Agricultural and Forestlands: U.S. Carbon Policy

The United States can capitalize on its substantial natural, institutional, and human resources to develop a strong, integrated, carbon sequestration program. The goals of a national sequestration strategy should include:

  • Achieving actual increases in carbon stocks on its forest and agricultural lands,
  • Maintaining existing carbon stocks,
  • Producing more reliable estimates of changes in the absolute levels of these stocks, and
  • Developing the methods needed to allow policy-makers to evaluate the effectiveness of government-sponsored sequestration programs.

Given the variety of activities, land types, and ownership patterns involved, policy-makers will need to include several different components in designing a national strategy for U.S. forest and agricultural lands. They will also need to draw on a variety of approaches to implement this strategy. To maximize results, government should employ the full range of policy tools at its disposal, including: direct government provision of information and increasing carbon on federal lands, regulations, practice-based incentives, and results-based mechanisms. Table 10 provides a summary of the many policy tools available to the government for implementing a national carbon sequestration program. Given the multiplicity of policy tools and mechanisms available, it will be important to assure that future programs complement each other and are presented to potential participants in a lucid manner.

As a first step in increasing carbon sequestration, the government should examine how it can modify management practices on its extensive land holdings to emphasize carbon sequestration in a manner that is consistent with other land management objectives such as habitat protection, erosion control, and timber production. The most promising avenue involves reducing the risk of catastrophic loss of forests to wildfires (see Box 2, page 17). The regulatory approach, which may be particularly helpful in preserving existing forests and decreasing losses of forest carbon on private land, must be implemented through state governments where the power to directly control land-use and management is vested. Recent experience suggests that private-sector certification programs like the SFI that promote adoption of best management practices for sustainable forests can provide an important supplement to state and local regulations.

In the past, the federal government has predominantly employed practice-based incentives to influence private landowner decisions. This tendency is reflected in the 2002 Farm Bill, which contains a number of programs that provide cost-sharing incentives for practices that enhance carbon stocks on the lands where the practices are adopted. These programs generally serve multiple objectives that include soil, water, and habitat conservation in addition to carbon sequestration. The 2002 Farm Bill increased funding for these programs substantially. Practice-based incentive programs have two advantages as vehicles for promoting carbon sequestration. First, they operate through established networks of organizations to implement the policies. This reduces both the financial and political costs of shifting the focus of farm programs toward carbon sequestration. Second, practice-based programs avoid the transaction costs associated with measuring, monitoring, and tracking site-specific changes in carbon stocks. They also rely on a less intrusive monitoring process since it is only necessary to check for the existence and extent of the practice, rather than determining actual carbon stocks. Thus, practice-based programs are likely to be the most cost-effective, familiar, and feasible components of a larger national strategy to promote carbon sequestration, at least in the near term.

To fully exploit the potential of practice-based approaches, the U.S. government must assure continued funding for the relevant programs. Volatility in program funding will reduce the effectiveness of the government’s financial resources as landowners hesitate to make long-term commitments due to programmatic uncertainty. The government should also establish a high priority research initiative to evaluate the carbon benefits and cost-effectiveness of Farm Bill initiatives. In particular, the research should examine whether the programs are inducing actual changes in practices beyond what landowners would have done in the absence of incentives. As these programs mature, the government should revisit the question of whether practice-based programs should be expanded. For example, if the Conservation Reserve Program (CRP) proves particularly successful, the government should consider increasing its funding level and removing the current cap of 39.2 million acres.

An important element of a national strategy will be to explore whether it is possible to develop a credible program incorporating results-based incentives for individual carbon sequestration projects. Results-based approaches have the advantage of providing high-powered incentives for innovative approaches to carbon sequestration. However, they are also less familiar than the well-established practice-based approach, and will require both overcoming information challenges and choosing among several options.

The first step to developing a program that bases incentives on the results of individual projects is to establish a viable, cost-effective method of measuring impacts of practice and land-use changes in specific locations. The government appears to have started this process with its program to reassess and redesign the 1605(b) reporting guidelines. Whether those revisions will provide guidelines that are adequate for a cap-and-trade program remains to be seen. Ultimately guidelines will need to provide methods that address development of reference cases, potential leakage, permanence, and effects on other greenhouse gases in a manner that is sufficiently clear and comprehensive so that independent evaluators of a given project will arrive at essentially the same estimate of carbon benefits.

The second step to adding a results-based approach to the national strategy is to determine how incentives will be provided to project developers. For example, the government could provide subsidies or contracts where payments to landowners are proportional to the amount of carbon actually sequestered. Alternatively, if there are caps on emissions of greenhouse gases from industrial sources, project developers might receive credits issued by the government, but the payments to project developers would come from sales of these credits to industrial sources which would use the credits to assist in meeting emissions limits.

Once key stakeholders are satisfied that methods are available that accurately assess the carbon effects of individual projects, then a results-based program for promoting carbon sequestration on agricultural and forestlands should be included in the national carbon strategy. Doing so will unleash the creativity and innovation of U.S. landowners and lead to lower overall costs of achieving national climate goals.

Opportunities for augmenting carbon sequestration may be even greater, and costs may be substantially lower, in developing countries than in the United States. Therefore, U.S. policy-makers should consider expanding the scope of a sequestration strategy to provide incentives for projects outside U.S. borders. The U.S. government could also work directly with other governments to identify, promote, and fund new policies and practices that will protect and increase carbon stocks in those countries. The incentives could be largely the same as for domestic initiatives, and could include practice-based or results-based payments. However, the process for including results from efforts in other countries in the national report would be different. Whereas the impacts of domestic initiatives would be included automatically in the inventory of national carbon stocks compiled by the United States under the U.N. Framework Convention on Climate Change, inclusion of international accomplishments would not be automatic (see Figure 1). Sequestration benefits achieved in other countries would have to be measured separately. The sum of these impacts would then be added to the national change in domestic stocks to estimate the total change in global carbon stocks for which the United States might claim credit. If the national strategy includes incentives for sequestration accomplishments in other countries, it will become even more critical to develop consistent methods for program and project evaluation.