Will agriculture be regulated by the “cap”?

No, under the most climate legislation being discussed in Congress manufacturing, transportation and utilities are “capped” entities, not agriculture. Agriculture, however, has the potential to be involved in the “trade” portion of the market.

Q. How much are these markets worth?

Analysis from EPA indicates ACES could create a domestic offset market valued at $2.7 billion to $3.4 billion or more annually within five years of the legislation’s implementation.(iii) Recent USDA analysis indicates domestic agricultural and forestry offset revenues of $2 billion per year in the near-term rising to $28 billion per year in the long-term.(iv) USDA analysis found that under ACES, “the agricultural sector will have modest costs in the short term and net benefits – perhaps significant net benefits – over the longterm.”(v)

Q. How can agricultural practices reduce or offset greenhouse gases and climate change?

Plants naturally take up carbon dioxide (a primary greenhouse gas) and give off oxygen. In this process, they also store or “sequester” carbon in the soil through their roots; however, most of that carbon is released when farmers plow up the field to plant a crop. If farmers were to use direct seeding or no-till practices to plant crops, they would keep all that stored carbon in the soil. Practices like this, which have the ability to literally take CO2 out of the atmosphere and sink it into soils –also create better soil fertility, water quality, water retention and greater wildlife habitat. Other farming practices could also qualify for GHG emission reduction credits under the bill now before Congress. ACES allows for 2 billion annual offset credits to be traded on the market. Currently, the bill allows for emissions to be offset by:(vi)

  • Soil Carbon Sequestration
  • Animal Waste Methane Capture
  • Nitrous Oxide Reductions from Fertilizer Application
  • Afforestation Carbon Sequestration
  • Forest Management Carbon Sequestration

USDA forecasts the amount of carbon sequestered by US agriculture will nearly double from current levels in the next five years.(vii) This additional uptake is expected through improved soil management (~60%), improved manure and nutrient management (~30%), and additional land-retirement (~10%).(viii)

Q. How do offsets impact the cost of emissions reductions for the US economy?

Agricultural carbon offsets are a lowest cost option and they can significantly reduce the overall cost of a cap-and-trade system while still achieving the desired level of emissions reductions. Additionally, offsets may act as a price “safety valve” for cap-and-trade if an unlimited number of offsets are allowed. As the price of a carbon allowance or credit rises, because the cost of abatement is often lower for agriculture than for other sectors, new entrants will arrive at an earlier price-point than other participants.

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