Environment and Natural Resources Seminar

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Climate, Carbon and Cowboys agriculture's role
in reducing greenhouse gases

• Environment and Natural Resources Seminar
• University of Wyoming
• November 3rd, 2004
• Siân Mooney
• Assistant Professor
• Dept. Agricultural and Applied Economics
• University of Wyoming

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Road map

• Climate
• Why are we concerned about climate?
• Carbon
• What role can carbon play in moderating
  concentrations of GHGs?
• Cowboys
• Emerging market for carbon credits
• Is there a role for agriculture?

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CLIMATE
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You dont need a weatherman to know which way
the wind blows- Bob Dylan

• Atmospheric concentrations of gases such as
  carbon dioxide, methane and nitrous oxide are
  increasing
• These greenhouse gases are thought to
  contribute to global warming

The Keeling curve, a long-term record of
atmospheric CO2 concentration measured at the
Mauna Loa Observatory (Keeling et al.).
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Possible Climate Change

• Global average temperatures predicted to increase
  by approx 2oC by 2050
• Regional and local changes most important
• Great Plains/Prairies (GCGM1, Hadley, CSIRO,
  GFDL)
• 2-3oC increase in summer temperatures
• 2.5-4.5oC increase in winter temperatures
• Small increase or decrease in summer
  precipitation
• Increase in winter precipitation

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So what?

• Climate change can affect world markets
• Crop yields, prices, energy demand
• Potential for greater weather extremes
• Drought, hurricanes, blizzards, floods
• Biodiversity
• Changes in the range of plants and animals (can
  they move fast enough?)
• Sea level rise (lots of the worlds population
  lives at low elevation)

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CARBON

• (and other greenhouse gases)

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What goes around comes around
Cartoon of the global carbon cycle. Pools (in
black) are gigatons (1Gt 1x109 Tons) of carbon,
and fluxes (in purple) are Gt carbon per year.
Illustration courtesy NASA Earth Science
Enterprise.
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International efforts to reduce GHGs

• Kyoto Protocol
• Introduced the idea of market trading to reduce
  GHGs

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US Trading Initiatives and Activities

• Chicago Climate Exchange
• www.chicagoclimatex.com
• National Carbon Offset Coalition
• www.nationalcarbonoffsetcoalition.org
• Commodity brokerage firms
• Natsource
• Cantor Fitzgerald
• Consultants
• State Initiatives

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COWBOYS

• A role for agriculture?

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Whole US SchneiderSchneider, U. A. 2000.
Agricultural Sector Analysis on Greenhouse Gas
Emission Mitigation in the United States.
Dissertation, Texas A M University,
Agricultural Economics.
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Biophysical Potential to Sequester C in US SOILS

• Grazing lands and pasture
• Net biophysical potential approx. 53 MMTC/yr
• Crop lands
• Net biophysical potential approx. 100 MMTC/yr
• Forest lands
• Net biophysical potential approx. 106 MMTC/yr

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Methane

• Source
• Livestock (enteric fermentation and animal waste)
  0.6 Gigatonnes CO2 equivalent/yr
• Less research on livestock systems
• Potential solutions
• Dietary changes
• Technological innovations e.g. methane
  digesters
• Ruminant Livestock Efficiency Program (EPA)

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How much is C worth?

• No well defined market in the US
• Prices for verifiable credits have ranged between
  1.50 to 12/MT C
• Likely that if trading is legitimized these
  credits would have more value
• Eventual market prices will be determined by the
  interplay of supply and demand

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Demand and Supply Factors

• Demand
• Domestic GHG policy
• International GHG policy
• Supply
• Cost of generating credits
• Costs of credit generation in other industries
  e.g. forestry, crop land

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How to generate C credits?

• Rules of the game not set
• Potential rules
• Additionality only get credit for any carbon
  reductions that are ADDITIONAL to current
  practices
• Likely you will need to change practices from
  business as usual to gain any credits

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Example
1. Currently engaged in conventional till on an
acre of land Rate of soil C sequestration is
0.1 MT/year This is business as usual 2.
Switch to no-till on that acre Rate of soil C
sequestration is 0.5 MT/year Now you have a
change from business as usual 3. Carbon
available for credit sales 0.5 0.1
0.4MT/year
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Carbon Economics when to change practices to
generate carbon credits?

• Assume
• Contract pays p for each MT of additional C/yr
• Change in management practice provides ?C MT/year
• Total payment p ?C
• Enter contract if ?o - ?s lt p
• ?C

Cost of producing each credit
Credit price
lt
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Cost from other sources (1)
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Costs from other sources (2)
Source Antle, J., S. Capalbo, S. Mooney, E.
Elliot and K. Paustian. 2002. A Comparative
Examination of the Efficiency of Sequestering
Carbon in US Agricultural Soils. American Journal
of Alternative Agriculture 17(3)109-115
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Actual Trades
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Other market/contract issues

• Measurement/monitoring and verification
• Size of contract units
• Contract term and non-compliance
• Selling carbon or carbon sequestration services?

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Other issues

• Many practices have other co-benefits
• Wildlife
• Water
• Change practices costly initially but in some
  cases returns increase after a short period
• Carbon credit payments could provide a financial
  bridge for these changes

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Funding Agencies

• This material is based upon work supported by the
  Cooperative State Research, Education, and
  Extension Service, U.S. Department of
  Agriculture, under Agreement Nos.
  2003-35400-12907 and 2001-38700-11092

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For more information contact
Siân Mooney Assistant Professor Dept.
Agricultural and Applied Economics University of
Wyoming Laramie, WY 82071 E-mail
smooney_at_uwyo.edu Phone [phone]