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

1. Carbon Sequestration in U.S. Agriculture: The Policy Context Linda M. Young Montana State University

2. 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?

3. 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

4. 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)

5. Kyoto Protocol 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

6. Forestry and Agriculture Problematic • Verification of carbon sequestered difficult • Guidelines: agreed 2001 Marrakesh accords • Revegetation, management of crop and grazing lands • Credit for carbon sequestered over 1990 levels

7. 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

8. 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

9. 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 Bush Plan 130% 1990 Level 100% KyotoProtocol 93%

10. 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

11. 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

12. U.S. State Policies • Many state actions • Their role? • State programs as prototypes • National involvement/international agreement • Businesses facing patchwork of registries and incentives

13. 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”

14. 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

15. 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

16. How much can agriculture sequester? (in mmtce) Source: Sperow, Eve, Paustian

17. 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