On April 24th, the Midwest Ag Energy Network hosted a webinar, "Carbon Policy and Agriculture". We had wonderful feedback and lots of questions! Debbie Reed of DRD Associates presented and has answered participant questions.
Q: One slide indicates that virtually 100% of CO2 reductions in the next 25 years will come from sequestration. Can that be? -David Morris A: The DOE slide in question depicts general trends in greenhouse gas (GHG) emissions in the U.S., under a “business as usual” (BAU) scenario, and alternatively, depicts generally what we would hope to achieve via a “generic” policy to slow, stop, and reverse emissions of GHG over time. The slide does not depict any single policy option (and in fact, you may note that it has a 1999 citation – long before any bills now being contemplated were even drafted or considered). I included it in the presentation to make the point that: (a) virtually every major analysis of how to reduce US GHG emissions utilizing currently available technologies and options includes soil carbon sequestration as a near-term, high-impact, low-cost, viable option with multiple ancillary environmental benefits to society and to agriculture; and (b) soil carbon sequestration is an especially valuable policy option, in the near-term – both technically and economically -- to begin to reduce US GHG emissions. The “purple” sliver in the referenced slide, which represents the potential contributions of soil carbon sequestration to U.S. emissions reductions, does not imply that soil carbon emissions reductions will be the only emissions reductions achieved in the early years of any particular policy; rather, it depicts the potential technical ability of soil carbon sequestration towards policies to slow, stop, and reduce US GHG emissions. No policy being considered to date has suggested that soil carbon sequestration be the only option to reduce GHG emissions; however, policies and policymakers are seeking to incorporate this valuable emissions reductions technology into bills as one of many options for reducing GHG emissions at lowest costs to society.
Q: Ag sequestration contracts are relatively short-term. What happens if a farmer that has adopted no-till for the 5 years or so of the contract then plows the field, releasing all carbon stored? -David Morris
A: The question pertains to the permanence of agricultural (and terrestrial) sinks. The way S.2191 resolves the issue is by establishing that the liability for the permanence of sink credits rests with the buyer of those credits, unless otherwise established by contract between the buyer and seller. Secondly, a certificate must be filed annually, after sink offset credits are awarded, stating that the sink is still intact, and that there has been no reversal or loss of sequestered CO2. If at any time a reversal or loss of sequestered CO2 occurs, the owner of the offset credits must replace the lost credits with new ones. These provisions address the permanence issue and the potential reversal or loss of sequestered tons, while still allowing terrestrial credits to be recognized and rewarded within the emissions reductions policy, to the benefit of society and the agricultural sector.
Q: Is it preferable for a CAP to (be) targeted at industry sectors or facilities that emit above a CAP regardless of industry type? -Steve Swaffer
A: That is an issue that has been widely studied and debated. What most analyses have concluded is that to be administratively feasible and environmentally effective, a policy has to be cost-effective and still capture the bulk of GHG emissions, while excluding smaller numerous emissions sources. Many different sectors and entities generate GHG. An effective policy, whether a cap-and-trade policy or otherwise, will target emissions reductions from the largest emitters that account for the bulk of emissions, but will exclude emitters or sectors that minimally increase the amount of emissions included, but dramatically increase administrative costs because they represent a diffuse source of emissions that would be very costly to try to regulate.
Q: Agriculture also has the potential to increase CO2 emissions, particularly as we contemplate returning fallowed land to production. What kind (of) policies might be appropriate for CRP lands? Should we recognize this in a cap and trade system? -Steve V.
A: I assume that the reference to returning fallowed land to production has to do with existing pressures on land and land use, including as related to biofuels mandates and policies, which have been attributed to some producers’ decisions to take lands out of CRP for biofuels production. I think there is always the danger of policies having unintended consequences, and this may be one such instance. However, growing and continued pressures on land use, couple with historical experience from farm and other policies, has shown that incentives are necessary to achieve desired consequences relative to conservation and environmental benefits, particularly related to land use. In the case of a cap and trade policy, we must provide direct incentives to land users to both protect existing soil carbon stores – as is the case in CRP lands, for instance – and to additionally build soil carbon stores. In the context of S.2191, for example, I advocate for utilizing the allowances provision for agriculture as a means of rewarding early adopters of no-till for continued soil carbon sequestration (they do not meet additionality criteria in the bill, and thus will not otherwise be rewarded for their ongoing efforts); as well as to reward other activities by agricultural producers that lead to GHG emissions reductions or increased or protected sequestration that may not otherwise be rewarded. This would include utilizing allowance credits to prevent perverse incentives, such as, in the case of CRP land, putting these marginal and highly eroded lands into production for purposes with higher economic value.
Q: How much free rider effect do we have here, where $$ go to sequester (sic) that would happen anyway? -Andy Olsen
A: The offsets provision will not provide credits to agricultural producers engaged in no-till or other emissions reduction or sequestration activities before an established baseline date (to be set by the bill), so there is no “free-rider” effect, as you call it. However, as indicated above, in order to prevent perverse incentives to change management practices in order to qualify for credits later, or to take marginal or eroded lands out of conservation policies – as well as to provide rewards to early actors and others already engaged in activities that are providing valuable emissions reductions on behalf of society, even in the absence of a GHG emissions reduction mandate – I have advocated that the 5% allowances set-aside for the agricultural and forestry sectors should be utilized for exactly these purposes. These allowances represent a “redundant” set of credits within the system, anyway, since the policy has already established that these tons can be emitted within the established cap, and the 5% set-aside requires that agriculture and forestry create additional reductions on top of these allowances – so by rewarding existing practices and early adopters, you provide economic incentives to continue beneficial practices (e.g., keeping CRP lands in conservation programs) without any impact to the policy.
Q: Can the same producer theoretically quality for an offset and an allowance? -Patrice Lahlum
A: Yes, a single producer can theoretically qualify for an offset and an allowance, but not for the same activity or project. S.2191 specifically excludes either double-counting or the crediting of the same project for an offset and an allowance.
Q: You say that if a farmer plows land that has received credits new credits need to be purchased to cover the reverse sequestration. Does that mean the farmer needs to pay back the money received? -David Morris
Q: You say that if a farmer plows land that has received credits new credits need to be purchased to cover the reverse sequestration. Does that mean the farmer needs to pay back the money received? -David Morris
A: (Please see also the response to a similar question by David Morris, above.) No, farmers will not be required to pay back monies received for sequestration. S.2191 would require that the owner of credits which have experience a reversal must replace these with new credits by a date certain.
We look forward to your comments!
