sinks

354045505560657075

1990 1999 2010

Potential reductionsfrom BAU (5 to 20 Mt) [with incentives]

6% below 1990

Gap (6.5 Mt)

Incentives are needed to send the right signals

For the first commitment period,we know we can contribute

MT CO2e

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There is a strong role for agriculture in the Federal Plan for Mitigation ...

First steps- Building the Foundation on Solid Science

Increase awareness: Baseline study of awareness level and small programs to increase knowledge of agriculture’s role in climate change and GHG emission

Develop GHG mitigation & science programs: Shelterbelts, Biofuels, Model Farms, GHG Mitigation (soil, nutrients, livestock), Manure technology, Carbon measurement/verification

International: Win recognition of agricultural sinks in Kyoto Protocol

New Steps - To Realize the Potential

Develop emissions trading system: Agriculture has opportunity to participate in market for offsets (provides flexibility to firms in a DET system)

Develop climate friendly technology: Invest in promising areas such as ethanol from cellulose feedstocks, bioenergy, bioproducts

Encourage renewable biofuels: Expand use of ethanol and biodiesel in transportation with potential benefits for agricultural sector

Building core knowledge: Develop economically viable mitigation methods by investing in science and economic analysis

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… and the Federal Plan acknowledges the potential

Action Estimated result (2008-12)

• Business as Usual (BAU) sink 10 Mt/y• Current programs

-AP2000, Greencover & APF 5.8 Mt/y• Next steps

- emissions reductions 1 Mt/y- sinks 9 Mt/y

TOTAL 24.8 Mt/y

Counting everything in the National Inventory is only one challenge, attribution for program delivery is another major issue

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The Federal Plan identifies offsets as the incent mechanism for the

agricultural sector• The sector indicated they preferred a market

mechanism to more traditional instruments

• We made the case and the “door is open” to developing an offset system that will work for agriculture domestically

• Getting Articles 3.4 in Kyoto was the key to unlocking this door

To be successful, offsets must make economic sense, as well as environmental sense

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The sector will need to be involved in the design of a workable offset system - become

familiar with the issues ...• Offsets must be real

– They have to provide sinks or emission reductions that will be counted in the national inventory - IPCC rules will be important

• They must be measurable and verifiable– Science is the key and we have good start, but more required

(NCGAVS, model farms, GHGMP, CCFIA, BIOCAP etc.)

• Probably need to be project based – An entity will have to develop a plan to show they can provide real

offsets: ex ante review, ex post verification, certification

• They must be additional/surplus & occur in 2008-12

– Over and above “business as usual” in the commitment period– Need to be differentiated from other incentives or requirements– There is a policy against providing “credit for early action”– This is the “baseline” issue and critical to whole system and dealing

with continuum and saturation

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2000 2010 2020 2030 2040 2050

… and there is more to a system...• They must be calculated on a net-net basis

• “Leakage” will need to be accounted for

• The system must be affordable– Transaction costs must be kept low relative to the

value of the offsets - @ $10/t this may be a challenge• The role of numerous players will need to be

sorted out – producers, registry, government, auditors,

aggregators, futures/commodity markets, insurance industry etc.

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… and more issues of particular interest to agriculture

• Permanence and Liability are critical issues for the sector wrt. soil sinks

• At Calgary Credit Workshop agricultural participants did not support the transfer of the liability for emission reductions from covered sector to agricultural sector

• Problem is that building sinks depends not only on management choices - but also on the weather

• It may not prove economic to maintain them on a long term basis - producer wants flexibility also

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What are the next steps?

• Development of an Offset System within a DET/covenant world for Large Industrial Emitters (LIE)– options – rules– analysis– consultations

• Best guess - we will need to have pretty good idea on “if” and “how” an offset system would work by this fall!!!!!!

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Doubling of CO2

(2050 under business as usual)

But we also need to think about adaptation because we can’t move fast enough to

avoid some impacts• Expected changes

– Warmer temperatures, drier or wetter conditions, more extreme events

• Assess impacts & plan to manage risks.

– Build knowledge base, networks & planning systems.

– Assess impacts and adaptation strategies for key policiese.g. water infrastructure & drought management

– water supply & infrastructure– financial risk management – food safety, disease

management/eradication