Soil Carbon: Policy And Economics

Abstract

Abstract. Agricultural soils provide a prospective way of mitigating the increasing atmospheric concentration of CO2. A number of agricultural practices are known to stimulate the accumulation of additional soil carbon and early indications are that some might sequester carbon at relatively modest costs with generally positive environmental effects. We discuss, under 10 themes, policy and economic issues that will determine whether programs for sequestration of carbon in agricultural soils can succeed. The issues involve contexts for implementation, economics, private property rights, agricultural policy, and institutional and social structures. Ultimately, success will depend on the incentive structure developed and the way in which carbon sequestration is integrated into the total fabric of agricultural policy.

Generated Summary

This journal article examines the potential of agricultural soils to sequester carbon, a strategy considered for mitigating the increasing atmospheric concentration of CO2. The study explores the policy and economic dimensions of soil carbon sequestration, addressing the complexities of implementing programs for carbon sequestration in agricultural soils. The research considers the Kyoto Protocol and the context for managing agricultural soil carbon, soil sequestration practices, externalities, private property rights, incentive system design, and economics, among other themes. The article provides an overview of the challenges and opportunities associated with soil carbon sequestration, including international trading, monitoring, and verification, as well as the role of baselines, and the concept of leakage. The research utilizes a systems approach to discuss the topic. The article addresses various factors, including economics, private property rights, agricultural policy, and institutional and social structures. The ultimate success of soil carbon sequestration hinges on the incentive structure developed and its integration within the broader framework of agricultural policy. The document explores the potential benefits and challenges associated with soil carbon sequestration in the context of climate change mitigation strategies. It aims to provide a comprehensive analysis of the policy and economic considerations that will determine the success of programs designed to enhance carbon storage in agricultural soils.

Key Findings & Statistics

• The Kyoto Protocol requires ratification by at least 55 countries, including countries responsible for at least 55% of the 1990 carbon dioxide emissions from those countries listed in Annex I of the UNFCCC. As of October 2000, 30 countries, none of them from Annex I, had ratified the Protocol.
• The Protocol clearly establishes credits for carbon sinks in Article 3.3.
• The Kyoto Protocol states that the Conference of the Parties will decide upon modalities, rules and guidelines as to how, and which, additional human-induced activities related to changes in greenhouse gas emissions by sources and removals by sinks in the agricultural soils and the land-use change and forestry categories shall be added to, or subtracted from, the assigned amounts.
• The Kyoto Protocol establishes the principle of international emission permit trading, which at least partially extends to sinks.
• The carbon sequestered by one Party could be used to offset emissions in another sector of the national economy, or it could be traded or sold to a Party in another country.
• Canada (1998) has outlined a proposal in which the amount of carbon sequestered by a mitigation measure would be reported along with the uncertainty in this measurement. Credits could be claimed only to the extent that there was 95% certainty in the amount of carbon sequestered.
• The McCarl (1998) modeling study found substantial countervailing movements of traditional forest land to agriculture when afforestation was subsidized.
• Historically, U.S. agriculture has received extensive public subsidies in the form of price and income supports. At times in the late 1980s or early 1990s the total cost of the farm program was half or more of estimated total U.S. net farm income. For a number of years the U.S. spent $10–15 billion on agricultural farm programs. In the mid 1990s the U.S. began phasing out the agricultural farm program, with farm subsidies reduced to $5–6 billion, but by the end of the decade they reached near record levels of $16–22 billion.
• Consumer food prices remain low even in the face of growing population.
• The greenhouse gas sequestration aspects of the Kyoto Protocol raise interesting new possibilities for income supports in agriculture. Most agricultural production faces what economists call an inelastic demand curve.
• McCarl (1998) and McCarl and Schneider (1999, 2000a), among others, computed that the cost of some opportunities for agricultural sequestration of carbon was at or below thirty dollars per ton of carbon, while recent work by Schneider (2000) finds that carbon sequestration is attractive at low prices.

Other Important Findings

• Agricultural soils provide a prospective way of mitigating the increasing atmospheric concentration of CO2.
• A number of agricultural practices are known to stimulate the accumulation of additional soil carbon.
• The issues involve contexts for implementation, economics, private property rights, agricultural policy, and institutional and social structures.
• Papers in this special issue consider the overall question of carbon sequestration in agricultural soils.
• Agricultural soils are among the planet’s largest reservoirs of carbon and hold potential for expanded carbon sequestration.
• Decreasing carbon stocks in the biosphere, including agricultural soils, have historically been a net source of CO2 emissions to the atmosphere, but this process is amenable to reversal and net carbon flows from the atmosphere to the biosphere are feasible.
• The Kyoto Protocol holds open the possibility that interests outside of the agricultural sector may approach those in the agricultural sector to trade emissions permits and credits.
• Emitters with high emission reduction costs could pay others to reduce net greenhouse gas emissions instead of substantially reducing emissions themselves.
• The United Nations Framework Convention on Climate Change (U.N., 1992), the Kyoto Protocol (1998), and subsequent discussions, a number of features make carbon sequestration on agricultural lands an attractive strategy for mitigating increases in atmospheric concentrations of greenhouse gasses.
• A number of concepts arise in the protocol that are relevant to the soil sequestration strategy, including the eligibility of sinks, treatment of soils, international trading, verification, leakage, and baselines.
• The Kyoto Protocol recognizes that net emissions may be reduced either by decreasing the rate at which greenhouse gases are emitted to the atmosphere or by increasing the rate at which greenhouse gases are removed from the atmosphere using sinks.
• The Kyoto Protocol clearly establishes credits for carbon sinks in Article 3.3.
• Article 6 discusses Joint Implementation, whereby one Annex I country can pursue projects in another Annex I country and use the carbon benefits toward its own emissions commitments. Article 12 discusses the Clean Development Mechanism, under which projects can be sponsored by an Annex I country in a non-Annex I host. Article 17 discusses trading of emissions credits among Annex I countries.
• There are a number of related concerns about international leakage under a system in which some, but not all, countries participate.
• A recurring theme in the Kyoto Protocol is monitoring and verification of carbon emissions and sinks.
• An important concept in terms of carbon credits for sinks is that of leakage.
• A variety of land-management practices might be encouraged if increasing the agricultural and forestlands carbon soil stock could earn credit toward national emissions targets.
• Pursuit of soil carbon sequestration may lead to a number of possible gains or losses in other sectors of the economy.
• The soil is not an infinite sink for carbon sequestration.
• Soil carbon is also volatile and changes in practices can cause the soil to quickly revert to a lower carbon state.
• The potential for expanding agricultural carbon sinks in the face of the volatile nature of future carbon releases when land management changes, raises yet another policy consideration.
• Agriculture can respond to a greenhouse gas emission reduction effort in a number of ways.
• Policies that are agriculturally oriented and directed toward net greenhouse gas emission reduction need to consider the total effect of all of these roles and the comparative attractiveness of carbon sequestration versus other strategies.
• Incentive systems may also need to recognize that farmers do not seek only to maximize profits.
• Targeting is also an important component of incentive design.

Limitations Noted in the Document

• The Protocol does not clearly indicate that soils are part of the forest.
• The Protocol fails to define ‘forest’, ‘afforestation’, and ‘reforestation’.
• Simply stated, sequestration in agricultural soils is not now permitted to produce carbon sequestration credits under the Kyoto Protocol, but the door is left open for its addition.
• Transfer of emissions credits under either Article 6 or Article 17 would not create additional global emissions permits. Transfer of emissions credits under Article 12 would create additional global emissions permits since a country with emissions restrictions would obtain additional emissions permits from a country without such.
• An issue open to discussion with respect to international trading is the allocation of responsibility for failure to sequester carbon.
• The leakage issue is further complicated by the fact that some changes in carbon stocks are reportable under the Kyoto Protocol while others are not.
• Measurement of carbon stock changes along the path-not-traveled might rely on modeling or control plots.
• Baselines are likely to be an issue under Article 3.4 of the Protocol as well.
• Carbon sequestration endeavors involving transfer of land from agriculture to forestry might stimulate substantial countervailing land transfers out of forestry, thus offsetting the carbon gains.
• There are a number of related concerns about international leakage under a system in which some, but not all, countries participate.
• The extent of leakage from offsetting strategies will depend on the tax, regulatory, and incentive schemes that countries adopt to try to meet national objectives.
• Also, leakage accounting may be biased if there is an uneven treatment of carbon stocks within the Protocol.
• The leakage issue is further complicated by the fact that some changes in carbon stocks are reportable under the Kyoto Protocol while others are not.
• Farmers may be unwilling to take on such long-term commitments and it may be difficult to pass the liability on from farmer to farmer when farm ownership changes.
• Contract terms and liability for discontinuing carbon-preserving practices need to be worked out.

Conclusion

This research underscores the multifaceted nature of soil carbon sequestration as a strategy for mitigating CO2 concentrations. The core issue revolves around the integration of carbon sequestration into agricultural policy. The Kyoto Protocol and the context of managing agricultural soil carbon are central to this discussion. The document highlights the importance of carefully designed incentive systems, the complexities of private property rights, and the need for economic viability. The study brings forward the idea that the overall question of carbon sequestration in agricultural soils can succeed is dependent on the incentive structure. The research examines the potential benefits and challenges of soil carbon sequestration within the framework of the Kyoto Protocol and the broader context of climate change mitigation. It emphasizes the role of international trading, monitoring, and verification, while also addressing the issues of leakage and baselines. The article also notes that soil carbon sequestration has a limited time frame. The research also discusses externalities and indirect market impacts, and the potential for expanding agricultural carbon sinks in the face of volatile carbon releases. There are significant economic considerations. The analysis underscores that the market for carbon credits should be analyzed and also the non-agricultural demand. The study indicates that the costs of carbon sequestration in agriculture are at or below thirty dollars per ton of carbon. The study concludes with several key questions that need to be addressed to ensure the success of soil carbon sequestration programs. It addresses issues such as the approval of agricultural soils as a means to meet greenhouse gas emission commitments, the design of effective incentive programs, the management of carbon sequestration for long-term effectiveness, and the avoidance of countervailing leakages. The final thoughts center on international mechanisms, acknowledging concerns about equity and the need to coordinate carbon sequestration policy with other policy endeavors. The study suggests that a comprehensive evaluation needs to add in the costs and benefits of the negative and positive externalities associated with carbon sequestration, including, ideally, the costs and benefits of a changing climate.