Creating a Role for Agriculture and Forestry in Emerging Carbon Markets

Encouraging agricultural and forestry carbon sequestration and greenhouse gas mitigation is a necessary tool to meet U.S. emissions targets at minimum cost, but implementation challenges have relegated the agriculture and forestry sector to a marginal role in national and international cap-and-trade and energy policies, including those currently being discussed by U.S. legislators. However, there are policy solutions for the widely understood challenges for agriculture and forestry carbon offsets that would allow inclusion of this important sector into the U.S. carbon economy and ultimately reduce the overall cost of meeting greenhouse gas (GHG) emission targets for the nation. The agriculture and forestry sector of the U.S. economy are unique because land managers can do more than simply reduce their own emissions of such key greenhouse gases as carbon dioxide, nitrous oxide, and methane. By adopting crop, soil, and livestock best management practices (BMPs), the sector can sequester additional carbon and/or replace fossil fuels with renewable energy sources, thus becoming part of the solution and providing carbon offsets for regulated sectors. The EPA estimates the mitigation potential of U.S. agriculture and forestry to be 10-25 percent of total annual U.S. GHG emissions. This potential is substantial, especially relative to emissions from the sector, estimated at about 8 percent of U.S. GHG emissions. Making the agriculture and forestry sector eligible for a compliance market is particularly attractive because many abatement options are cost-neutral or net-profit-positive, require low capital investment, and rely on existing technologies. Many BMPs for mitigation include additional environmental, food safety, and sustainability co-benefits, such as improving soil health by increasing soil organic matter, and protecting soil and water resources. With such significant potential, why has the agriculture and forestry sector remained relatively marginal in both international and national climate change and energy policies to date? The main reason is the challenges and uncertainties involved in implementation. Perhaps most daunting are concerns about high transaction costs for determination of carbon stock baselines, monitoring, and verification, especially for highly-variable soils, in a diverse sector with many individual enterprises. This sector also faces a unique set of challenges with issues of permanence, leakage, and additionality. Equity in distribution of carbon offset revenues is another factor, with small