Could Agriculture Compete in a Market for Carbon Results from a Study of Montana Dryland Grain Produ

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Could Agriculture Competein a Market for
Carbon?Results from a Study of Montana Dryland
Grain Production J. Antle, S. Capalbo, S.
MooneyMontana State UniversityE.
ElliottUniversity of NebraskaK.
PaustianColorado State University
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This research is also funded by grants from
USDAs National Research Initiative Competitive
Grants Program, the National Science Foundation,
and the Consortium for Agricultural Soils
Mitigation of Greenhouse Gases.
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Factors Determining the Cost of C Sequestered in
Agricultural Soil

• Farm Opportunity Costs What does the producer
  have to do to increase soil C, and how does that
  affect profitability?
• Change tillage practices?
• Change crop rotation?
• Change fertilizer rates?
• If producer earns RF per hectare for a
  crop-fallow rotation, and earns RC for a
  continuous crop, the opportunity cost of
  switching from crop-fallow to continuous is (RF
  RC).

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Factors Determining the Cost of C Sequestered in
Agricultural Soil (2)

• Rates of change in soil C associated with a
  change in management
• Changing from one practice to another increases
  soil C at an annual average rate of ?c tonnes/ha
• E.g., in Montana, changing from a crop-fallow SW
  rotation to continuous SW gives ?c ? 0.4 t/ha/yr

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Factors Determining the Cost of C Sequestered in
Agricultural Soil (3)

• Measurement Contracting costs
• Measuring ?c for each agroecozone and each type
  of practice
• Monitoring compliance with contracts
• Other transactions costs

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Factors Determining the Cost of C Sequestered in
Agricultural Soil (4)

• Cost of Producing a tonne of C
• (farm opp. cost) contract costs
• (RF RC)/?c contract costs
• E.g. if opp cost 10/ha/yr and ?c 0.4 t/ha/yr
  then opp cost/t 10/0.4 25/t

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Factors Determining the Cost of C Sequestered in
Agricultural Soil (5)

• A contract could specify
• Location (type of soil climate)
• Type of cropping history (SW crop-fallow)
• Type of cropping practices to be used (no-till
  corn beans, or continuous SW)
• How many years
• Penalty for default
• Carbon rate and price
• Commodity versus Service Contracts?

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When is farming soil C profitable? (1)

• Per-acre (or hectare) contract
• Producer receives g/ha/yr for N years to make
  specified change from practice A to practice B
• Producer earns RA without contract, earns RB g
  with contract (less any fixed contracting costs)

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When is farming soil C profitable? (2)

• Per-tonne contract
• Producer receives P/tonne C
• Producer changes from practice A to practice B,
  gets credit for ?c t/ha/yr for N years
• Producer earns RA without contract, earns RB
  P?c with contract (less any fixed contracting
  costs)

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Table 1. Simulated Value of Carbon Contracts to
Montana Grain Producers for Changing from
Crop-Fallow to Continuous Cropping




Net Producer
Payment
Quantity Soil

Cost to

Income per
Farm Opportunity
Hectare
Level
C Sequestered

Buyer

Net Producer
Cost (/MT C)

(/ha/year)
(Million )
(/ha/yr)

(MM
T)


Income (Million )


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7.61

26.50

201.7

66.4

4

20

12.22

52.95

647.1

303.4

10

30

15.54

78.91

1226.3

639.6

17

40

17.2
8

105.24

1818.6

1063.5

25

50

18.25

131.78

2404.9

1531.2

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Marginal cost of soil C sequestration under a
per-tonne contract in Iowa and Montana
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Estimates of GHG Emissions Reductions Costs from
Other Sources
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This presentation and related publications can be
found atwww.climate.montana.edu