CASMGS Insider - Add vignette

Economics of Sequestering Carbon in the U.S. Agricultural Sector
Author Carol Jones, Colorado State University	Executive Summary This study explores the economic potential of sequestering additional C in the U.S. agricultural sector by providing farmers with incentives to expand the adoption of land uses and production practices that increase C storage in soils and vegetation.

Jan Lewandrowski, Mark Peters, Carol Jones, Robert House, Mark Sperow, Marlen Eve, and Keith Paustian

Soil science studies have estimated the technical possibilities for sequestering additional carbon. This study explores the economic potential of sequestering additional carbon in the U.S. agricultural sector by providing farmers with incentives to expand the adoption of land uses and production practices that increase the quantity of carbon stored in soils and vegetation. We address two primary issues:

� How much of the estimated �technical� potential for carbon sequestration is economically feasible? � How cost effective are alternative incentive designs that might be used to encourage carbon- sequestering activities?

How was the study conducted?

To assess the economic potential to sequester carbon in the farm sector, we adapted the ERS U.S. Agricultural Sector Model (USMP) to include both sequestration and emissions parameters and the costs associated with switching into and out of land uses and production practices that build carbon levels in soils and vegetation. From the sequestration/emission parameters, we were able to implement alternative designs for carbon-based incentive payments to farmers. The three sequestering activities we studied were afforesting croplands and pasture, shifting cropland to permanent grasses, and increasing the use of production practices (particularly no-till) and rotations that raise soil-carbon levels. Model simulations were run reflecting 15 sequestration contracts, four alternative payment designs, and six alternative payment levels for additional sequestered carbon.

Click on the image to view the unscaled version.		Picture Caption: Publication Cover

Findings:

� 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; 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 conversion to conservation tillage on a cropped field could generate increasing soil carbon for 20-30 years on the field, 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.

� 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 part because conversion to afforestation was more profitable with its higher sequestration rate per acre.

� 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 US 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 previously estimated technical potential.

� 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, 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. 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 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.

For more information, review this document. tb1909_researchbrief.pdf		Research Brief in PDF

For more information, review this document. research vignette for casmgs 051404.doc		Research in Word Format

For more information on this subject see the web site publication		ERS web site

Go Home
View Another Vignette

Comments? Questions? Click here.

Economics of Sequestering Carbon in the U.S. Agricultural Sector

Author Carol Jones,Colorado State University

Executive Summary This study explores the economic potential of sequestering additional C in the U.S. agricultural sector by providing farmers with incentives to expand the adoption of land uses and production practices that increase C storage in soils and vegetation.

This study explores the economic potential of sequestering additional C in the U.S. agricultural sector by providing farmers with incentives to expand the adoption of land uses and production practices that increase C storage in soils and vegetation.

Picture Caption: Publication Cover

Research Brief in PDF

Research in Word Format

ERS web site

Comments? Questions? Problems? Click here.

Comments? Questions?
Click here.

Author
Carol Jones,
Colorado State University

Executive Summary
This study explores the economic potential of sequestering additional C in the U.S. agricultural sector by providing farmers with incentives to expand the adoption of land uses and production practices that increase C storage in soils and vegetation.

Comments? Questions? Problems?
Click here.