Power plants, other industry could offer contracts to farmers in helping reduce carbon emissions

03/03/04

COLLEGE STATION Two research economists say electrical power plants and other manufacturing agencies could someday seek the aid of farmers, offering contracts to help industrial firms reduce carbon emissions. For farmers, such agreements could create an additional source of income and make carbon a traded commodity.

Dr. Bruce McCarl, a Texas Agricultural Experiment Station economist, and Dr. Tanveer Butt, a professor of economics at Texas A&M University, are looking at the possibilities.

The researchers said global warming is partially due to an increase in greenhouse gases, and is released primarily by power plants, automobiles, manufacturing companies and tropical deforestation.

Both McCarl and Butt said carbon dioxide is the most dominant greenhouse gas. Since crops and trees process carbon dioxide and return it back into the soil in the form of carbon, land used by agriculture could play an important role in carbon sequestration.

Land management practices, such as tree production, the planting of grasses on rangeland, and conservation tillage, are a few methods that would help reduce levels of carbon dioxide.

"Plants can take carbon from the air and put it back into the soil, and this could be a cheaper alternative than causing cutbacks or technology change in the energy or manufacturing industries," Butt explained

Agriculture could play a key role in carbon reduction when industry, such as power plants, might face greenhouse gas emission limits and look for ways to offset levels that are above the limits.

The major sources of greenhouse gas emissions in the United States are power plants (36 percent), transportation (28 percent) and the manufacturing industry (22 percent), according to the U.S. Environmental Protection Agency.

There are two fundamental ways that farmers might be paid for sequestration. A subsidy program might pay farmers to retire land or alter practices. The second alternative would allow private buyers to contract with private sellers.

But there is one big hurdle, according to the research economists. The current carbon market offers very limited prospects for farmers to make money. Existing prices suggest farmers could make 49 cents per acre for practicing conservation tillage and 74 cents per acre for planting grasses.

The prospects can only improve if the U.S. government enforces a greenhouse gas emission reduction plan, which would strengthen market prices or introduce funded programs that share part of the carbon sequestration cost, according to the researchers.

And such drastic measures enforcing carbon reduction among power plants, the transportation sector or other industrial firms could have a damaging impact on the national and world economies.

"If the U.S. goes 'whole hog' in restricting carbon emissions, they could put a tax on power-generating companies to reduce their carbon emissions," Butt said. "This will, in turn, increase the cost of energy generation that will be passed on down to the consumer and industrial and manufacturing sectors. Agriculture may accomplish this objective at lower economy-wide impacts."

Internationally, emissions limits are beginning to be imposed. Canada, for example, is planning for implementation of greenhouse gas limits that would come with its ratification of the Kyoto Accord. As more and more countries around the world ratify the Protocol, the U.S. will under increasing pressure to cut its emissions.

So far, a few national farming organizations, including the American Farm Bureau, have shown interest in examining the potential of carbon reduction contracts.

"There are farmers who are willing to do it, but they are still wanting to learn more about the economic issues. Industry emitters are also knowledgeable about the prospect but need information on its potential and cost," Butt said.

The Consortium for Agricultural Soil Mitigation of Greenhouse Gases has been formed to address such issues. The consortium consists of nine universities, including Texas A&M, and the Battelle-Pacific Northwest National Laboratory. All are working together through the U.S. Department of Agriculture.

The consortium is currently developing tools and information to implement carbon sequestration programs. The group met with industry and government representatives to discuss the possibilities. The meeting was held at the George Bush Presidential Library Conference Center in College Station earlier this year.

"The conference was a success," Butt said. "Industry and government representatives got a first-hand look at how they could use this as a technology for reducing emissions."

Editor's Note: The Consortium for Agricultural Soil Mitigation of Greenhouse Gases is a consortium of nine universities and one national laboratory collaborating with government agencies funded by a Congressional appropriation. The consortium members are:

Texas A&M University System
Colorado State University
Iowa State University
Kansas State University
Michigan State University
Montana State University
Purdue University
The Ohio State University
University of Nebraska
Battelle-Pacific Northwest National Laboratory
USDA-Agricultural Research Service
USDA-Natural Resource Conservation Service
USDA-Economic Research Service/Resource and Environmental Policy

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