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Assessment of GHG Mitigation Opportunities in the U.S. Forest and Agricultural Sectors Bruce A. McCarl Texas A&M University Collaborators Heng-Chi Lee Dhazn Gillig Darius Adams Ken Andrasko Ron Sands Uwe Schneider Brian Murray Ralph Alig Ben Deangelo Francisco Delachesnaye Basic Components of Talk Project Goals Last Years Efforts Key Findings Directions being Pursued Project Goals Examine the portfolio of land based GHG mitigation strategies and identify ones for further scrutiny considering Afforestation, Forest management, Biofuel, Ag soil, Animals, Fertilization, Rice, Grassland expansion Manure, Crop mix Look at market and time conditions under which strategies dominate Educate on needed scope of economic analysis Bring in a full cost and GHG accounting Look at market effects and co benefits/ costs Activities in last year FASOM-GHG - examines Land based GHG strategies Strategy Afforestation Existing timberland Deforestation Biofuel Production Crop Mix Alteration Crop Fertilization Alteration Crop Input Alteration Crop Tillage Alteration Grassland Conversion Irrigated /Dry land Mix Enteric fermentation Livestock Herd Size Livestock System Change Manure Management Rice Acreage Basic Nature Sequestration Sequestration Emission Offset Emiss, Seq Emiss, Seq Emission Emission Sequestration Emission Emission Emission Emission Emission Emission CO2 X X X X X X X X X X X X X X CH4 N2O X X X X X X X X X X X X X Activities in last year FASOM-GHG - examines Land based GHG strategies Dissertation by Heng-Chi Lee Considers saturation characteristics of both soils and forests (uses 30 years for ag soils, Birdsey for forest soils and growth/yield characteristics of forests from forest service) 100 year model Land exchanges in response to GHG prices, plus all the agricultural activities by decade Empirical examinations done in last year Leakage International Leakage in ag Regional project appraisal Favored regional activity identification Co-benefits study Simultaneities with climate change Improved Non CO2 inventory Ties to CGE Major Results Portfolio Dynamic role of strategies Potential measures Mitigation and Markets Dynamics and co benefits Favored regional activity identification Simultaneities with climate change Ties to CGE Portfolio Results Millions of metric tons sequestered by source at alternative prices GHG Price ($/ton C) Activity $5 $10 $25 $50 $100 $200 Soil Management 28.7 33.7 41.5 43.0 37.8 27.0 Afforestation 1.0 3.8 53.0 156.3 366.2 358.2 Forest Management 7.0 11.2 12.9 -0.6 7.8 62.0 Biofuel Offsets 0.0 0.0 1.5 162.9 233.7 375.1 CH4+N2O Reduction 2.1 2.9 6.1 17.1 34.4 43.0 Other Activities 1.7 2.1 3.9 13.8 18.6 22.4 Total 42.4 55.5 121.7 394.9 700.8 890.7 Sectors can make a difference Portfolio Results MMt arising at an offset price giving $/tonne carbon equiv $120 $100 Soil Management Afforestation Biofuel Offsets Forest Management CH4+N2O Reduction Total $80 $60 $40 $20 $0 -100 0 100 200 300 400 500 600 •Small importance of CH4 and N2O •Different strategies dominate at different price levels 700 800 Dynamic role of strategies Results 10000 Non-CO2 Sources Agricultural Soil 7500 MMT MMT Forest Carbon 5000 35000 Non-CO2 Sources 30000 Biofuel Offset 25000 Agricultural Soil 20000 Forest Carbon 15000 10000 2500 5000 0 0 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 Time Time Cumulative Contribution at a $10 Price 10000 Cumulative Contribution at a $50 Price Non-CO2 Sources 125000 Biofuel Offset 7500 100000 Agricultural Soil Biofuel Offset Agricultural Soil MMT Forest Carbon MMT Non-CO2 Sources 5000 2500 75000 Forest Carbon 50000 25000 0 0 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 T ime Time Cumulative Contribution at a $25 Price Cumulative Contribution at a $100 Price Source: Lee, Heng-Chi, An Economic Investigation of the Dynamic Role for Greenhouse Gas Emission Mitigation by the U.S. Agricultural and Forest Sectors , PhD Dissertation, Texas A&M University,December 2002 >30 years Limited forest and afforest O to30 years Time from now Dynamic role of strategies Results Ag soils Limited Ag soils Limited forest and afforest Forest and afforest Non co2 Non co2 Bio fuels Non co2 Non co2 Biofuels <$50/metric ton >$50/metric ton Level of Price Potential measures Results Economic vs competitive potential 200 C Value in $/TCE C Value in $/TCE 200 150 100 Competitive Potential 50 Economic Potential 0 150 100 Competitive Potential 50 Economic Potential 0 0 15 30 45 60 M M TCEq Annual Soil Carbon Sequestration on Crop Land 0 100 200 300 400 500 600 700 800 MMTCEq Annual Carbon Sequestration in Forest Sector Economic potential is how much one would get if this was the only strategy employed Competiive potential is how much one gets when other strategies are possible Technical potential of ag soils is at 140 MMT Potential measures Results Implementation policy and response (from ASM summary) 500 450 CE price ($/ton) 400 350 300 AffDef 250 AllCarb 200 NoBiof 150 OnlyCO2 100 Sequest 50 0 0 100 200 300 400 Net Emission Reduction in MMTCEq Affdef Allcarb Nobiof OnlyC02 Sequest -- afforestation and deforestation only -- all forestry and ag -- no biofuels -- no non co2 gasses -- ag soils only 500 600 Mitigation and markets results GHG Mitigation and Ag-Markets 220 200 Fisher index 180 160 Crop prices Livestock prices 140 120 Livestock production 100 80 Crop production 60 Crop exports 40 20 0 50 100 150 200 Carbon price ($/tce) From ASMGHG 250 300 Dynamics and co benefits results Ag-Sector Welfare Multi-environmental Impacts 100 Nitrogen Subsurface Flow 100 90 U.S. Producers (Net) 50 Foreign Countries 0 Dead Weight Loss Pollution (%/acre) Welfare changes (bill $) 150 80 Nitrogen Percolation 70 60 Soil erosion -50 U.S. Consumers -100 0 50 100 150 200 Carbon price ($/tce) 50 250 300 40 Phosphorus loss through sediment 0 50 100 150 200 250 300 Carbon price ($/tce) High prices erode co benefits due to intensification Producers gain Consumers lose Exports reduced Some co benefits do not saturate over time but continue to be accrued (erosion, runoff, farm income). Ecosystem gains in habitat may saturate From ASMGHG Regional Strategy Results Largest opportunities by region and type Region/Type $5 $10 $25 $50 CB-Soil Management 1 1 3 7 10 SC-Forest Management 2 2 2 6 7 9 LS-Soil Management 3 4 8 GP-Soil Management 4 3 6 RM-Soil Management 5 5 9 CB-Afforestation Activities 6 8 1 1 1 SE-Forest Management 7 7 7 RM-CH4+N2O 8 SW-Soil Management 9 NE-Soil Management 10 SC-Afforestation Activities $100 9 3 9 9 4 5 5 NE-Afforestation Activities 5 4 8 SE-Afforestation Activities 10 10 PNWE-Soil Management $200 6 6 10 SC-Biofuel Offsets 1 2 2 SE-Biofuel Offsets 2 4 4 LS-Afforestation Activities 8 3 7 6 8 NE-Biofuel Offsets LS-Biofuel Offsets 3 CB-Biofuel Offsets 5 RM-Afforestation Activities Regionally dominating strategies 10 Simultaneities with climate change Results MMTC/yr deviation from baseline Climate Change Anticipation Effects on US Sequestration Rate: FASOM 200 150 CC: Variable activity CC: Fixed Activity 100 50 0 2000 2020 2040 2060 Projected climate change could substantially enhance C sequestration rates Strong synergies between climate change and C prices Need to consider feedback effects between sequestration, GHG concentrations, and climate change Ties to CGE Results Developed response functions from ASMGHG sector model To do this ran ASMGHG sectoral model multiple times under alternative levels for carbon equivalent price, agricultural commod. demand - domestic & export fuel price Yielding data on simultaneous production of GHG offsets AF commodity price and quantity AF sectoral performance Then we fit functions to those data to encapsulate the results Ties to CGE Results Estimation data 405 systematic scenarios of independent variables 15 alternative carbon eq. prices $1, $5, $10, $20, $30, $40, $50, $60, $70, $80, $90, $100, $200, $300, and $400 per ton 3 levels of fuel prices 80%, 100%, 120% of base 3 levels of domestic demand 80%, 100%, 120% of base 3 levels of export demand 80%, 100%, 120% of base another 100 random scenarios from the ranges above for each of the 4 items to build degrees of freedom Ties to CGE Results Estimated functions Quantity of GHG emissions and sinks. Emissions of CO2, CH4, and N2O (broken out to avoid double counting) Sinks for CO2 (did CH4 but should not use?) Ag Production, exports, imports and price Fisher index tot ag production, exports, imports and price changes Biofuel production Land Use, allocation and valuation. Acres crops, biofuels, pasture and forest, and choice of tillage practices. Welfare distribution. consumers' producers' and foreign interests. Levels of environmentally related items use of crop land, irrig. water; nitrogen, phosphorus, potassium, pesticides, fossil fuels, water and wind erosion. Ties to CGE Results Functional form ki Yk A k x i k i where Ak is the intercept term associated with the kth response function ik is a vector of parameters associated the vector x of signals. The base functions with all of the independent variables held at the base level 1 for carbon price , 100 for the others That depicts the ASMGHG output under a zero carbon price 1997 energy price, 1997 domestic demand, 1997 export demand levels. Ties to CGE Results Dependent Variables Intercept Carbon Price Agriculture Exports Fuel Price 2 R Demand GHG Accounts: CO2 source emissions a CO2 nonag emissions b 19.6450 -0.1725 0.1844 -0.0322* 0.0904 0.879 0.603 -0.076 0.395 0.245 0.236 0.901 CH4 source emissions 85.3070 -0.0742 0.0303* -0.0252* -0.0428 0.785 N2Osource emissions CO2 sinks c 9.9328 -0.0653 0.1477 0.0886 0.0975 0.763 7.6185 0.5122 -0.1824 0.0866* 0.2752 0.918 CO2 offsets from biofuel 0.00001 3.4568 -0.9853* -1.2428* 0.2849 0.733 0.685 Agricultural Prices and Production: Price 12.9690 0.1309 0.1208 0.1365 0.1086 Production 72.1472 -0.0642 0.0810 0.0106* 0.0147* 0.732 Exports 2.4464 -0.1826 -0.2640 1.2012 -0.0194* 0.589 Imports 18.2478 0.0197 0.3122 0.0129* 0.0324 * Marks insignificant coefficients 0.603 Directions being Pursued Other Costs of Strategies Discounts for leakage, saturation, uncertainty additionality Dynamic response functions from FASOM Better ag carbon – Century, EPIC Better forest carbon – Century, EPIC Better non CO2 Improved animal emission accounting and management Updated forest inventory and growth CGE