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July 27, 2009

UN Approves Ag Carbon Offset Methodology to Cut CO2 Emissions

The United Nations recently approved the broad application of the first agricultural methodology, or biological approach, for Clean Development Mechanism (CDM) projects to reduce greenhouse gas emissions. The UN’s announcement coincides with the USDA’s analysis report that shows the economic benefits to agriculture from the U.S. cap-and-trade legislation.

The Clean Development Mechanism (CDM) is part of the Kyoto Protocol, which allows industrialized countries to purchase emission reduction certificates, called Certified Emission Reductions (CERs), from projects that reduce emissions in developing countries that do not have a reduction commitment under the Kyoto Protocol.

The agricultural methodology, which will be used to design projects that eliminate the use of synthetic nitrogen on legumes like soybeans and cowpeas, was developed by Amson Technology LC, a greenhouse-gas-reduction and sustainability consulting firm, Becker Underwood Inc., a leading developer of bio-agronomic and specialty products and Perspectives GmbH, a Point Carbon company, a high-quality greenhouse gas reduction market solutions provider.

“The UN’s decision highlights how agriculture can provide solutions to climate change issues while feeding a growing world population,” said Peg Armstrong-Gustafson, owner and founder, Amson Technology LC.

A recent study from DB Climate Change Advisors finds that the agriculture sector can participate in the mitigation of climate change due to its ability to store and cycle CO2 and to provide potential offset markets for the trading/management of carbon. This can be done through a number of technologies and management practices such as no-till cropland management, planting of perennials and the development of biochar resources, according to the study.

The methodology calls for the use of a unique bacterium to stimulate the creation of nitrogen by the plant for its own use, called biological nitrogen fixation (BNF), which eliminates the need for the application of nitrogen fertilizer. According to Amson Technology the production of nitrogen fertilizer is energy intensive and releases significant amounts of CO2.

Amson, Becker and Perspectives will soon begin implementing CDM projects with the unique bacteria from Becker Underwood. The three firms launched the project more than three years ago. The CDM projects will run for up to 21 years and operate under the terms of the methodology for measuring and monitoring the reduction of CO2 emissions.

In the U.S., a sustainable agriculture survey conducted by Rabobank shows that nearly 70 percent of the U.S. farmers and ranchers have taken steps toward implementing sustainable agricultural practices, and dairy farmers are striving to cut 25 percent annual GHG emissions related to the production of fluid milk by 2020.

Earlier this year, the Office of Ecosystem Services and Markets, which is a part of the U.S. Department of Agriculture, started a program to partner industrial emitters of CO2 with landowners to plant forests or crops to reduce carbon emissions.

In addition, the recently released Voluntary Carbon Standard (VCS) allows agriculture, forestry and other land use (AFOLU) projects to generate carbon credits that are interchangeable with other carbon credits generated by non-AFOLU activities such as energy and industrial projects.

The UN’s decision coincides with the release of a USDA report that analyzes the impact of the U.S. climate legislation, which reduces greenhouse gases and implements a cap-and-trade program, on the agricultural and forestry industries.

U.S. Secretary of Agriculture Tom Vilsack said the results of a recent USDA economic analysis shows that the economic benefits to agriculture from the cap-and-trade legislation will likely outweigh the costs in the short term, and that the economic benefits from offsets markets will easily outpace increased input costs over the long term.

According to the USDA report, the U.S. climate legislation provides opportunities for farmers and ranchers to receive payments for carbon offsets. EPA’s analysis indicates that in 2020 agricultural lands would supply 70 million tons of CO2e offsets through changes in tillage practices, reductions in methane and nitrous oxide emissions, and tree planting (afforestation), while existing forests would supply an additional 105 million tons of CO2e reductions through enhanced forest management, according to the report.

Vilsack said the House climate bill would increase farm expenses by $700 million, or 0.3 percent, from 2012-18, reported Reuters. However, the report analysis indicates that would be offset by revenue from a carbon offset market, estimated at $1 billion per year from 2015 to 2020 to almost $15-$20 billion in 2040-2050, not accounting for costs of implementing offset practices.

As an example, Vilsack said a Northern Plains wheat producer, for example, might see an increase of $.80 per acre in costs of production by 2020 due to higher fuel prices. Based on a soil carbon sequestration rate of 0.4 tons per acre and a carbon price of $16 per ton, a producer could mitigate those expenses by adopting no-till practices and earning $6.40 per acre.

Though Vilsack admits that climate legislation will impact different landowners in different ways.

EPA administrator Lisa Jackson said offsets would be worth nearly $3 billion a year in 2020 for farms, ranches and forests, reports Reuters.

The report indicates that by 2050, agricultural lands could supply 465 million tons of CO2e reductions and existing forests could supply an additional 178 million tons of CO2e reductions. This could generate gross domestic agricultural and forestry offset revenues of about $1-2 billion per year from 2012-2018, rising to $20 billion per year in 2050, according to EPA analysis.

However, the report does not consider the potential effects of the offsets markets on commodity prices. The removal of cropland and pastureland for afforestation would place upward pressure on crop prices, which would benefit producers of livestock feed but lead to higher livestock input costs and higher producer prices for livestock and milk, according to the study.

In the near term, most of the money would go to people who plant trees to lock carbon in the soil or enroll woodlands as carbon sinks, while  relatively small amounts would be generated by changes in tillage or crops, reports Reuters.

Two senators from the Great Plains, Republicans Mike Johanns of Nebraska and Pat Roberts of Kansas, asked Vilsack and Jackson, how much pasture and crop land would shift into trees if a carbon offset market is created, according to Reuters. Roberts said 40 million acres might be converted, reports the news agency.

The EPA estimates U.S. cropland accounts for 6 percent of greenhouse gas emissions but growing vegetation removes 1 billion tons of carbon dioxide from the atmosphere, reports Reuters.

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