One of President Obama’s goals as he entered office was to address “global warming” and concerns over world climate change.
The U.S. House Energy and Commerce Committee, chaired by Congressman Henry Waxman, D-Calif., passed a somewhat controversial climate change bill (HR-2454) in late May. House Speaker Nancy Pelosi, D-Calif., is encouraging other U.S. House committees to review this legislation, offer suggested amendments and to move it forward for passage in the next few weeks.
HR-2454, as it currently is written, would cap carbon emissions at 17 percent below 2005 levels by 2020, 42 percent below by 2030 and 83 percent below by 2050. The bill also creates a so-called “Cap and Trade” system, through which a company or business could purchase carbon allowances (credits) from other businesses and industries that reduced carbon emissions through their normal operations.
The legislation also calls for 15 percent of electrical energy in the United States to come from renewable sources by 2020, including wind, solar, biomass and geothermal. There was little mention of agriculture or the agriculture industry in the version of HR-2454 that is currently being debated in Congress.
However, U.S. House ag committee Chair Collin Peterson, D-Minn., and other Midwestern Congressmen, would like to see the role of agriculture more clearly defined in the climate change legislation, before it is brought to a vote in the U.S. House.
A little later in this column, I will look in more detail at some of the provisions in HR-2454, and what the implications for the agriculture industry might be. However, we first want to look at some of the background regarding climate change and carbon credits.
Understanding carbon credits
There has been considerable discussion in the United States and throughout the World over the concern of “global warming,” and how to address it for the future. Global warming is generally the result of excess build-up of the so-called “greenhouse gases,” which are usually linked to excessive emissions of carbon dioxide and other gases into the atmosphere.
Carbon dioxide has been involved in the normal life process since the beginning of time; however, practices such as burning fossil fuels and changing global land-use patterns can increase carbon dioxide emissions and lead to increased heating of the Earth’s atmosphere.
Carbon dioxide is a concern due to the large amounts that are regularly released into the atmosphere. Some of the other “greenhouse gases” have a much lower occurrence than carbon dioxide, but are much more powerful and stay in the atmosphere much longer. For example methane has a 21 times greater warming effect on the Earth’s atmosphere that carbon dioxide, while nitrous oxide has an almost 300 times greater effect on heating the atmosphere compared to carbon dioxide.
It is important to recognize how the agriculture industry compares to other industries and commercial ventures regarding “greenhouse gas” emissions and to understand what the sources are for the greenhouse gas emissions by agriculture.
Following is an Environmental Protection Agency listing of the greenhouse gas emissions by various segments of the U.S. economy in 2005.
U.S. greenhouse gas emission by economic sector (2005)
Percent of emissions — Sector
33.5 — Electric power industry
27.7 — Transportation industry
18.6 — Manufacturing industry
8.2 — Agriculture industry
5.0 — Soil management
1.5 — Animal production
0.7 — Manure management
0.6 — Fossil fuel emissions
0.3 — Other sources
5.9 — Commercial
5.2 — Residential
0.8 — Other
100.0 — TOTAL
Source: EPA, U.S. Inventory of Greenhouse Gas Emissions and Sinks (1990-2005).
Carbon opportunities for agriculture
A “carbon sink” reduces carbon greenhouse gases by storing the carbon in another form rather than releasing it into the atmosphere as carbon dioxide. Forests and growing trees are good examples of naturally occurring “carbon sinks” that help mitigate carbon emissions into the atmosphere.
Organic matter in our agricultural soils currently accounts for less than 1 percent of the “carbon sinks” that exist to offset greenhouse gas emissions. However, there appears to be opportunities for agriculture producers to capture more greenhouse gases in the future through adoption of reduced tillage methods.
Besides reduced tillage for crop production, some other opportunities for agriculture include:
• Reduced nitrous oxide emissions through improved management of nitrogen fertilizer.
• Technology to create ammonia (nitrogen fertilizer) from sources other than natural gas.
• Develop strategies to capture and utilize methane gas emissions from livestock manure facilities.
• Substitute renewable fuel sources for gasoline, diesel fuel and natural gas used on the farm.
• Increasing the generation of electricity from wind, solar and other renewable energy sources.
• Expanding the use of conservation practices such as managed shelterbelts, riparian zones, etc.
Agriculture producers who adopt reduced soil tillage and other practices may have the opportunity to earn “carbon credits” for some practices. The U.S. Department of Agriculture, the state of Minnesota and some private organizations offer incentives to producers to implement conservation practices and to plant alternative vegetation on some farmland.
The Chicago Climate Exchange has been established to buy and sell carbon credits, similar to the Chicago Board of Trade for grain futures or the Chicago Mercantile Exchange for livestock futures. This has the potential to create a new income source for farm operators and owners that adopt alternative management practices that help reduce greenhouse gas emissions.
Several farm organizations have provided assistance and information to agriculture producers on carbon credits, and have information available on their websites.
Agriculture also has plenty to be concerned with relative to possible legislation and regulation targeted at reducing the emissions of greenhouse gases. The largest contributors to the emissions of these gases are the traditional energy industry, transportation and manufacturing.
Added fees and taxes to these industries will likely lead to considerable increases in costs for goods and services needed by crop and livestock producers in their normal farm operation.
Ethanol and biofuels
When ethanol and other biofuels are discussed relative to greenhouse gas emissions, there are two different lines of thought.
One line of thought is that ethanol and other biofuels offer a significant improvement over traditional gasoline and diesel fuel, due to decreased direct greenhouse gas emissions when the fuel is utilized. The other line of thought wants to also include the impacts of changing land-use (“indirect land-use impacts”) relative to greenhouse gas emissions resulting from the production of the feedstock (corn, soybeans, etc.) for the ethanol or biofuels being produced.
Several studies have shown that there is an improvement of about 20 percent in greenhouse gas emissions from utilizing ethanol as a fuel source compared to traditional gasoline. The improvement in greenhouse gas emissions can rise to as high as 70 percent when the ethanol is produced from certain types of biomass.
However, when indirect land-use impacts are factored in to the equation, that percentage changes. The thought process is that if we use traditional cropland for fuel production, it will take more cropland around the world to meet global food needs in the future. This could result in non-ag land being converted to crop production acres, and thus would reduce “carbon sink” acres, and ultimately increase the incidence of greenhouse gases.
Also, the current main alternative feedstocks to corn for producing biofuels are crop residue sources, which when removed from the soil could reduce soil organic matter, and ultimately increase greenhouse gases.
One concern with the inclusion of indirect land-use impacts in the calculations, is that many of the future models and estimates are based on today’s technologies for agriculture production and biofuel production. We have seen tremendous research advancements in seed genetics to enhance crop yields and other production traits in many crops.
There are also many advancements occurring in the efficiency of producing ethanol and other biofuels. So, the overall net impact from future production of biofuels may be far less on emission of greenhouse gases than some current studies and analysis have shown. Another concern for agriculture is that the indirect impacts from other energy sources are not being recognized in this process.
California legislation
The California Environmental Protection Agency is moving forward with their own legislation addressing the emission of greenhouse gases.
At least 13 other states are considering similar legislation. Given the current “fast-track” approach that the federal EPA and the U.S. House are currently moving at regarding carbon credits and climate change legislation, the California legislation takes on added significance for agriculture and the biofuels industry if it is incorporated into HR-2454.
The California legislation to reduce greenhouse gas emissions seems to be counter to the Energy Independence and Security Act passed by Congress in 2007. EISA requires a gradual increase in the volume of various types of biofuels over the next several years, in order to allow time for research and technology development. EISA did not outline specific targets for carbon sequestration, or contain any discussion of indirect land-use impacts.
The California legislation calls for more immediate reductions in carbon emissions, beginning in 2010, with a 10-percent reduction in emissions by 2010.
The California legislation also rates various fuel sources for the estimated amount of carbon emissions, compared to a “baseline,” which is crude-oil based gasoline. The California estimates for carbon emissions for fuel-type include indirect land-use emissions in the calculation. As a result, all corn-based ethanol production has about a 30 percent higher rate of carbon emissions, compared to the baseline, when indirect land-use emissions are included, compared to non-inclusion.
In fact, the proposed California calculations would list corn-based ethanol, produced under normal production methods, as having higher carbon emissions that traditional crude-oil based gasoline.
The California calculations are favorable to future fuel development from energy resources such as natural gas, hydrogen and non-coal based electricity. The California calculations are also favorable to ethanol produced in Brazil, which is processed from sugar cane, and could become a viable alternative to corn-based ethanol as a major source of biofuels in the future.
Agriculture and HR-2454
As mentioned earlier, Peterson and other Congressional leaders are pushing for a more-defined role of the agriculture industry in climate change legislation.
Most would also like to see indirect land-use emissions taken out of the equation for ethanol and other biofuels, until more research exists on the subject. Most major agriculture organizations and commodity groups are fairly unified in their proposals relative to potential federal climate change legislation.
Following is a summary of recommendations from the various ag groups for HR-2454 and similar legislation:
• Agriculture should have unlimited offsets via the proposed carbon “Cap and Trade” system.
• Agriculture should be rewarded (paid) for carbon sequestration efforts. (A recent study predicted that the value of one ton of carbon credit could be worth more than $28 by 2012.)
• Payment should include practices that farmers and ranchers have already implemented.
• Indirect foreign land-use should not be considered for domestic carbon offsets (ethanol).
• The USDA should have a major role in agriculture carbon sequestration efforts.
• Land should not be taken out of production to provide for carbon sequestration.
• The market, not the government, should determine the value of carbon credits.
• Poor and rural residents may need additional assistance to deal with higher energy costs.
Bottom line
The bottom line is that the concern over global warming and greenhouse gases, and the attention to “carbon credits” and other solutions, is here, with the proposed climate change bill in Congress, as well as the California carbon legislation.
These issues and potential legislation are likely to have a big impact on the agriculture industry in the coming years, so it is a good time to learn more about the issue and how it could affect your farm. All of the major farm organizations and commodity groups, as well as several land grant universities, are active on these issues, and most have information available on these topics. Check out their websites for details.
