Bio-economics of Climate Change

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Bio-economics of Climate Change Payments for
Carbon Sequestration in Michigan
This poster shows how strategies to mitigate
global warming can also help Michigan farmers
earn more money from their conservation
practices. Threat of Global Warming Life on
earth exists due to presence of gases like carbon
dioxide (CO2) that keep the earths surface warm
by absorbing suns radiation reflected by it. The
global carbon cycle keeps the optimum
concentration of CO2 in the atmosphere. Human
activities burning of fossil fuels and
large-scale deforestation have disrupted this
natural cycle by sharply increasing the
atmospheric CO2 concentration.
Carbon sequestration credits Potential gains for
Michigan landowners The growth in Michigans
forests raises the states carbon sequestration
potential. Michigan farmers can earn income by
selling carbon credits from post-1990 forest
plantations and post-1999 grass plantings and
no-tillage practices. The estimated value of
carbon credits from Michigan is 9.3
million/annum. As CO2 emissions rise, there will
be a higher demand for these carbon credits.
This produces the the greenhouse effect. CO2
absorbs more heat in the atmosphere, leading to
global warming, thereby increasing temperature,
changing weather patterns, melting glaciers and
polar ice, and raising sea level. Continued
global warming may have adverse impact on
national and international economies.

• Realizing this value will require
• aggregator an organization that helps
  individual farmers link up and sell carbon
  credits on CCX.
• ways to reduce costs for monitoring and
  measuring carbon sequestration on farmers
  fields. Researchers are working on computer based
  models that can use satellite images to monitor
  and measure carbon sequestration on farmers
  fields.

Carbon Sequestration a solution Possible
solutions to combat global warming include
reducing CO2 emissions (e.g. by burning less
fossil fuels) and carbon sequestration removing
excess CO2 from the atmosphere and storing it as
other forms of carbon. Plants and trees absorb
CO2 from the atmosphere and convert it into
biomass and soil organic matter through
photosynthesis. Forestry, conservation tillage,
and grass plantings are viable carbon
sequestration activities.
Potential Income for Michigan Landowners from
Carbon Sequestration
    Sequestration (tons of CO2/acre) Total Sequestration (tons of CO2) At CCX price (4/ton CO2)
Land Use Acres Sequestration (tons of CO2/acre) Total Sequestration (tons of CO2) At CCX price (4/ton CO2)
Post-1990 Timberland 325,682 2.4 781,637 3,126,548
Land under Christmas Trees 60,520 2.4 145,248 580,992
Land under woody crops 10,966 2.4 26,318 105,272
Land under Conservation Tillage 296,666 0.5 148,333 593,332
Idle land for cover crops 607,936 0.5 303,968 1,215,872
Woodland 1,224,237 0.75 918,178 3,672,712
Total 2,526,007   2,323,682 9,294,728
Markets for carbon credits The Kyoto Protocol
enacted in 2005, requires member countries to
reduce carbon emissions by 5.2 below 1990 levels
by 2008-12. Countries can achieve these targets
by trading in carbon credits, which are units of
carbon emissions reduced at source (measured in
tons of CO2 equivalent tCO2e). These efforts
have led to growth in carbon markets such as the
European Union Emission Trading Scheme. In 2006,
more than 760 million tCO2e were traded in this
market, valued at 18.9 billion. Another market
for carbon credits is the US based Chicago
Climate Exchange.
Calculations based on conservative sequestration
estimate of 6 ton CO2 / acre for post-1990
timberland. CCX estimates of 0.50 ton CO2 / acre
for both land under conservation reserve and for
cover crops, and 0.75 ton CO2 / acre for
woodlands.
Chicago Climate Exchange (CCX) and Carbon Payments
In November 2006, MSU joined the CCX as part of
its commitment to promote green technologies
and reduce its own emissions of about 520,000
tons CO2e/year. As CCX prices continue to rise,
MSU can help Michigan farmers sell additional
carbon credits on the exchange, thus setting an
example for all the Great Lakes states.
CCX is a voluntary emission reduction and trading
program whose members reduce their carbon
emissions by 1 per year. Members include Ford,
DuPont, IBM, Motorola, New Mexico, Chicago, and
Universities of Minnesota and Iowa. Members that
cannot reduce their own emissions can buy credits
from other members that exceed their reduction
targets and from farmers engaged in carbon
sequestration. Since its 2003 inception, CCX has
traded more than 15 million tons of carbon
credits. The present price of carbon on CCX is
4/ton. Farmers can make money by selling carbon
sequestration credits from forestry, conservation
tillage, and grass plantings. In 2005, Iowa
farmers sold 20,000 tons of carbon credits on the
CCX from no-till farmland and grasslands. The
University of Iowa, a CCX member, bought all
these credits. As the map shows, Michigan can
also earn CCX carbon payments for conservation
tillage, grass planting, and forestry.
US Central Region for CCX Soil Offsets
Data Sources Chicago Climate Exchange, Department
of Natural Resources, Intergovernmental Panel on
Climate Change, Michigan Land Resource Project,
MSU (Office for Campus Sustainability), Natural
Resource Conservation Service, United Nations
Environment Program, UN Framework Convention on
Climate Change, University of Michigan (SNRE),
USDA (National Agricultural Statistical Service),
US Environment Protection Agency, and USDA
(Forest Service).
Contributing Authors Rohit Jindal (CARRS), John
Kerr (CARRS), Stuart Gage (Entomology), Gene
Safir (Plant Pathology), Brent Simpson (Institute
of International Agriculture), David Skole
(Forestry), and Terry Link (Office for Campus
Sustainability).
Offsets for no-till or grassesOffsets for
grasses only