Agriculture's ability to offset climate change

EDF has long supported employing market principles that protect the environment while stimulating the economy. In the case of climate policy, that means establishing a firm limit on greenhouse gas emissions paired with maximum flexibility in how that limit is achieved.

A key tool in making such a market work well is something called an offset market. Below are some common questions about the potential for an climate-agriculture offset market.

What is an "offset market"?

Since global warming pollution accumulates in the atmosphere from emissions throughout the world, to reduce the concentration, reductions can come from anywhere with equal impact on global warming. To get maximum reductions, EDF believes we should be helping major emitters find the least costly ways to meet reduction requirements.

The essential criteria is to ensure that the reductions are real, verified and are additional to the emissions established in the baseline. Offset markets are a way for companies to meet their greenhouse gas (GHG) reduction obligations through reductions occurring outside their facility(ies). A company might do this for a period of time to avoid replacing equipment before the end of its useful life or because it is the most cost effective way to meet their reduction obligations.

A significant reduction opportunity exists from farm and forestry practices that can actually take carbon pollution out of the atmosphere – or avoid emissions that would otherwise be released.

So if a utility is required to reduce their emissions by 100 tons over the next year, an offset market allows them maximum flexibility to meet that goal while not driving prices higher for consumers. The utility could reduce its direct emissions to reach part of the goal, increase its efficiency to meet part, and it could choose to purchase GHG reductions from farmers for part – or all of its target depending on which choices make the most economic sense.

In this way, offset markets make it possible to take action to reduce greenhouse gases without significantly disrupting the economy. It creates a market that rewards those who make emission reductions in the most efficient manner.

How can we assure that agricultural or forestry reductions are real and long-lasting?

Companies that have emissions reduction obligations under a cap and trade program are responsible for demonstrating that they have achieved their full requirement of verified reductions each year. If equipment breakdowns release more emissions than a company is allowed, the company must make up those reductions within the reporting period or be subject to stiff penalties. Similarly, if a company buys reductions from a farmer or another company, the reductions they buy must be certified as real for each year they are purchased.

Carbon sequestration in soils and plants is potentially reversible. That is, carbon that is sequestered in farmland and forests can be re-released into the atmosphere as a result of changes in the ways landowners manage their fields or forests. In addition, catastrophic events such as fires and storms could also result in losses of carbon stored in soils and plants. Also, the amount of carbon that can be stored in soils is finite.

Ensuring that carbon sequestration activities result in permanent reductions, therefore, requires on-going monitoring of fields and forests where carbon sequestration activities are taking place.

What happens if carbon stored in soils and sold as a credit, is released?

If the amount of carbon stored in those fields and forests is reduced and GHG credits have been issued based on that sequestered carbon, then the purchaser of the credits must be liable for the loss. So, for example, if a utility purchases GHG offsets from a tree planting project and the trees later burn up in a fire, then the utility must monitor those credits and replace an equivalent amount of GHG offsets as were lost in the fire.

One way to standardize this on-going monitoring and liability is the concept of carbon “leasing” or “renting.” Instead of purchasing permanent carbon sequestration credits, utilities and others who purchase GHG offsets would lease carbon credits for a 10-20 year period, for example. During the term of the lease, the purchaser would have to ensure that the carbon is periodically monitored and that the carbon remains stored in soils and plants. Because the lease provides for temporary storage, credits will sell at a discount.

At the end of the lease contract, the purchaser of the credit would have three options. First, the purchaser could pay the landowner for the right to extend the lease agreement for another defined period. The purchaser could also buy an equivalent amount of offsets from some other source – thereby allowing the initial landowner to lease those carbon credits to some other purchaser or to even allow the carbon stored in soils and plants to be re-released into the atmosphere. Finally, the purchaser could make additional reductions in their own operations to meet their overall cap. Even if the sequestered carbon from the initial lease is eventually returned to the atmosphere, the on-going liability that requires that sequestration credits be replaced will ensure that atmospheric GHGs are not increased.

In summary, addressing the reversibility of carbon sequestration requires on-going monitoring and liability for any loss of carbon sequestered in soils and plants. The verification process ensures that the company with reduction obligations must demonstrate annually that they have enough verified reduction credits to meet their full obligations.

How can agricultural practices reduce or offset greenhouse gases and global warming?

Plants naturally take up carbon dioxide (a primary greenhouse gas) and give off oxygen. In this process, they also store carbon in the soil through their roots. Most of that carbon is released when farmers plow up the field to plant a crop. Certain management practices, however, may have the ability to take CO2 out of the atmosphere and sink it into soils. Some of these practices may also increase soil fertility, improve water quality and water retention and enhance wildlife habitat.

How would an agriculture-climate offset market work?

There are many different ways in which agriculture practices can offset or avoid GHG emissions. The key will be that companies will likely want to buy a bulk amount of GHG tons and will not want to make several hundred contracts with individual farmers. This means there will be a new market for what might be called carbon aggregators. These entities – which could be a service of a local farm association or cooperative, would be responsible for bundling the carbon and verifying that the reductions are actually occurring. Some promising examples include:

• Soil Carbon Sequestration – Certain farming practices may increase the amount of carbon stored in the soil.

• Methane Captured from Agriculture Operations – Some agricultural operations emit methane.  For example, livestock operations produce a lot of manure which is usually a problem for these operations. However, the technology exists today to capture the methane bio-gas from the manure and use it as a fuel source to replace natural gas. Since methane gas is 21 times more potent in terms of global warming than CO2, the primary GHG, avoiding small amounts of methane emissions can help the atmosphere significantly while providing a steady, clean source of renewable energy.

• Reforestation – Planting trees on formerly forested, marginal agricultural lands can sequester large amounts of carbon while providing additional environmental benefits like improved water quality and wildlife habitat.

How do you know that the carbon is actually stored in soils?

Just as with any product or process – an agriculture offset is only as good as the measurement and verification processes involved in proving that greenhouse gases are being kept out of the atmosphere. The good news is that we have several ways of testing to ensure that carbon really is being stored in soils. By taking a soil sample and analyzing it at a lab, it can be determined how much carbon exists in a given set of soil. Periodic sampling will show how much carbon has been added. Also, there are many agriculture research universities who have done significant work studying which soils are best equipped to store carbon and which plants and crops do the best of injecting carbon into the soil. As a result, it is possible to determine which soils, crops and practices will combine to create large amounts of soil carbon sequestration.