agriculture’s role in climate change mitigation july 18, 2007 (revised)
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Agriculture’s Role in Climate Agriculture’s Role in Climate Change MitigationChange Mitigation
July 18, 2007July 18, 2007 (revised) (revised)
Daniel A. Lashof, Ph.D.Daniel A. Lashof, Ph.D.Science Director Science Director Climate CenterClimate Center
Natural Resources Defense CouncilNatural Resources Defense Council
IntroductionIntroduction Agricultural solutions are one of many approaches Agricultural solutions are one of many approaches
(“wedges”) needed to reduce emissions of heat-(“wedges”) needed to reduce emissions of heat-trapping gasestrapping gases
Agriculture will play a key role in U.S. and global Agriculture will play a key role in U.S. and global climate solutionsclimate solutions Bioenergy productionBioenergy production Increased soil carbon sequestrationIncreased soil carbon sequestration Wind energyWind energy
A mandatory Greenhouse Gas (GHG) cap will bring A mandatory Greenhouse Gas (GHG) cap will bring long-term monetary value for carbon sequestration long-term monetary value for carbon sequestration
Reliable methods are needed to measure, verify, Reliable methods are needed to measure, verify, and account for the climate benefits of agricultural and account for the climate benefits of agricultural practices practices
Potential for Co-benefits Potential for Co-benefits
NRDC Stabilization WedgesNRDC Stabilization Wedges
-
2
4
6
8
10
12
14
2000 2010 2020 2030 2040 2050
GtC
O2e
Electricity EfficiencyRenewable ElectricityGeologic DisposalVehicle EfficiencyLow Carbon FuelsSmart GrowthOther EfficiencyOther RenewablesNon-CO2 AbatementForest and Soil CarbonOtherTarget
Emission Reduction SharesEmission Reduction SharesSanders-Boxer with Limited Offsets
66 Gt total reduction
Carbon Sequestration
0%
End-use Efficiency
29%
Renewable Energy
20%Nuclear Power
6%
Demand Elasticity and
Fuel Switching
27%
Carbon Offsets18%
Preliminary model results indicate that soil and forest carbon sequestration plus reductions in non-CO2 gases could supply ~20% of cumulative reductions
Carbon Sinks &Non-CO2 Reductions
18%
Criteria for Sound PolicyCriteria for Sound Policy
Does it Does it solvesolve the problem the problem Does it change Does it change investment patternsinvestment patterns Does it provide incentives for Does it provide incentives for
promisingpromising solutions solutions Does it protect Does it protect consumersconsumers, displaced , displaced
workersworkers, and impacted , and impacted communitiescommunities
Mandatory v. Voluntary Mandatory v. Voluntary Markets Markets
Chicago Climate Exchange (CCX) voluntary Chicago Climate Exchange (CCX) voluntary marketmarket Soil carbon creditsSoil carbon credits Methane creditsMethane credits Forestry creditsForestry credits
2007 CCX price of ~$4/ton CO2007 CCX price of ~$4/ton CO22 Equates to ~$2.25/acre for continuous no-tillEquates to ~$2.25/acre for continuous no-till Value under federal mandatory “cap and Value under federal mandatory “cap and
trade” legislation anticipated to be 3-6 times trade” legislation anticipated to be 3-6 times greatergreater
Mandatory cap ensures long term value Mandatory cap ensures long term value
Offsets v. AllocationsOffsets v. Allocations
Verifiable, certified Verifiable, certified GHG reductionsGHG reductions
Sold through market Sold through market to covered sourcesto covered sources
Alternative to Alternative to emissions emissions reductionsreductions
Share of total Share of total allowance valueallowance value
Distributed based Distributed based on climate benefitson climate benefits
Included in the capIncluded in the cap
Offsets for Offsets for sequestrationsequestration
Allocation of Allocation of sequestration sequestration allowancesallowances
Offsets v. AllocationsOffsets v. Allocations
Emissions Cap
Total GHGEmissions
Offsets
Allocation
Sequestration benefits
EmissionsCap
Offsets: Allocation:
Total GHGEmissions
Offsets v. AllocationsOffsets v. AllocationsOffsetsOffsets: :
AdvantagesAdvantages Market-driven valueMarket-driven value Program size not limited by Program size not limited by
allocationallocation
DisadvantagesDisadvantages Potential to weaken emissions Potential to weaken emissions
reduction steps taken reduction steps taken elsewhereelsewhere
Verification challengesVerification challenges Higher transaction costs than Higher transaction costs than
allocationallocation
Allocation:Allocation:AdvantagesAdvantages
Quick launch with direct Quick launch with direct appropriationsappropriations
Use existing USDA Use existing USDA channelschannels
Integrate multiple criteriaIntegrate multiple criteria Lower transaction costsLower transaction costs Greater environmental Greater environmental
benefitsbenefits
DisadvantagesDisadvantages Program size limited by Program size limited by
allocationallocation Not market-drivenNot market-driven
Challenges for Either PolicyChallenges for Either Policy Setting the Baseline/Ensuring Setting the Baseline/Ensuring
Additionality Additionality Who gets benefits?Who gets benefits? Measurement, Monitoring, and Measurement, Monitoring, and
VerificationVerification Accounting for non-permanence Accounting for non-permanence
AdditionalityAdditionality Will the practices adopted provide Will the practices adopted provide
additional sequestration of carbonadditional sequestration of carbon Will incentives provided to farmers Will incentives provided to farmers
promote investment in practices that promote investment in practices that would not have happened without would not have happened without themthem
Additionality Based on Additionality Based on Comparison LandsComparison Lands
0
5
10
15
20
25
30
35
40
1 2 3 4 5 6 7 8 9 10 11 12
Accounting Period
Tons
per
Per
iod
Baseline SequestrationProject SequestrationMitigation
Who Gets Benefits?Who Gets Benefits? Current contributors or only new adopters?Current contributors or only new adopters? Iowa No till- 5.17 million acres (23% of Iowa No till- 5.17 million acres (23% of
total Iowa farmland) in 2004, 2total Iowa farmland) in 2004, 2ndnd in nation in nation Solution: Proportional additionality Solution: Proportional additionality
Measurement and Measurement and MonitoringMonitoring
Carbon sequestration from no till farming Carbon sequestration from no till farming and CRP programs would need to be and CRP programs would need to be monitored and verifiedmonitored and verified
Field soil testing needed for offsets Field soil testing needed for offsets (Green-e Standard)(Green-e Standard)
Practice-based accounting may be Practice-based accounting may be sufficient for allocationsufficient for allocation
Ongoing monitoring needed to ensure Ongoing monitoring needed to ensure replacement of any reversalsreplacement of any reversals
Illustrative Aggregate Value to Illustrative Aggregate Value to FarmersFarmers
Allocation has higher carbon price Allocation has higher carbon price because total emissions are lowerbecause total emissions are lower
ApproacApproachh
CarboCarbon n Price: Price: $/ton$/ton
Tons Tons CarbonCarbon
Aggregate Aggregate valuevalue
AllocationAllocation 2020 300 million 300 million (5% of (5% of allocation)allocation)
$6 billion$6 billion
OffsetOffset 1010 430 million430 million $4.3 billion$4.3 billion
Illustrative Individual Value to Illustrative Individual Value to FarmersFarmers
ApproachApproach Carbon Carbon Price: Price: $/ton$/ton
Qualifying Qualifying acresacres
SequestratSequestration benefition benefit
Total Total Income: Income: price x price x tons –tons –costscosts
AllocationAllocation $20$20(supply (supply of credits of credits restrictedrestricted))
1000, 10% 1000, 10% discount, discount, practice practice basedbased
.9 ton/acre, .9 ton/acre, 900 tons 900 tons total, after total, after discountdiscount
$20 x 900 $20 x 900 = = $18,000$18,000
OffsetOffset $10$10(unlimite(unlimited supply)d supply)
1000, 40% 1000, 40% discount, discount, measurememeasurement basednt based
.6 ton/acre.6 ton/acre600 tons 600 tons totaltotal
$10 x 600 $10 x 600 = = $6,000$6,000
CRP in IowaCRP in IowaConservation Reserve Program- Conservation Reserve Program- 1.9 million acres currently enrolled in 1.9 million acres currently enrolled in
Iowa Iowa 1.15 million could be removed by 1.15 million could be removed by
20092009 CRP lands sequester 1-10 tons of CRP lands sequester 1-10 tons of
CO2 per acre per yearCO2 per acre per year
Individual Farm Income with Individual Farm Income with a Carbon Capa Carbon Cap
Farm Income and GHG Farm Income and GHG PaymentsPayments
Potential for Co-benefitsPotential for Co-benefits Improved air and water qualityImproved air and water quality Reduced soil erosion and improved Reduced soil erosion and improved
soil fertility and productivitysoil fertility and productivity Improved wildlife habitatImproved wildlife habitat
ConclusionsConclusions Farmers will benefit from mandatory capsFarmers will benefit from mandatory caps Tighter caps mean higher carbon prices and Tighter caps mean higher carbon prices and
higher net incomehigher net income Allowance allocation may offer advantages Allowance allocation may offer advantages
over offsets approachover offsets approach Quicker startQuicker start Lower transaction costsLower transaction costs Higher incomeHigher income
Continued dialogue key to win-win solutionsContinued dialogue key to win-win solutions
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