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Climate Change and Agriculture:
Agriculture’s Role in Cap-and-Trade
Feeding a Hot and Hungry Planet: The
Challenge of Making More Food, Fewer GHG
Debbie Reed
DRD Associates
Washington, DC
Princeton University
Friday, May 1, 2009
Climate Change and Agriculture:
Agriculture’s Role in Cap-and-Trade
Presentation Overview:
 
 
 
 
Global Climate Change…and Agriculture
Cap-and-Trade…and Opportunities for
Agriculture
Policy Landscape: 2009-2011 Windows of
Opportunity
Improving our Agricultural Policies:
– 
– 
Offsets are Transitional
Cap-and-Trade can be Transformational
Climate Change and Agriculture:
Agriculture’s Role in Cap-and-Trade
Presentation Overview:
  Global
Climate Change…and
Agriculture
 
 
 
Cap and Trade…and Opportunities for Agriculture
Policy Landscape: 2009-2011 Windows of
Opportunity
Improving our Agricultural Policies:
– 
– 
Offsets are Transitional
Cap-and-Trade can be Transformational
Global Climate Change…
If atmospheric CO2 levels are to be stabilized at
reasonable concentrations by 2050 (450-650
ppm CO2), drastic reductions in emissions
are required over the next 20-30 years.
--IPCC Special Report on Emissions Scenarios
During this critical 20-30 year period, all
available emissions reductions measures
must be utilized, and new energy
technologies must be developed.
Climate Change and Agriculture:
Agriculture’s Role in Cap-and-Trade
Premise
WE do not have the luxury of excluding
agricultural emissions reductions from GHG
emissions reductions policies*;
AND
We should incentivize agriculture’s participation
by providing full market value for emissions
reductions.
Climate Change and Agriculture:
Agriculture’s Role in Cap-and-Trade
Presentation Overview:
 
Global Climate Change…
  Cap-and-Trade…and
Opportunities for Agriculture
 
 
Policy Landscape: 2009-2011 Windows of
Opportunity
Improving our Agricultural Policies:
– 
– 
Offsets are Transitional
Cap-and-Trade can be Transformational
Cap-and-Trade…and
Opportunities for Agriculture
Economy-Wide, Cap-and-Trade
CAP = amount of GHG that can be
emitted in a year
  Established by policy
  Reduced every year (theoretically)
  Applies to emitters ID’d by policy
Cap-and-Trade…and
Opportunities for Agriculture
Economy-Wide, Cap-and-Trade
Allowance = legal tender, represents
1 ton GHG emissions
  Given/auctioned to capped entities
  Can be traded, sold on GHG
market(s)
Cap-and-Trade…and
Opportunities for Agriculture
Economy-Wide, Cap-and-Trade
Offset = legal tender, represents 1
ton GHG reductions
  Given to non-capped entities for
proven, verified GHG reductions
  Can be traded, sold on GHG
market
  Offsets are a transitional policy
Cap-and-Trade…And
Opportunities for Agriculture
Economy-Wide Cap-&-Trade:
A New Economy
CBO estimates allowances from capand-trade worth $50 B - $300 B/year
  Over 20 years = $300 B - $6 Trillion
 
Cap-and-Trade…and
Opportunities for Agriculture
Why Offsets for Agriculture?
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In cap-&-trade, goal is efficiencies of scale
Cap largest emitters (e.g., power plants)
Smaller, diffuse, non-point sources = not efficient
targets, regulated reductions are too costly
Ag = non-capped sector
Ag = source of offsets (emissions reductions) or
some other “incentivized” emissions reductions
Cap-and-Trade…and
Opportunities for Agriculture
The Role of U.S. Agriculture in Climate Change
Mitigation:
  Agriculture is both a source of GHG, and a sink
(GHG reservoir)
  As a source of GHG, agriculture contributes
approximately 7% of US GHG emissions – mostly
from small, diffuse, non-point sources
  N2O and CH4 account for the largest share of
agricultural emissions (CO2 equivalent basis)
Cap-and-Trade…and
Opportunities for Agriculture
The Role of U.S. Agriculture in Climate Change
Mitigation:
  Reducing emissions from agricultural
sources of GHG,
and
  enhancing terrestrial/biological sinks (soil
carbon sequestration)
Cap-and-Trade…and
Opportunities for Agriculture
Agricultural Sources of Nitrous Oxide (N2O)
emissions:
– 
– 
Soils, Fertilizers
Land application of manure
Cap-and-Trade…and
Opportunities for Agriculture
Agricultural Sources of Methane (CH4):
– 
– 
– 
Livestock (enteric fermentation, manure handling)
Soils
Rice cultivation
Cap-and-Trade…and
Opportunities for Agriculture
Mitigation Options for Agriculture
CH4
N 20
Cap-and-Trade…and
Opportunities for Agriculture
Mitigation Options for Agriculture
** Protecting and enhancing the soil C sink **
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No-till, cover crops
Crop Rotations
Rangeland Management
Cap-and-Trade…and
Opportunities for Agriculture
Q: What is the role of Agricultural Offsets
in Cap-and-Trade?
A: Offsets are a cost-containment measure
(keep costs of cap-&-trade system lower
for society, for capped entities); and,
A: Soil sinks, other ag reductions have
multiple ancillary benefits to society, and
to agriculture: “charismatic carbon
credits.”
Potential CO2 Reduction Options
Rapidly Deployable
Minor
Contributor
<0.2 PgC/y
Major
Contributor
>0.2 PgC/y
Not Rapidly Deployable
•  Photovoltaics
•  Ocean fertilization
•  C sequestration in
Agricultural soils
•  Improved efficiency
•  Industrial Non-CO2 gas
abatement
•  Ag non-CO2 gas
abatement (CH4, N2O)
•  Reforestation
•  Biomass to hydrogen
•  Biomass to fuel
•  Cessation of deforestation
•  Energy-efficient transport
•  Geologic storage
•  High efficiency coal technology
•  Large-scale solar
•  Next generation nuclear fission
Caldeira et al. 2004. A portfolio of carbon management options, p. 103-130,
In C. B. Field and M. R. Raupach, eds. The Global Carbon Cycle. Island Press, Washington, DC.
Cap-and-Trade…and
Opportunities for Agriculture
In theory, then, a cap-and-trade system, can
incentivize agricultural emissions reductions
that are proven and verified via offsets
credits that can be traded or sold in GHG
markets…….”transformational”
Policies to Address Global Climate
Change…the Role of Agriculture
Presentation Overview:
 
 
Global Climate Change…and Agriculture
Policies to Address Global Climate Change…and
Opportunities for Agriculture
  Policy
Landscape: 2009-2011
Windows of Opportunity
 
Improving our Agricultural Policies:
–  Offsets are Transitional
–  Cap-and-Trade can be Transformational
Policy Landscape: Windows of
Opportunity, 2009-2011
Agriculture and Cap-and-Trade:
Policy Issues, Concerns
Issues, Concerns for the Sector…
 
Economic impacts of C&T for agriculture:
– 
– 
 
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↑,↓
Net impacts unknown
Protocols: cannot be burdensome, onerous
USDA jurisdiction over ag and forestry
offsets programs
Agriculture and Cap-and-Trade:
Policy Issues, Concerns
Policy Issues…
 
 
Agricultural offsets important early, but
protocols, categories of eligibility uncertain
Measurement, monitoring, verification
– 
– 
 
must balance costs and accuracy
Discount based on uncertainty, pre-award
(important for fungibility of offsets)
Must protect existing C stocks, enhance the
stocks, and build more
Agriculture and Cap-and-Trade:
Policy Issues, Concerns
Policy Issues…
  Lack of data – particularly for non-CO2
gases: incentivize new technologies, better
data collection, measurement techniques
  Avoid perverse outcomes
– 
– 
– 
Reward, not punish, early actors engaged in
desired activities
Additionality: adjust cap?
Baselines: temporal?
Agriculture and Cap-and-Trade:
Policy Issues, Concerns
Policy Issues…
  Early focus on project-level activities
– 
– 
 
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Whole-farm GHG accounting systems needed
Move towards landscape accounting, systems
Duration of biological sinks: goal is to
maximize residence time in sinks
Better valuation of additional ecosystem
services delivered by agricultural offset
activities
Improving our Agricultural Policies:
C&T is Transitional, Transformational
Agricultural emissions reductions are a lowcost, high-impact, readily available means of
near-term, transitional GHG reductions
(2) Cap-and-trade can incentivize good
agricultural practices, policies: devil will be in
the details
(3) If ag offsets not included from the start, a huge
missed opportunity: society & agriculture
(4) Cap-and-trade can be “transformational”
(1) 
-- Farm Bill 2013?