sensitivity of agricultural and forest ghg mitigation ... · pdf filesensitivity of...

Sensitivity of agricultural and forest GHG mitigation potential

Steven Rose

RFF/EPA WorkshopModeling the Costs and Volumes of GHG OffsetsMay 12, 2009

2© 2009 Electric Power Research Institute, Inc. All rights reserved.

Some issues to consider

• Policy design

– Eligibility

– Discounting

• Various reasons: e.g., missing costs, uncertainty, leakage

• Various forms: e.g., x% discount, 20% quantity cushion

– Constraints on use – creates a secondary market

• Economic/market

– Energy prices – affect agriculture/forestry costs and bioenergy demand and supply

– Commodity demand

– Technological change

– Offset market power – buyers or sellers?

– Competitiveness – relative domestic production costs?

– Adoption sequence – marginal biophysical responses

• Non-climate policies

– Energy policies (e.g, RFS, RPS)

– Federal farm policy

– Policies abroad


Some issues to consider

• Policy design

– Eligibility

– Discounting

• Various reasons: e.g., missing costs, uncertainty, leakage

• Various forms: e.g., x% discount, 20% quantity cushion

– Constraints on use – creates a secondary market

• Economic/market

– Energy prices – affect agriculture/forestry costs and bioenergy demand and supply

– Commodity demand

– Technological change

– Offset market power – buyers or sellers?

– Competitiveness – relative domestic production costs?

– Adoption sequence – do marginal biophysical responses matter?

• Non-climate policies

– Energy policies (e.g, RFS, RPS)

– Federal farm policy

– Policies abroad


Limiting/discounting the set of eligible options

Illustrative scenario

• Limited set of eligible mitigation activities

– Full GHG price for

• Capped activities: bioenergy, fossil fuel combustion

• Offset activities: afforestation, manure management

• Limited set and discounting of other mitigation

– 50% discount of other mitigation activities (e.g., ag soil carbon and N2O, forest management, enteric fermentation, rice CH4)

• $15/tCO2 (2010) + 5%/year

• Preliminary results – please do not cite!


Limiting/discounting the set of eligible optionse.g., $15/tCO2e + 5%/yr

-1000

-800

-600

-400

-200

0

200

400

600

2010 2015 2020 2025 2030 2035 2040 2045 2050

MtC

O2e/y

r

Reference

Limited eligible set

Limited eligible & 50% discount of others

Full eligibility

Preliminary results


Limiting the set of eligible optionse.g., $15/tCO2e + 5%/yr

Full eligibility

-200

0

200

400

600

800

1000

1200

2010 2015 2020 2025 2030 2035 2040 2045 2050

MtC

O2

e/y

r

Crop Management FF

Biofuels

Bioelectricity

Other CH4&N2O

Animal Waste CH4

Net Ag Soil Seq

Afforestation

Forest Management

Offset total

All Strategies

Preliminary results



Limited eligible set

-200

0

200

400

600

800

1000

1200

2010 2015 2020 2025 2030 2035 2040 2045 2050

MtC

O2

e/y

r

Crop Management FF

Biofuels

Bioelectricity

Other CH4&N2O

Animal Waste CH4

Net ag soil seq

Afforestation

Forest Management

Offset total

All Strategies

Preliminary results



Preliminary results

Limited eligible & 50% discount other

-200

0

200

400

600

800

1000

1200

2010 2015 2020 2025 2030 2035 2040 2045 2050

MtC

O2e/y

r

Crop Management FF

Biofuels

Bioelectricity

Other CH4&N2O

Animal Waste CH4

Net ag soil seq

Afforestation

Forest Management

Offset total

All Strategies


Large reduction in forest management; little even negative response for eligible options

Difference in mitigation between limited eligible and full

eligible sets

-400

-300

-200

-100

0

100

200

2010 2015 2020 2025 2030 2035 2040 2045 2050

MtC

O2e/y

r

Forest Management Afforestation

Net Ag Soil Seq Animal Waste CH4

Other CH4&N2O Bioelectricity

Biofuels Crop Management FF

All Strategies Offset total

Preliminary results


Synergies: afforestation increases with crediting for non-CO2 mitigation

Preliminary results

Difference in mitigation between limited eligible & 50%

other and full eligible sets

-400

-300

-200

-100

0

100

200

2010 2015 2020 2025 2030 2035 2040 2045 2050

MtC

O2e/y

r

Forest Management Afforestation

Net Ag Soil Seq Animal Waste CH4

Other CH4&N2O Bioelectricity

Biofuels Crop Management FF

All Strategies Offset total


Secondary market

EPA Waxman-Markey ADAGE GHG Prices

0

20

40

60

80

100

120

2015 2020 2030 2040 2050

$/t

CO

2e

Allowance price

Domestic offset

Intl offset/credit

EPA Lieberman-Warner GHG Prices


Secondary market GHG price?

Offset quantity/yr

Supply

Demand

P1

P2

Offset

priceAnnual constraint

P2 assumes

buyers have

market power

Also, an issue of constraint design –

cumulative offset constraints

(vs. annual) will increase fungibility

Bottom-line: offset price could be

higher than shown in current analyses

Who will have the market power?


International considerations

•Competitiveness

•Leakage


USA sectoral mitigation w/ US only carbon tax (on ag & forest GHGs)GE MAC of USA: USA-only carbon tax, sectoral and region total

0

10

20

30

40

50

60

70

80

90

100

0 50 100 150 200 250abatement - mmtce

2001

USD

per t

onne

of C

.

Regional AG+FRS abatement

Regional agriculture abatement

Regional forest total sequestration

USA forest intensification abatement

forest total

ag intensification

Golub et al. (2009)


ROW sectoral mitigation w/ various US only carbon taxes

ROW AGR sectoral GE-MAC: USA-only taxed

0

10

20

30

40

50

60

70

80

90

100

-8 -7.5 -7 -6.5 -6 -5.5 -5 -4.5 -4 -3.5 -3 -2.5 -2 -1.5 -1 -0.5 0

Abmatement - MMTCE

2001

USD

per t

onne

of C

.

1 PaddyRice

2 OtherGrain

3 OtherCrops

4 Ruminants

5 NonRuminLivs

Tot_AGR

GE MAC of ROW: USA-only carbon tax, sectoral and region total

0

10

20

30

40

50

60

70

80

90

100

-30 -25 -20 -15 -10 -5 0

abatement - mmtce

2001

USD

per t

onne

of C

.




ROW forest intensification abatement

forest total

agintensification~10% leakage total at

$27/tCO2e ($100/tCe)

~8% forest

~7% ag


USA sectoral mitigation w/ global carbon tax

USA sectoral mitigation w/ US only carbon taxGE MAC of USA: USA-only carbon tax, sectoral and region total

0

10

20

30

40

50

60

70

80

90

100

0 50 100 150 200 250abatement - mmtce

2001

USD

per t

onne

of C

.




USA forest intensification abatement

forest total

ag intensification

~30% reduction in ag

mitigation potential

~10% reduction in

total mitigation potential


Net export changes (million $/year) with global tax of $100/tCe ($27/tCO2e)

• US increasing livestock and food net exports, decreasing forest product net exports

• Interesting increase in fertilizer and energy intensive manufacturing from China and increase in manufacturing and services from ROW

-8000 -6000 -4000 -2000 0 2000 4000 6000

Rice

Other Grains

Other Crops

Ruminants

Non-Ruminants

Other Foods

Forest Products

Fertilizer & Energy

Intensive Manufacturing

Other Manufacturing

and Services

USA

CHN

ROW

Ag


Evaluating incremental adoption of technologies on ag mitigation supply

Quantity abated

PriceSupply

Tech. B

Tech. A

Tech. C

Least-cost ordering of the abatement technologies

Incremental adoption implies:

MCTech A = MC(Tech A|Tech B)

MCTech C = MC(Tech C|Tech A,Tech B)

However, typically ignore

interaction and compare

MC(Tech A|base), MC(Tech

B|base), MC(Tech C|base)

Price

Rose et al. (work in progress)


Preliminary results suggest it matters (e.g., abatement for Xinyang county rice paddies)

$(14)

$(12)

$(10)

$(8)

$(6)

$(4)

$(2)

$-

$2

$4

$6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulative net GHG reduction from baseline

$/t

CO

2eq

Incremental

Optimistic

Conservative

USEPA (2006)

Incremental

Straight stacking


Thank you!

Steven Rose Global Climate Research Group

[email protected]

sensitivity of agricultural and forest ghg mitigation ... · pdf filesensitivity of...

Documents