SOIL CARBON AND CLIMATE CHANGE NEWS

From Kansas State University's:

Consortium for Agricultural Soils Mitigation of Greenhouse Gases(CASMGS)

http://soilcarboncenter.k-state.edu

Charles W. Rice, K-State Department of Agronomy, National CASMGS Director

(785) 532-7217 cwrice@ksu.edu

Scott Staggenborg, K-State Department of Agronomy (785) 532-7214 sstaggen@ksu.edu

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

September 22, 2006

No. 51

Kansas:

* Basic Principles Of Carbon Sequestration And The Carbon Credit Market

National:

* US Power Company Steps Up Commitments To Reducing Greenhouse Gas Emissions

* Government Report Favors Economics Of Pricing Carbon Emissions in US

* US States Acting To Cap Greenhouse Gas Emissions

* Billions Committed To Fighting Global Climate Change At Clinton Global Initiative

* Current Market Prices For Carbon Offet Credits In US

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BASIC PRINCIPLES OF CARBON SEQUESTRATION

AND THE CARBON CREDIT MARKET

Greenhouse gas mitigation, carbon sequestration, carbon credits, global warming – these are all increasingly “hot button” issues. Agriculture is in the thick of it, driven by the possibility of getting paid for carbon credits through practices that result in carbon sequestration, methane capture, or possibly nitrous oxide reductions, says Chuck Rice, K-State soil microbiologist and CASMGS National Director. Rice’s comments on the basic principles of carbon sequestration and the carbon credit market follow:

Several different approaches to quantifying carbon sequestration, determining the amount of carbon credits being “produced,” and marketing those carbon credits are being utilized in Kansas. While it’s possible for agricultural producers to generate carbon credits through the use of certain practices, and to market these credits in some cases, producers should be careful to make sure that any agreements they enter into are legitimate and reasonable.

A. Soil carbon sequestration

Agricultural soil carbon sequestration involves the long-term net accumulation and storage of carbon in the soil. The effect of this is to reduce the amount of carbon dioxide in the atmosphere. In crop production and grassland agriculture, plants absorb carbon dioxide from the atmosphere through the process of photosynthesis. Carbon dioxide is then released back into the atmosphere through soil microbial respiration and plant root respiration. In all plant-based systems, carbon is constantly being cycled back and forth between the atmosphere, living plants, soil organic matter, and soil microbes. It is the net result of this cycle that is of interest.

During the first half of the 20th century, much of the cropland was being tilled constantly and the net effect was a loss of net carbon from cropland soils and into the atmosphere. More recently, research has shown that net carbon levels in the soil can be increased in most Kansas soils by using one or more of the following practices:

* No-till

* Elimination of fallow in cropping systems

* Use of wheat, corn, and grain sorghum in cropping systems

* Use of manure

* Use of practices that control soil erosion

* Grass plantings on land that had been bare or in low-productivity cropping

* Moderating grazing pressure where overgrazing has occurred

* Regular use of prescribed burning at the proper time on rangeland

It is difficult to sequester carbon in sandy soils, in soils that tend to waterlog often, and in soils with very low productivity.

In most situations, the buildup of carbon in soils comes primarily through greater root production, less erosion, and a decrease in the oxidation of organic matter caused by tillage. To a lesser extent, the buildup of carbon can be attributed to an increase in aboveground topgrowth.

One mistake is to assume that soil carbon sequestration can be measured by calculating or estimating plant productivity alone. While aboveground and belowground plant growth does add carbon to the system, some of this carbon is released again as soil microbes oxidize soil organic matter. As mentioned above, it is the net result of this cycle that determines whether carbon is being sequestered in the soil or emitted into the atmosphere.

For example, in cropping systems, net soil carbon sequestration tends to increase for a given crop rotation if the crops are grown under continuous no-till for 20-30 years. After that time, the system eventually reaches equilibrium and very little additional net carbon sequestration occurs.

Similarly, there is typically no net carbon sequestration on established, permanent grasslands that have not been grazed or disturbed. The net intake and output of carbon are in balance. Under light or moderate grazing pressure, the net carbon balance in the grazingland ecosystem is also close to zero in most cases. Grasses and forbs are adding carbon to the system at about the same rate it is being respired back into the atmosphere. Where a grazingland has been overgrazed, however, net carbon has been lost from the ecosystem. In that situation, a return to moderate grazing pressure can increase plant and root productivity, and sequester a net positive increase in carbon.

B. Carbon credit markets

Where carbon is being sequestered in the soil, there is now an emerging opportunity for producers and landowners to market those carbon credits.

Carbon credits in cropland and grassland systems are generated through an increase in soil carbon. Changes in plant aboveground biomass and roots alone are not considered viable credits because much or all of that carbon may be decomposed and returned to the atmosphere – depending on whether the carbon cycle within the system is in equilibrium or is undergoing changes. Changes in soil carbon levels are dynamic, and can only be known for sure by physically sampling and measuring changes in organic matter through time. After enough research has been done to correlate organic matter measurements with known practices, it is possible to project the rate of carbon sequestration that will result from these practices.

For example, research has shown that no-till will usually sequester somewhere between 0.35 and 0.70 tons of CO₂ per acre per year. This can be counted as carbon credits. The rate of carbon sequestration for new grass plantings is about 50 percent higher than for no-till. For long-established grasslands, the amount of carbon credits generated varies considerably. In general, there will typically be no carbon credits from long-established grasslands under steady management because the system is in equilibrium and no increase in net soil carbon levels can be measured. It’s only where a grassland is being converted from overgrazing or improper burning to improved management methods that carbon credits may be generated.

There are several frequently asked questions about carbon credits:

• How do I know how many credits, if any, I have to offer? Markets for soil carbon credits are still very new in the US. As a result, there is no universally recognized system for physically measuring and recording increases in soil carbon levels. Soil carbon credits are being estimated at the current time. Methods of estimating soil carbon credits vary considerably. For example, the Chicago Climate Exchange, one of the market mechanisms, assigns a carbon sequestration level of 0.5 tons of CO₂ per acre for continuous no-till based on a discounted science-based value. This value is applied uniformly to a wide region of the country. Other markets may use different values. If a private agreement is reached between buyers and sellers, the two parties will have to settle on their own definition of carbon credits. Hopefully this will have a scientific basis, but there’s no guarantee in all cases.

• How much can I get for each credit? At the moment, it’s best to be conservative in your expectations. The price for carbon credits in the European market is very high, about $20 per ton of CO₂. But that’s because there has been a mandatory cap-and-trade system in place there for quite some time. That’s not true for the US market, so prices are considerably lower here. On the Chicago Climate Exchange, recent prices are about $5 per ton. That equates to $2.50 per acre for continuous no-till for credits that are sold on this exchange. For credits that are negotiated privately between buyer and seller, there is no established price.

• How do I go about marketing them? This is the most difficult question to answer. The Chicago Climate Exchange has a pilot project, managed by the Iowa Farm Bureau, that allows producers and landowners in most counties of Kansas to put their carbon credits into a larger pool that the Iowa Farm Bureau will sell on the Exchange. Currently, credits are being signed up for “Pool 3” of this program. Details are available at www.iowafarmbureau.com/special/carbon/default.aspx. Organizations such as Environmental Defense (ED) are working to establish a connection between buyers and sellers of carbon credits. ED has successfully arranged such a program between the Northwest Direct Seeders Association and an energy company. There are no such contracts currently being offered through ED in Kansas, however. Otherwise, there may be some other types of private contracts being offered, but sales figures from those contracts have not been made public.

• Will it cost me anything to market these credits? The organization or company that is compiling the credits to be sold will typically take a small percentage of the selling price for overhead or administrative costs.

Producers and landowners should be cautious about entering into the carbon credit market. Before doing so, take the following precautions:

* Ask the company or organization you are contracting with exactly how the credits will be sold and specifically who is buying. Any contract should be specific how the credits will be marketed and who the buyer is. Do not put too much stock into stories about how much the European market is paying for carbon credits. The European market does not buy credits from the US, and that market does not yet acknowledge the legitimacy of carbon credits from soil carbon sequestration.

* Ask the company or organization you are contracting with to see some records of sales they have made with carbon credits similar to the ones you are being offered.

-- Steve Watson swatson@ksu.edu

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US POWER COMPANY STEPS UP COMMITMENT

TO REDUCING GREENHOUSE GAS EMISSIONS

In a pledge to the Clinton Global Initiative, the AES Corporation recently announced it has committed to produce 10 million tonnes of greenhouse gas emission offsets by 2012, and said it will pursue offset development projects under the Clean Development Mechanism of the Kyoto Protocol in Asia, Africa, Europe and Latin America.

AES is actively developing offset projects in the agricultural, reforestation, landfill gas, and coal mine methane emission reduction sectors that meet the requirements of the Clean Development Mechanism of the Kyoto Protocol. AES announced its first significant business venture in the greenhouse gas emission offset production sector in May 2006, through the creation of AES AgriVerde. This majority-owned subsidiary will deploy offset technologies in ten developing countries in Asia, Europe and North Africa. AES AgriVerde utilizes a technology to capture methane from agricultural and animal waste sites, reducing net greenhouse gas emissions by approximately 95 percent over traditional organic waste management processes. Once captured, the methane is either destroyed or it is used to generate a renewable source of electricity.

For details, see:

http://www.aes.com/aes/index?page=news

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GOVERNMENT REPORT FAVORS ECONOMICS OF

PRICING CARBON EMISSIONS IN US

A report issued Sept. 18 by the US Congressional Budget Office (CBO) concludes that increasing the costs of emitting carbon through a cap-and-trade system or a tax on fossil fuel use would reduce emissions more cost-effectively than merely funding research and development (R&D) of new technologies. The CBO analyzed three research studies, and concluded that “pricing (carbon) emissions would contribute more to minimizing the cost of reducing emissions than would subsidizing investments in R&D.”
 
The full report is available at:

http://www.cbo.gov/ftpdocs/75xx/doc7567/09-18-CarbonEmissions.pdf

-- Steve Watson swatson@ksu.edu

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US STATES ACTING TO CAP

GREENHOUSE GAS EMISSIONS

The “Global Warming Solutions Act” was recently passed by the legislature in California and signed into law by Gov. Arnold Schwartzenegger. This Act requires California to cut emissions in the state back to their 1990 levels by the year 2020. That will mean a cutback of about 25 percent.

The Act does not specifically establish a greenhouse gas cap-and-trade scheme, but it does call on the state’s Air Resources Board to set mandatory limits on greenhouse gas emitters, which would become effective in 2012, according to Carbon Market North America, September 13, 2006, from PointCarbon. The article states: “The Board works closely with state energy regulators who are planning a load-based cap-and-trade system for utilities. With all electricity providers subject to caps, a credit system that could link to the European Union or other regional schemes may not be far off.”

Schwarzenegger and New York City Mayor Michael Bloomberg also announced on Sept. 20 that they will collaborate on efforts to reduce greenhouse gas emissions.
 

In other state-related developments, the seven Northeast states participating in the Regional Greenhouse Gas Initiative (RGGI), a multi-state program to reduce harmful climate-changing emissions from power plants, released on August 15 a model set of regulations to be proposed in each state to implement the program.

Under the RGGI, seven Northeast states agreed to propose a cap-and-trade program to reduce carbon dioxide (CO2) emissions. The states participating in RGGI are: Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont.

In the model set of regulations released August 15, the states agreed to simplify the way the program will incorporate “offset credits” -- reductions of greenhouse gas emissions that are achieved outside the electricity sector, such as at landfills, farming operations, or certain other project sites.

Beginning in 2009, emissions of CO2 from power plants in the Northeast region would be capped at approximately current levels -- 121 million tons annually -- with this cap remaining in place until 2015. The states would then begin reducing emissions incrementally over a four-year period to achieve a 10 percent reduction by 2019. Compared to the emissions increases the region would see from the sector without the program, RGGI will result in an approximately 35 percent reduction by 2020.

Under the model regulations, offset credits may come from anywhere in the United States, provided offset projects from outside of the participating states must take place under the regulatory watch of a cooperating agency in that state. States or other U.S. jurisdictions not participating in RGGI will need to enter into a memorandum of understanding with the RGGI state agencies and agree to take on certain administrative obligations to ensure the credibility of the offset projects.

In Arizona, Governor Janet Napolitano signed an executive order on Sept. 8 that sets a goal of reduce the state’s greenhouse gas emissions to 2000 levels by 2020, and to 50 percent below 2000 levels by 2040. This action was taken after receiving a report from the governor’s Climate Change Advisory Group (CCAG) on cleaner air.

The states of Oregon and New Mexico, along with the Western Governors Association are also actively pursuing climate change initiatives and policies. A private initiative in Colorado to target climate change efforts is also underway.

 
For details on these developments, see:

http://www.pointcarbon.com/getfile.php/fileelement_86494/Carbon_Market_North_America_13_September_2.pdf

http://gov.ca.gov/index.php?/print-version/press-release/4000/

http://www.rggi.org/docs/model_rule_release_8_15_06.pdf

http://www.azclimatechange.us/

http://www.oregon.gov/ENERGY/GBLWRM/CATF.shtml

http://www.nmclimatechange.us/

http://www.westgov.org/wga/policy/06/climate-change.pdf

http://www.rockymountainclimate.org/website%20pictures/Colorado%20Climate%20Project%20Description.pdf#search=%22colorado%20climate%20agenda%22

-- Steve Watson swatson@ksu.edu

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Billions Committed to Fighting Global Climate Change

at Clinton Global Initiative

UK billionaire tycoon Richard Branson yesterday committed to spend $3 billion over the next ten years to promote renewable energy in the fight against global climate change.

http://www.clintonglobalinitiative.org/NETCOMMUNITY/Page.aspx?&pid=725&srcid=457

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Current Market Prices For

Carbon Offet credits In US

You can keep current on daily market prices on the Chicago Climate Exchange (CCX) for carbon offset credits by checking its web site at:

http://www.chicagoclimatex.com

As of Sept. 21, 2006, the market price on the CCX ranged from $4.05 to $4.20 per metric ton of CO2, depending on the vintage year.

-- Steve Watson swatson@ksu.edu

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MEETINGS OF INTEREST (All dates are 2006 unless otherwise noted.)

December 5-6

North America and the Carbon Markets

Washington, DC

PointCarbon

For details, see http://www.pointcarbon.com

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