Economics of Sequestering Carbon in the U.S. Agricultural Sector. By Jan
Lewandrowski, Carol Jones, and Robert House, Resource Economics Division,
Economic Research Service, U.S. Department of Agriculture; Mark Peters,
Agricultural Marketing Service, U.S. Department of Agriculture; Mark Sperow,West
Virginia University; and Marlen Eve and Keith Paustian, Natural Resource Ecology
Laboratory and Colorado State University. Technical Bulletin No. 1909.
____
Strategies that have been proposed to mitigate global climate change typically
focus on reducing energy-related emissions of greenhouse gases (including carbon
dioxide) into the atmosphere. But atmospheric concentrations of greenhouse gases
also can be reduced by withdrawing carbon from the atmosphere and storing, or
sequestering, it in soils and biomass. In examining the economics of sequestering
carbon in the U.S. farm sector through changes in agricultural land use and
management practices, this study focuses on two questions:
● How much of the estimated “technical” potential for carbon sequestration
is economically feasible?
● How cost effective are alternative designs for incentive payments that
might be used to encourage carbon-sequestering activities?
Model-based findings reflect the provision of financial incentives to landowners
for sequestering carbon through changes in land use (converting cropland to forest
or grassland) and cropland management practices (adopting conservation tillage or
alternative crop rotations):
● Agriculture can provide low-cost opportunities to sequester additional
carbon in soils and biomass. At a price of $10 per metric ton for permanently
sequestered carbon, the ERS model estimates that from 0.4 to 10 MMT of carbon
could be sequestered annually from adoption of the land-use changes or
management practices analyzed; and at $125 per ton, from 72 to 160 MMT
could be sequestered, enough to offset 4 to 8 percent of gross U.S. emissions of
greenhouse gases in 2001.
● The different sequestration activities studied become economically feasible
at different carbon prices. The model predicted that farmers would adopt cropland
management (primarily conservation tillage) at the lowest carbon price, $10
per metric ton permanently sequestered carbon, and would convert land to forest
as the price rose to $25 and beyond. The model predicted farmers in most
regions would not convert cropland to grassland up through a $125 carbon price
(in the absence of other incentives, such as Conservation Reserve Program payments),
in part because conversion to afforestation was more profitable with its
higher sequestration rate per acre. These estimates are comparable with estimates
in earlier studies.
● The estimated economic potential to sequester carbon is lower than previously
estimated technical possibilities. Soil scientists have estimated that
increased adoption of conservation tillage on U.S. cropland has the technical
potential to sequester as much as 107 million metric tons (MMT) additional carbon.
The ERS model estimates economic potential by factoring into farmers’
adoption decisions the tradeoff between the additional costs of sequestering
practices, relative to the additional returns from the per ton carbon payments. We
estimate that farmers could sequester up to an additional 28 MMT by adopting
conservation tillage on additional lands at the top carbon price we studied, $125
per ton. For the other activities studied—afforestation and, particularly, for
conversion to grassland—the estimated economic potential also was less than
the literature estimates of technical potential.
vi ● Economics of Sequestering Carbon in the U.S. Agricultural Sector / TB-1909 Economic Research Service/USDA
● Incremental sequestration from agricultural activities can continue for
decades. Conversion to conservation tillage could sequester additional soil carbon
for 20-30 years, at which point a new equilibrium level of soil carbon would be
attained. But carbon may be released relatively rapidly if farmers shift back to
conventional tillage. Additional sequestration from afforestation may continue for
many more decades, depending on region, species of trees, and harvest decisions.
These findings have implications for policy:
● Payments for carbon sequestration may exceed their value if sequestration
is not permanent. To have the same greenhouse gas mitigation value as a unit
of carbon emissions reduction, a unit of additional carbon sequestration must
remain stored in soils or biomass permanently. If a program makes per ton payments
equal to the value of permanent sequestration (“asset” payments), overpayments
will occur if subsequent changes in land use or management practices
release carbon back into the atmosphere—unless compensation is adjusted for
the releases. “Rental” payment mechanisms, which pay farmers to store carbon
for specific periods by maintaining carbon-sequestering practices, can help avoid
this problem—particularly for contract renewals after the period when a new
equilibrium level of soil carbon is reached and no more carbon is being added to
the soil.
● An incentive system that includes both payments for carbon sequestration
and charges for carbon emissions may be much more cost effective than a
system with payments only. For example, at a carbon price of $125 per ton of
permanently sequestered carbon, changes in tillage practices account for 7 MMT
of additional sequestered carbon with a rental payment system that includes both
payments and charges. Annual government expenditures for storage of this carbon
during the 15-year contract period total $300 million. In contrast, when the incentives
include only carbon payments, a price of $125 per ton results in half the
sequestered carbon (3.5 MMT), while annual government expenditures increase
tenfold to $1.5 billion.
● Adding a cost-share subsidy does not appear to improve the cost effectiveness
of incentive systems. A 50-percent cost-share for cropland conversion to forestry
or grasslands would increase sequestration at low carbon payment levels but not at
high payment levels. The implications for cost per ton are minimal.
Fair Use Notice: This post contains copyrighted material that has not been authorized by the copyright owners. PGI believes this educational use on the Green Eye Web-blog constitutes a fair use of the copyrighted material (as provided for in section 107 of the US Copyright Law.) If you wish to use this copyrighted material for purposes that go beyond fair use, you must obtain permission from the copyright owner. Fair Use notwithstanding we will immediately comply with any copyright owner who wants their material removed or modified or wants us to link to their web site which we routinely do as a business practice notwithstanding.
No comments:
Post a Comment