SOIL CARBON AND CLIMATE CHANGE NEWS

From Kansas State University's:

Consortium for Agricultural Soils Mitigation of Greenhouse Gases (CASMGS)

http://www.oznet.ksu.edu/ctec

Charles W. Rice, K-State Soil Microbiology, National CASMGS Coordinator (785) 532-7217 cwrice@ksu.edu

Scott Staggenborg, K-State Extension Northeast Area Crops and Soils Specialist (785) 532-5833 sstaggen@oznet.ksu.edu

Kent McVay, K-State Soil and Water Conservation Specialist (785) 532-5776 kmcvay@ksu.edu

Steve Watson, CASMGS Communications (785) 532-7105 swatson@oznet.ksu.edu

November 24, 2003

No. 27

This week's issue:

K-State:

* Effects of Carbon Sequestration BMPs on Soil Quality and Moisture: Kansas Studies

National:

* CASMGS National Soil Carbon Sequestration Forum at Texas A&M University

International:

* Emissions Credit Trading Mechanisms Around the World: The World Bank’s Carbon Fund, Chicago Climate Exchange, and Other Programs

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EFFECTS OF CARBON SEQUESTRATION BMPs

ON SOIL QUALITY AND MOISTURE: KANSAS STUDIES

Some of the most commonly recommended Best Management Practices (BMPs) for carbon sequestration include no-till or reduced tillage, more intensive crop rotations, and optimal nitrogen fertilization rates. These practices generally increase soil carbon levels. But what effect do these BMPs have on soil quality and soil moisture retention?

A study by Kent McVay, K-State Research and Extension soil and water conservation specialist, and agronomy graduate student Josh Budde looked at this question.

The agronomists examined soil samples from two long-term tillage and fertilization experiments -- one at the KSU Ag Research Center-Hays, and one at the Agronomy North Farm in Manhattan. The experiment at Hays has been ongoing since 1975. The Manhattan trial began in 1990. At Hays, the treatments included tillage (no-till, reduced tillage, and conventional tillage) and nitrogen rate (60 lbs N per acre and no fertilizer) in a wheat/sorghum/fallow rotation on a silty clay loam soil. At Manhattan, the treatments included tillage (no-till and conventional tillage) and nitrogen source and rate (manure and ammonium nitrate at the rate of 150 lbs N per acre, and no fertilizer) in a continuous corn system on a silt loam soil.

McVay and Budde summarize their findings as follows:

* Reducing tillage increased the amount of desirable large soil aggregates.

* Manure application benefits the formation of large soil aggregates.

* Applying fertilizer increased the formation of large soil aggregates compared to no fertilizer.

* In addition to creating larger aggregates, no-till and manure applications at the Manhattan site resulted in greater amounts of total soil carbon.

* No-till management systems will retain more plant available water for longer periods of time after rainstorm events than conventional-till systems.

* Switching from conventional tillage to no-till can increase soil quality by increasing the amount of large soil aggregates.

* No-till management systems have the potential to increase soil bulk density (although bulk densities in this study were not high enough to restrict plant growth).

* Increasing fertilization rates and adding nitrogen as manure will result in greater soil aggregation and increased soil quality.

For more information, contact Kent McVay at kmcvay@ksu.edu

-- Steve Watson swatson@oznet.ksu.edu

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CASMGS NATIONAL SOIL CARBON SEQUESTRATION

FORUM AT TEXAS A&M UNIVERSITY

A second CASMGS national forum on soil carbon sequestration issues will be held January 20-22, 2004 at College Station, Texas. The title of the forum is: “Can Agriculture and Energy Partner Using Soil Carbon Sequestration to Offset Greenhouse Gases?”

This forum will bring together representatives from the energy and agricultural industry, producer organizations, governmental organizations, and non-governmental organizations. Participants will discuss the options for establishing and operating programs and markets for carbon sequestration.

For more information, see:

http://agecon.tamu.edu/faculty/mccarl/acs/casmgs_conf_send.htm

-- Tanveer Butt, Texas A&M University <tanveer@tamu.edu> phone: 979-845-3153

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EMISSIONs Credit TRADING Mechanisms Around the World:

The World BANK’S Carbon Fund, Chicago Climate Exchange, and Other Programs

Emissions trading has already begun in many countries around the world, even though the Kyoto Protocol has not yet been ratified by enough countries to enter into force. There are many different types of emissions trading mechanisms currently in operation. What follows is a brief outline some of the different types of emissions trading mechanisms underway, based on many sources of information. Emissions trading is evolving rapidly, and this outline does not presume to include all mechanisms underway throughout the world.

Note: The material in this article borrows heavily from two good, recent comprehensive papers on greenhouse gas (GHG) emissions markets: “An Overview of Carbon Transactions” by H.C. de Conick and N.H. van der Linden, Energy Research Center of the Netherlands (ECN-C--03-022), 2003; and “A Strategic Assessment of the Kyoto-Marrakech System” by Michael Grubb, et al., The Royal Institute of International Affairs Briefing Paper No. 6, June 2003. Web addresses for these two papers are:

http://www.ecn.nl/library/reports/2003e/c03022.html

http://www.riia.org/pdf/research/sdp/Kyoto-Marrakech%20Grubb%20et%20al%20Jun%2003.pdf

The Kyoto Protocol allows for the establishment of emissions trading systems. This allows countries and private businesses that cannot meet their targeted GHG-emissions reduction levels to buy emissions credits from others. The industries most likely to be buyers of emissions credits are energy, steel, iron, chemicals, cement, glass, ceramic, and pulp and paper. Even though Kyoto has not entered into force, some companies within these industries and some governments have already begun emissions trading. European countries that have ratified Kyoto are imposing binding GHG emissions limits that likely will go into effect by 2005 even if the Kyoto Protocol has not entered into force. There are three general emissions trading mechanisms in operation today:

1. Project-based mechanisms among countries that have ratified the Kyoto Protocol

2. Emission trading schemes among Kyoto countries

3. Voluntary agreements in non-Kyoto countries

1. Project-Based Mechanisms. This is the area that has seen the most interest in emissions credit trading worldwide so far. Among countries that have ratified Kyoto, the treaty allows industries and governmental entities to buy emissions credits by investing in specific projects that utilize emissions-reducing technologies. There are two types of project-based mechanisms allowed by Kyoto: (a) Joint Implementation (JI) projects; and (b) Clean Development Mechanism (CDM) projects. JI projects are those that allow “Annex B” (industrialized) countries to buy into GHG-emission-reducing projects in other Annex B countries, mostly those in eastern Europe. CDM projects are those that allow Annex B countries to buy into projects in non-Annex B (developing) countries. Most CDM projects under consideration are large-scale renewable energy or energy efficiency projects.

Notable programs that fund project-based mechanisms among Kyoto countries include:

* The Prototype Carbon Fund (PCF). The PCF was established in July 1999 by the World Bank with the objective to invest in CDM and JI projects. The PCF is a partnership among six governments (Canada, Finland, Norway, Sweden, Netherlands, and Japan) and 17 private sector companies.

* The Community Development Carbon Fund (CDCF). The CDCF is another program established by the World Bank, aimed especially at small-scale CDM projects in collaboration with the International Emissions Trading Organization.

* The BioCarbon Fund. The World Bank launched the BioCarbon Fund in November 2002 to demonstrate projects that sequester carbon in biosinks.

* Government of the Netherlands. The Dutch government has acted early and aggressively to buy emissions credits through JI and CDM projects to meet its Kyoto targets. The Dutch have bought credits through the PCF Fund, bilateral country contracts with Panama and Costa Rica, banks, and its own tenders through the ERUPT and CERUPT programs. The ERUPT program is used to buy emissions credits using JI projects. The CERUPT program funds CDM projects.

* Singapore-ASEAN Carbon Fund. This is a five-year closed investment fund administered though Electric Eye Pte Ltd in Singapore. It will target energy efficiency and renewable energy CDM projects in the ASEAN countries.

* Government of Finland. The Finnish government may fund small-scale CDM projects to meet its Kyoto emissions reduction target, and has invited project proposals.

2. Emission Trading Schemes (ETS’s) under Kyoto. The Kyoto Protocol allows free trading of emissions credits among Annex B countries, as outlined in Article 17 of the Protocol. Some pilot emissions trading projects have begun, with full-scale emissions credit trading set to begin in 2005 within the European Union.

* UK Emissions Trading Scheme (UK ETS). In April 2002, the UK government launched the voluntary UK Emissions Trading Scheme. Participating organizations have their CO2 emissions capped by the government. Organizations are able meet their target by reducing their emissions or by purchasing reduction units from other organizations. The government provides a financial incentive for participating organizations. Unfortunately, the UK ETS was overwhelmed soon after it started with a large supply of carbon credits. Prices for carbon credits went down sharply and the market has dried up.

* BP Amoco. BP implemented a voluntary emissions trading system in 1998, complete with a self-imposed emissions reduction target of 10 percent in 2010 (the base year is 1990). Some BP units will take part in the UK Emissions Trading Scheme.

* EU-wide Emissions Trading Scheme (EU ETS). EU-wide trading in CO2 emissions among Annex B countries is scheduled to start in January, 2005, with other GHGs to follow. Member countries are set to present an allocation plan to the EU Commission by March 2004 capping the emission of GHGs by facility and allocating free certificates for the first trading period. The EU Commission will review and approve the national plans before actual trading can start. Companies in Europe have already expressed concern at possible competition distortion because of different principles being applied by the various nations in drafting their plan. Under this emissions trading scheme, companies that cut emissions by more than required would be able to sell them as credits to firms unable to meet required reductions. Companies will be financially penalized - EUR40 a metric ton in the first compliance period - if they don't meet their levels by a certain date. As more companies have begun to gear up for the EU ETS, carbon prices have gone up about 30 percent over the past few months. Delays in the ratification of the Kyoto Protocol, which establishes worldwide emission reduction targets, has had little effect on the nascent certificate market. There is some question as to whether the EU will be able to get this trading system started according to schedule, but little doubt that the EU ETS will eventually become established.

* Canada and Japan Emissions Trading Schemes. Both Canada and Japan have ratified Kyoto, and are developing their own domestic emissions trading schemes. These trading schemes are early in the development stage. Under the Canadian government’s Climate Change Plan for Canada, large final emitters of GHG’s (energy, electricity, and selected mining and manufacturing entities) are encouraged to reduce GHG emissions by 15 percent from the government's business-as-usual forecast for 2010. The Canadian government has made commitments to not disadvantage firms who take steps now to reduce greenhouse gas emissions. Eventually, the EU ETS may link up with the ETS in Canada and Japan if a set of uniform carbon credit criteria can be established.

3. Voluntary Agreements. There are many voluntary emissions trading systems currently underway in countries that have not ratified Kyoto -- primarily the U.S. and Australia. The trading volume within these systems is considerably less than in systems operating within Kyoto countries. There is currently no central point where credits earned through the programs listed below are registered. If these credits were to be counted under the Kyoto system in the future, these credits will eventually have to be registered via the United Nations Framework Convention on Climate Change (UNFCCC).

* Chicago Climate Exchange (CCX). The CCX is the first U.S. voluntary pilot program for GHG trading. It is administered by Environmental Finance Products, LLC. Many private companies and public organizations are members of CCX. Pilot trading projects are underway, including some projects involving agricultural soil carbon credits, and active trading is underway this fall.

* Cantor Fitzgerald Environmental Brokerage Services / CO2e. Cantor Fitzgerald EBS trades mainly in pollution-related gases, but also includes some GHG trading. CO2e is a sister company that helps companies hedge their GHG exposure. CO2e works with CDM projects and various energy-related and methane-capture projects in the U.S., Australia, Canada, and Europe.

* Trexler and Associates, Inc. Trexler and Associates (TAA) Climate Services trades in GHG reduction units, with standardized portfolios for its customers. These include the Climate Neutral Portfolio that includes climate-neutral companies, Carbon Offset Portfolio that includes offset projects such as renewable energy and forestry, and Customized Portfolios that includes projects in forestry, agriculture, energy efficiency, renewable energy, and others.

* Environmental Defense. Environmental Defense (ED), a large U.S.-based environmental organization, works to bring buyers and sellers of carbon credits together to arrange a private trading contract. ED plays no direct role in the contract between the parties, but assists in making the initial arrangements. An example is the carbon trading contract between Entergy (an energy company based in Louisiana) and the Pacific Northwest Direct Seed Association.

-- Steve Watson swatson@oznet.ksu.edu

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MEETINGS OF INTEREST

January 20-22, 2004

CASMGS Forum: Can Agriculture and Energy Partner Using Soil Carbon Sequestration to Offset Greenhouse Gases?

College Station, Texas

For more information, contact: tanveer@tamu.edu (979-845-3153) or see:

http://agecon.tamu.edu/faculty/mccarl/acs/casmgs_conf_send.htm

Send comments or items for the newsletter to Steve Watson at:

<swatson@oznet.ksu.edu>

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