WRI Publications Feed: Biofuels Production and Policy: Implications for Climate Change, Water Quality, and Agriculture

The Time Value of Carbon and Carbon Storage: Clarifying the terms and the policy implications of the debate

Maggie Barron — Mon, 01 Nov 2010 14:22:07 -0400

Executive Summary

The question of whether there is any value to the temporary storage of carbon is fundamental to climate policy design across a number of arenas, including physical carbon discounting in greenhouse gas accounting, the relative value of temporary carbon offsets, and the value of other carbon mitigation efforts that are known to be impermanent, including deferred deforestation. Quantifying the value of temporary carbon storage depends on a number of assumptions about how the incremental impact (or social cost) of a given ton of carbon emissions is expected to change over time. In 2009, a U.S. government interagency working group was established and assigned the responsibility of calculating social cost of carbon estimates to be used in benefit/cost analysis of regulations impacting carbon dioxide emissions. Those estimates were released in March 2010.

This working paper explores what those estimates imply about the value of temporary carbon storage, as well as the implications of those temporary storage values for several critical policy design questions relating to greenhouse gas accounting and biological offsets. This analysis suggests, for instance, that appropriate physical carbon discount rates for carbon accounting may be even lower than the social discount rates often used in intergenerational analyses. In the context of agricultural offsets, the social cost of carbon estimates are used to establish a definition of equivalence between permanent and temporary offsets; equivalence ratios are derived that vary between ~2 and 30, depending on the discount rate used and the length of the temporary offset contract period.

Fields of Fuel: Market and Environmental Implications of Switching to Grass for U.S. Transport

Tim Herzog — Fri, 30 Apr 2010 00:00:00 -0400

Commercial-scale switchgrass production is projected to involve substantial increases in agricultural land acreage, with new acres coming from a combination of conservation reserve program (CRP) acreage, other cropland currently used as pasture, a reduction of winter fallow in production rotations, and displacement of existing crop production. The displacement of existing crop production reduces domestic crop supply and generates market impacts in the form of increased prices and reduced exports for existing crops, which creates the potential for significant indirect land use impacts associated with changing commodity production patterns beyond the borders of the United States and outside the scope of this study. Domestic environmental implications are also simulated; commercial-scale switchgrass production may be associated with reduced erosion and improved nutrient pollution performance on U.S. working croplands, but projected increases in nitrogen application and the associated nitrous oxide emissions could offset soil carbon sequestration benefits and result in substantial increases in greenhouse gas (GHG) emissions from the agricultural sector. Furthermore, the loss of substantial amounts of conservation reserve program acreage and pasture land could have significant impacts on dimensions of environmental quality not covered by this analysis, including habitat quality and biodiversity.

Policy Recommendations

Federal biomass research programs should prioritize research on the long-term environmental impacts of scaling up production of switchgrass and other biomass crops. All projects that receive federal funds to explore crop yield improvements should be required to explicitly address the soil, water, and GHG implications of the new production methods.
Federal biomass research programs should also perform system-wide studies to identify potential impacts of scaled up biomass production, including switchgrass, on landscape-level ecosystem services like provisioning of habitat, maintenance of surface water quality, and support of biodiversity.
Reducing the uncertainty associated with carbon impact estimates of biofuels under current regulatory programs such as the federal Renewable Fuel Standard and California’s Low Carbon Fuel Standard will require increased investment in research on agricultural land-use dynamics in the United States, including regional availability of idle cropland and the returns to land in alternative uses such as pasture and forestry.
Payments rewarding GHG performance in agricultural production, through offsets or cost-share programs, for instance, should, wherever feasible, be awarded based on actual performance rather than assumed performance of a class of production practices. Actual performance for any given practice can be highly variable across soils and climatic regions.
Performance-based payments for carbon mitigation should be based on a comprehensive quantification of the impact on emissions across all changes in production practice. While no-till is generally believed to have soil carbon sequestration benefits, for instance, if a switch to no-till is accompanied by increased levels of nitrogen application, the resulting nitrous oxide emissions could offset the soil carbon benefits associated with switching to a no-till, perennial farming system. The no-till practice alone should not be rewarded without a consideration of the GHG impacts of all accompanying changes in production practice.
Existing and proposed policies in support of biofuel production, including the 2007 Renewable Fuel Standard and the Volumetric Ethanol Excise Tax, should be revised to include a broad array of safeguards to protect air, soil, and water quality in addition to climate.

When President Bush mentioned switchgrass in the 2006 State of the Union address, listeners across the country responded with a collective “huh?” But in part due to that highly visible endorsement, and in part due to the explosive growth of the ethanol industry and the rapid advancement of ethanol conversion technologies, this modest prairie grass species has now become a household word. As large sections of the U.S. ethanol industry push hard to move beyond the current generation of corn-based ethanol and introduce technologies that will allow use of a much broader range of feedstocks for ethanol production, increased attention is being paid to new feedstocks that have the potential to be produced at large commercial scale. In this Policy Note we explore the potential for the use of switchgrass as a domestic energy source, as well as some of the environmental issues associated with producing it at a large scale.

Biofuels and the Time Value of Carbon: Recommendations for GHG Accounting Protocols

admin — Sun, 01 Mar 2009 00:00:00 -0500

The quantification of the carbon dioxide emissions impact associated with land-use change for biofuels production is complicated by the fact that the carbon costs from land-use change and the avoided emissions from substituting biofuels for fossil fuel in transport occur over an extended period of time. Estimating the net carbon impact therefore requires a method for aggregating the increased and avoided emissions that play out over time into a single figure. The choice of accounting method can have a significant impact on the resulting net emissions measure for specific land-use options such as biofuels production. This in turn will influence the relative desirability of different land management scenarios for a given piece of land. Traditional cost-benefit analysis regularly uses discounting to compare and aggregate monetary units over time. However, extrapolation of this approach to assess physical units of carbon dioxide emissions released or avoided in the future is not straightforward. Selection of an appropriate discount rate for physical carbon units requires a consideration of multiple additional variables. These include rates of carbon accumulation and decay in the atmosphere and estimates of the marginal damages arising or avoided from changes in atmospheric carbon stocks.

Accounting recommendations for quantifying the emissions impact of land-use change for biofeedstock production

Ideally, a GHG accounting method for land use change associated with biofeedstock production should explicitly analyze the expected damages associated with those fl ows over time. The corresponding monetary units associated with this damage can then be discounted to determine how the impacts of future flows compare to those of the present.
There is little theoretical justification for discounting physical carbon flows. Discount rates used for physical carbon units are not analogous to monetary discount rates such as interest rates or the social rate of time preference. They therefore should not be selected based solely on an extrapolation of how those financial discount rates are usually applied.
The “project horizon” should be considered independently of the longer atmospheric “impact horizon” when selecting appropriate discounting horizons. In the context of biofuels production, the “project horizon” refers to the period of time over which feedstock cultivation will occur (and benefits from displaced transport fossil fuel realized). The “impact horizon” refers to the period of time over which impacts of increased or decreased emissions are felt in the atmosphere.
The impact horizon should be applied as a rolling target that is measured relative to the year of emissions, which can occur at any point over the project horizon, rather than as a fixed target that is measured relative to year 0 of the project. Atmospheric impacts are therefore fully accounted for, whether the emissions or emissions savings occur at the end of the project or at the beginning.
When it is necessary to bypass the full-cost accounting suggested in #1, selection of a next-best discount procedure for carbon units may need to consider: a range of possible discount rate values beyond those normally used for financial discounting (including zero or negative numbers); different discount figures for the two distinct time horizons; and non-constant numbers such as declining discount rates for the longer impact horizon.
Salvaged carbon from acreage reversion or revegetation should not be considered as part of the GHG accounting protocol for land-use conversion for feedstock production. Carbon benefi ts associated with revegetation are not guaranteed when acreage is initially converted to biofuels production, and should more appropriately be considered a benefit associated with a future form of land-use change should such conversion occur.

Corn Stover For Ethanol Production: Potential and Pitfalls

Liz Marshall — Wed, 21 Jan 2009 14:49:18 -0500

Prompted by volatility in oil markets, growing concerns about global warming, and an interest in supporting farms and rural communities through stronger agricultural markets, several groups in the United States have turned their attention to the potential for ethanol to alleviate our dependence on oil. The domestic ethanol industry has expanded rapidly in recent years, but in the United States, as in other countries, that development has relied heavily on government support. Until 2005, direct support was primarily in the form of tax incentives; the Volumetric Ethanol Excise Tax Credit (VEETC) provides blenders with a tax refund for blending ethanol with gasoline that has ranged between $.54 per gallon and $.45 per gallon. To further catalyze expansion of the renewable fuels market, Congress passed in the 2005 and 2007 energy bills a federal Renewable Fuels Standard (RFS) that mandates increased blending of renewable fuels into our fuel supply.

The sugars found in corn kernels are currently the predominant feedstock for the burgeoning ethanol industry in the United States. However, as increasing world food prices heat up the food versus fuel debate, and scaling up corn production for ethanol use raises environmental concerns (Marshall and Greenhalgh, 2006; Marshall, 2007), increased attention has turned to the potential for second-generation ethanol technologies to free the domestic ethanol industry from its dependence on corn grain. Advanced technologies such as cellulosic conversion, which would allow the production of ethanol from the complex sugars in leaves and stalks, promise to radically broaden the range of possible ethanol feedstocks. Potential future feedstocks include woody biomass such as forest residues, post-consumer municipal solid waste, and agricultural residues such as wheat straw and corn stover— the leaves and stalks that remain behind when corn grain has been harvested.

It is widely believed that cellulosic technologies will allow us to produce ethanol with a smaller environmental footprint than corn-based ethanol. In the expanded RFS passed with the Energy Independence and Security Act of 2007, the amount of corn-grain ethanol that can qualify for the RFS was capped to provide an incentive for the development of second-generation technologies such as cellulosic ethanol. Furthermore, the 2008 Farm Bill includes a cellulosic biofuels production tax credit of up to $1.01/gallon, on top of the VEETC described above, and a “Biomass Crop Assistance Program” that supports farmers as they establish and grow cellulosic biomass crops. As we advance policy to encourage cellulosic production, however, we cannot assume that “better than corn” means sustainable. Different feedstocks will have widely varying environmental footprints that must be understood and acknowledged within flexible biofuel policies that ensure sustainable outcomes. Designing such policies will require greatly increased investment in understanding the potential impacts of various proposed feedstocks, how producer decisions infl uence those impacts, and how producer decisions respond to policy and market incentives.

Key Findings

Even moderate harvest of corn stover and other agricultural residues for use as an ethanol raw material, or “feedstock,” threatens to significantly increase erosion and emissions of greenhouse gases (GHG) from the agricultural sector.
The estimates of stover availability appearing in the USDA/USDOE report “Biomass as Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion-Ton Annual Supply” rely on harvest levels that would substantially increase erosion levels and GHG emissions from agriculture and are therefore unsustainable.
A large-scale switch to no-till agricultural production would mitigate the increased risk of erosion, but would be relatively ineffective at managing the risks of increased soil carbon loss and increased agricultural GHG emissions that arise with harvest of corn residues. Alternative best management practices (BMPs) for agriculture, including increased use of cover crops, green manures, and precision nitrogen management, may be effective at addressing negative impacts to air, water, and soil resources.
Effective integration of BMPs into crop rotations with corn stover harvest will require greatly increased federal investment in research on the long-term impacts and effectiveness of BMPs as well as on overcoming obstacles to farmer adoption.
The current system of incentives is not suffi cient to induce farmers to voluntarily adopt BMPs such as no-till production in association with corn stover harvest to reduce damaging side effects. Farmers do not switch to no-till production unless the price received for stover is significantly higher than the price at which conventional stover enters the market. Additional incentives and safeguards must be established to ensure sustainable supply.

Policy Recommendations

All biofuel incentive programs and policies, including the 2007 Renewable Fuel Standard and the Volumetric Ethanol Excise Tax Credit, should be revised to include a broad array of safeguards to protect air, soil, and water quality.
Existing federal biomass research programs, such as the jointly administered USDA/USDOE Biomass Research and Development Initiative, should be fully funded and should prioritize research on the short- and long-term environmental impacts of harvesting stover and other biomass crops in their funding allocations.
Environmental safeguards attached to feedstock production should be performance-based rather than technology- or feedstock-specific. Performance-based safeguards offer maximum flexibility in that they provide incentives for improving feedstock management practices without pre-judging what levels of sustainability are achievable by a given feedstock.
To complement feedstock-specific research, greater investment is required for the development of tools to measure the performance, or environmental impacts, of agricultural systems in an affordable and accurate way. Such tools are the foundation of cost-effective agricultural and biofuel sustainability policies.
Programs within both USDA and EPA should invest more heavily in research on the contribution of nitrogen (through nitrous oxide) and soil carbon to greenhouse-gas emissions from agriculture and in ways to manage those contributions through both on-farm and off-farm changes in production practices and land management.

Finding Balance: Agricultural Residues, Ethanol, and the Environment

Liz Marshall — Mon, 01 Dec 2008 15:40:28 -0500

Crop residues like wheat straw and corn stover—i.e. stalks and leaves—have been proposed as a sustainable feedstock for a “next-generation” cellulosic ethanol industry in the United States. However, use of agricultural residues should not be considered to have low environmental impacts simply because they are a by-product of an existing use of the land. Such residues currently replenish and protect soils on working agricultural lands, and their removal is unlikely to be sustainable unless accompanied by adoption of agricultural best management practices such as no-till production, cover crops, and precision fertilizer management.

Key Findings

Even moderate corn stover harvest increases erosion and depletes soil carbon on working lands.
The increased fertilizer application and increased erosion associated with harvest of corn stover leads to increased nutrient losses from the field, which will exacerbate critical surface and coastal water issues like the Gulf of Mexico’s “dead zone.”
A conversion to reduced tillage production can help protect against soil loss due to erosion, but it is relatively ineffective at protecting against the depletion of soil carbon.
Other best management practices such as winter cover crops are effective at capturing nutrients and replacing harvested residues as a source of soil enrichment, but are not widely used by farmers in practice.

Policy Recommendations

All federal and state policies providing support for biofuel production (such as the Renewable Fuels Standard and the Volumetric Ethanol Excise Tax Credit) should include environmental performance requirements that ensure the adoption of best management practices to offset the environmental impacts of feedstock production.
Federal biomass research programs should be fully funded. Both USDA and USDOE should invest greater resources into research on the long-term sustainability of using biomass and agricultural residues for biofuel production.
All projects receiving federal funds to explore crop use for biofuel production should be required to explicitly address the soil, water, and greenhouse gas implications of the new crop varieties or production methods.
USDA should increase investment in research on obstacles and opportunities for adoption of agricultural best management practices, particularly cover crops and conservation tillage, and support programs and/or policies to overcome them.
In federal evaluations of biomass availability, the criteria for “sustainable” residue supply systems must be broadened beyond a consideration of erosion to include other ecosystem services provided by agricultural land such as soil carbon sequestration and water quality considerations.

Plants at the Pump: Reviewing Biofuels' Impacts and Policy Recommendations

Tim Herzog — Wed, 23 Jul 2008 17:07:40 -0400

As biofuels become a larger part of the social, economic, and environmental strategies of countries around the world, standards and regulations are needed to ensure that biofuels do in fact reduce greenhouse gas (GHG) emissions and promote sustainable development.

In a world of rapidly rising GHG emissions and growing unease about imported oil, the appeal of renewable fuels is growing apace. Biofuels — liquids produced from plant matter that can substitute for gasoline or diesel fuel—have become a hot topic from Capitol Hill to Silicon Valley. Despite their promise, however, recent research suggests that most of today’s biofuels increase GHG emissions compared to gasoline or diesel fuel. These increases in greenhouse gas emissions primarily result from land-use changes associated with growing crops for biofuels. The scale-up of biofuels to meet market demands for alternative fuels should therefore be examined further for its impacts on greenhouse gas emissions.

Greenhouse gas emissions concerns, coupled with rising global food prices, have called into question biofuels policies, and some of the “silver bullet” sheen has begun to wear off. Policy makers should understand that the term “biofuels” covers a range of products with varying potentials to achieve energy, climate, transportation, or agricultural policy aims. A key policy question, then, is how to ensure that biofuels do not cause greater harm than good. Policy makers should:

Use technology-neutral policies, as opposed to technology-specific policies such as biofuel subsidies, to drive fuel choices in relation to desired policy goals (e.g., greenhouse gas reductions, energy security, and other social and environmental priorities).
Design methodologies for calculating the sustainability benefits of fuel options and incorporate these calculations into energy, climate, agricultural, land use, and trade policy.
Design certification programs to avoid “exporting” negative impacts of biofuels production to other producing countries where regulation is not yet in place.
Recognize that biofuels alone will not provide low-carbon transportation solutions needed to address climate change. Policy support for other mobility options, such as increased efficiency in the immediate term, or electricity for vehicle propulsion accompanied by an aggressive rise in zero-carbon power generation, should be explored. Addressing emissions from transport will ultimately require rethinking how cities are designed and must include an aggressive push toward improved public transportation.

Plants at the Pump: Biofuels, Climate Change, and Sustainability

Laura Lee Dooley — Mon, 03 Dec 2007 00:00:00 -0500

Biofuels are being heralded as an alternative to oil that can be grown by farmers across the globe, addressing many of the economic, security, and environmental concerns associated with oil dependence. The story is not that simple, however, because the life-cycle energy efficiency and environmental impacts of biofuels varies significantly depending on feedstocks, production methods, and scale.

Plants at the Pump examines the feasibility of achieving significant emissions reductions from the proliferation of biofuels. First, it explores the challenges raised by today’s production and distribution technologies. It then turns to current biofuels policies and their environmental impacts, both positive and negative. The next section looks at how these policies drive investment, and argues that some technology incentives will make rapid scale-up of next-generation biofuels particularly challenging.

The report concludes that biofuels are not a complete, nor even the primary, solution to our transport fuel needs. They have the potential to play some role in meeting future energy demands. But since large-scale carbon displacement would require significant destruction of global forests, the benefits of biofuels would likely be outweighed by the costs with respect to forestry, agriculture markets, and economic hardship for the world’s poor.

This report is part of an ongoing collaboration between WRI and the Goldman Sachs Center for Environmental Markets.

Assessing U.S. Farm Drainage: Can GIS Lead to Better Estimates of Subsurface Drainage Extent?

admin — Wed, 01 Aug 2007 00:00:00 -0400

Extensive agricultural subsurface “tile” drainage in the Midwestern U.S. has important implications for nutrient pollution in surface water, notably the seasonal hypoxic “dead zone” in the Gulf of Mexico.

However, drainage data limitations have constrained efforts to effectively factor tile drainage into regional economic and environmental impact studies.

Better drainage data would be a valuable addition to future modeling applications.

In light of this need, a methodology incorporating a geographic information system (GIS) analysis based on soil and land cover maps was used in addition to existing data to create a set of county-level tile drainage extent estimates.

These estimates are downloadable for review (ZIP archive, 144 Kb) in order to evaluate existing data and the results of this GIS analysis, with the goal of arriving at an improved picture of tile drainage in the U.S.

Conclusions and Recommendations

Map-based GIS analysis using soil and land cover data can provide a good representation of land that would benefit from drainage, and in densely tile-drained regions may be an improvement over previous estimates. Refinements could be made through further exploration of smaller geographic areas using more detailed data and maps.
Improved drainage data will contribute to a better understanding of the large-scale environmental impacts of tile drainage-related nutrient pollution, and the cost-effectiveness of nutrient abatement strategies. To that end, we offer a range of drainage estimates and a revised national county-level database of agricultural tile drainage for collaborative validation and review.
Ultimately, without actual measurements, ad hoc efforts to estimate tile drainage extent will only be stop-gap measures in solving the drainage data problem. Pressing water quality concerns such as Gulf hypoxia highlight the need for another large-scale drainage survey, which could be included in the USDA’s next agricultural census.

DOWNLOAD DATA (ZIP archive, 144 Kb): County Estimates of U.S. Tile Drainage

Thirst for Corn: What 2007 Plantings Could Mean for the Environment

admin — Fri, 01 Jun 2007 00:00:00 -0400

Thanks in large part to the Renewable Fuels Standard (RFS)—a legislative mandate for increased renewable fuels use that passed as part of the Energy Policy Act of 2005—the corn ethanol industry is expanding at an unprecedented rate in the United States. In its spring planting projections, the USDA projected that corn acreage in the U.S. would increase by 12 million acres, or 15%, during the 2007 planting season alone to meet demands for ethanol and other uses.

This study explores the potential environmental impacts of this surge in corn production, and suggests some policy measures to help make agriculture in general more robust to increased demands for energy production.

Farm Policy Recommendations

Resist the pressure to allow farmers penalty-free “early outs” from their CRP contracts.
Increase funding for working lands conservation programs such as CSP and EQIP.
Extend “sodbuster” compliance requirements for receipt of commodity payments to all acreage in production, not just highly erodible lands.
Create a pilot TMDL project for the Chesapeake Bay with joint USDA/EPA jurisdiction.
Extend compliance requirements for receipt of commodity payments to include nutrient management requirements in TMDL non-attainment watersheds.
Establish a new program in the Farm Bill to encourage riparian buffers.
Require all projects that receive federal funds to explore crop yield improvements to explicitly address the soil, water, and GHG implications of the new production methods.
Promote conservation tillage in corn production and provide research resources directed explicitly at use of slowrelease fertilizers and use of precision nitrogen management in row crop production.
Task the USDA with development of a consistent methodology for calculating the environmental impacts of biofuels feedstock production.

Agriculture and Climate Change: Greenhouse Gas Mitigation Opportunities and the 2007 Farm Bill

admin — Thu, 01 Mar 2007 00:00:00 -0500

Note: This policy note is the second in a series of policy notes on the 2007 Farm Bill, and the role that U.S. agriculture might play in addressing global warming.

This policy note addresses the following questions:

How can managers of agricultural operations reduce their greenhouse gas emissions?
What opportunities exist under the Conservation Title of the 2007 Farm Bill to enhance climate change mitigation opportunities from the U.S. agricultural sector?

Recommended Actions

Ensure that 2007 Farm Bill legislative language includes greenhouse gases specifically as a resource of concern under air quality.
Ensure that 2007 Farm Bill implementation language for conservation programs includes opportunities for reductions in all agricultural greenhouse gas emissions, including nitrous oxide and methane and enhanced carbon storage as national priorities.
Require that environmental tradeoffs are assessed when evaluating applications for cost-share or incentive payments in the 2007 Farm Bill. Include in the United States Department of Agriculture (USDA) implementation language the need to establish protocols to assess environmental tradeoffs within broader conservation program implementation language, e.g., between enhancing wildlife benefits and reducing greenhouse gas emissions.
Explicitly specify nitrous oxide and methane mitigation opportunities in any existing climate change language.