Carbon sequestration from forestry and agriculture

Rob Stavins writes about curbing potential climate change by sequestering carbon rather than, or in addition to, reducing emissions from fossil fuel consumption. Stavins focuses mainly on preserving and increasing forest coverage. There are two good reasons for this focus: (1) deforestation is responsible for about 20% of CO2 emissions worldwide and (2) preventing deforestation and planting new forests appear to be low-cost ways of reducing total emissions.

Within the Waxman-Markey bill, CO2 emissions can be offset from agriculture and forestry activities. I'm not convinced much sequestration gains are to be had from agriculture. But farmer interests smell an opportunity, and with 80 years of rent-seeking under their collective belts, they are quite good at capitalizing on them. Under the bill (at least some versions of it) USDA will run the offset program, not EPA. That's probably essential given political constraints.

Some environmentalists smell a rat in the offset provision. They seem to see offsets as a loophole to avoid actual emissions reductions. There may be some truth to this.

My view is a little different (see earlier post). The problem is that by restricting emissions from carbon-based fuels and ultimately increasing the price of energy, there will be increased demand for other resources, including those from agriculture and forestry. Instead of using oil and gas people will use wood and ethanol. If carbon emissions from wood and ethanol are not counted they will be under-priced in a cap-and-trade world. Besides wood and ethanol, there are surely a zillion other indirect market implications we are unlikely to imagine.

So, in the end, we must at least try to count all the carbon. Otherwise we'll be squeezing a balloon--reducing emissions in one part of the global economy just to have them pop out somewhere else. It's not much different from having cap-and-trade in the U.S. and then buying Chinese goods produced using their uncapped carbon emissions. Eventually, we'll need to get China, India, and the rest of the developing world on board. Everyone knows this. But not everyone seems to recognize that we need to count all the carbon.

An offset policy doesn't capture these indirect effects. Even a painfully complicated offset policy that attempts to trace market impacts far and wide to make sure they are "additive." Even if there are no offsets, energy price changes will shift demand for all kinds of resources, from firewood to ethanol, all which affect the carbon balance.

I don't think many are yet willing to seriously consider the difficulty of this problem. It almost surely won't get into the first bill. But sooner or later we'll see fewer emission reductions than we expected. Maybe then we'll start counting all the carbon. Hopefully it won't be too late.

Reliable and transparent measurement of carbon emissions and sequestrations from forestry and agriculture will be key. While current [proposed] offset policies may do little in the way of actually influencing the carbon balance, they will spur research and debate about measurement issues. That's a good first step.


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