Carbon Sequestration

1
Carbon Sequestration

• Darmawan Prasodjo

2
Introduction Background

• Under Kyoto Protocol industrialized countries
  have pledged to reduce their carbon emissions to
  below 1990 emission levels over period 2008-2012.
• A number of AF practices are known to stimulate
  the absorption of atmospheric carbon or reduce
  GHG emission at relatively modest cost. (McCarl,
  Schneider, Murray 2001)
• Proposal the inclusion of three broad land
  management activities forest, cropland and
  grazing land management (Feng et al 2000).

3
Introduction Sequestration

• Sequestration reducing atmospheric carbon stock
  by removing carbon from the atmosphere and
  storing it in soil or biomass.

4
Sequestration Forestry Ag activities
(McCarl presentation, Purdue University, April
2003)
5
Why Sequestration ?

• Society is searching for low cost options.
• Forest and Ag costs estimated near 100 per ton
  carbon for Kyoto implementation. Non ag costs are
  bigger
• (McCarl presentation, Purdue University, April
  2003)
• The climate benefit of one ton of sequestered
  carbon and one ton of non emitted carbon are
  roughly equivalent

6
Sequestration Potential

• Carbon sequestration potential of US cropland
  through improvement management is 75 208
  MMTC/year (Lal et al).
• Soil sinks and forest sinks could potentially be
  used by US to meet half of its emission reduction
  commitment.

7
Bridge To The Future

• Costs of sequestration are significantly lower
  than GHGs emissions abatement costs in the energy
  system.
• Carbon sequestration can serve as the bridge to
  the future.

8
Permanence Issue

• Saturation storage reservoirs fill up due to
  physical or biological capacity
• Volatility carbon released through land use
  change, tillage change, harvesting, fires, or
  other natural disturbance

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Permanence Issue Saturation
Gitz et al 2004

• Sequestration accumulates carbon until absorptive
  capacity is used up
• West and Post find a 10-15 year period for
  tillage changes.
• Birdsey shows a longer period 30-70 years for
  forest carbon.
• Majority of gains occur in the first couple of
  decades.

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Permanence issues Volatility
Gitz et al 2004

• When practice is discontinued, reverting from
  reduced back to conventional tillage, most of the
  carbon is released quickly.
• If one is to permanently retain then the program
  must be designed to both encourage and maintain a
  change in land management
• May also lead to discounts ala McCarl and Murray.

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Economics Drive Abatement

• How efficient is carbon saving technology.
• Rate and speed of abatement

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Economics Drive Sequestration

• Cost of sequestration (McCarl, April 2003)
• Afforestation land cost opportunity. (Gitz et
  al 2004)

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Economics Drive Land Opportunity Cost

• Costs of sequestration are indeed affected by the
  opportunity costs of lands diverted from other
  uses to sequester carbon.
• Average net revenue of agricultural land in 1997
  to evaluate the marginal opportunity cost of
  using land for sequestration purposes.

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Economic Drive Cost of Carbon(already discussed
in the class)

• Carbon will cost money to produce, sell, and
  measure.

DISC (1-ADD)(1-LEAK)(1-UNCER)(1-PERM)
(McCarl, April 2003)
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Timing Of Sequestration

• Sequestration potential should start immediately
  as a brake slowing down both the rate of growth
  of concentration and the rate of abatement in the
  energy sector (Gitz et al 2004)
• Carbon sinks should be utilized as early
  possible, and carbon flow into sinks should last
  until the atmospheric carbon concentration is
  stabilized. (Feng, Kling 2002)

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Optimal Control Model Setup

• Motion for C(t)
• (1)

• Motion for A(t)
• (2)

• Social planners net payoff function
• (3)

Maximizing (3) subject to (1) and (2) yields the
optimal carbon sequestration and emission level
over time.
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Optimal Control Optimal Paths of Sequestration

• Current value of Hamiltonian
• (4)

• (5)

• (6)

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Optimal Control Optimal Paths of Sequestration

• (7)

• Transversality condition
• (8)

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Optimal Control Steady State
Assuming that a steady state exists, setting
and using (1), (2), (6) and (7), we can derive
(iv)
(i)
(ii)
(v)
(iii)
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Optimal Control Long Run Emission
(i)

• Carbon sequestration activities do not play
  additional role in the long run.
• Emissions should be in balance with reduction due
  to the natural decay

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Optimal Control Sequestration in Steady State
From (ii), (iii) and (iv) we can derive
From (iii) we can sign
D(.) gt 0
We can deduce the sign
Q(.) gt 0
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Optimal Control Sequestration in Steady State

• This means that
• The result of using sequestration during the
  transition path toward the steady state (Feng et
  al 2002)
• Sequestration does affect the process of reaching
  long run targets.

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Optimal ControlMarginal Cost of Sequestration
(steady state)
From (iv) we can
interpret

• amount of sequestration depends on the Q(.),
  marginal cost of sequestration
• Q(.) is lower (sequestration more effective),
  then the amount of sequestration is higher.

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Marginal Cost of Sequestration(empirical)
Annual offset arising from agricultural soils
(McCarl et al 2001)
Annual offset arising from forest (McCarl et al
2001)

• The amount of sequestration increases as the
  sequestration technique is becoming more
  effective.
• Steady state analysis is empirically confirmed.

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Optimal Control Carbon Marginal Abatement Cost
(MAC)
From (ii), (iii) and (iv) we can derive
B(.) represents the marginal benefit of emission
which is equivalent to Marginal Abatement Cost
(MAC)
Replacing B(.) with MAC
As the marginal abatement cost is increasing,
the amount of carbon sequestration is also
increasing
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Optimal Control Carbon Marginal Abatement Cost
(MAC)

MAC0
MAC0
Seq market
Seq0
A0
Abatement
L0
Lpolicy
Panel A
as MAC increases, the amount of sequestration
also increases which is in synch with the result
of steady state
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Payment Scheme PAYG(Pay-As-You-Go)

• Owners sinks sell and repurchase emission credits
  based simply on the permanent reduction of
  carbon.
• A farmer who adopts conservation tillage
  practices on 100 acres may earn 200 permanent
  carbon.
• If in the fifth year, the farmer plows the land,
  he would be required to purchase carbon credits.

(Feng, Zhao, Kling 2000)
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Payment Scheme VLC (Variable-Length-Contract)

• VLC system evolves through independent broker
  arrangements.
• A broker wishes to buy permits from sink sources
  and sell them to emitters
• The broker must contract with sink sources to
  achieve permanent reduction.
• Permanent carbon reduction is produced from a
  series of temporary reduction.
• Broker contacts farmer 1 to sign a contract to
  adopt conservation tillage, say 3 years before
  plowing the land.
• Broker contacts farmer 2 to plant trees at
  beginning of year 4.

(Feng, Zhao, Kling 2000)
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Payment Scheme CAA Carbon Annuity Account

• The generator of a sink is paid the full value of
  the permanent reduction in the GHGs stored in
  the sink.
• Payment is put directly into the annuity account.
  
• Owner can access the earning of the account as
  long as the sink remains in place.
• The principal is withdrawn when and if the sink
  is removed.
• If the sink remains permanently, the sink owners
  eventually earns all the interest.

(Feng, Zhao, Kling 2000)
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Conclusion

• Agricultural and forest carbon sequestration are
  important components in response to a greenhouse
  gas emission
• Sequestration should not be treated the same as
  abatement/reduction. Sequestration always has the
  potential to be temporary.
• Sequestration does affect the path of reaching
  long run targets.

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Conclusion

• Marginal sequestration cost affects the amount of
  carbon sequestered in the long run.
• The carbon MAC of the industry also affects the
  amount of sequestered carbon. As the MAC
  increases, the amount of carbon sequestration
  also increases.  
• On the whole, it does not matter whether the
  reduction is done by sequestration or emission
  abatement as long as there is less carbon in the

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References

• Birdsey, R.A 1996. Carbon Storage for Major
  Forest Types and Regions in the Contiguous United
  States. . Chapter 1, Forest and Global
  Change, in Vol. 2 Forest Management
  Opportunities for Mitigating Carbon Emissions,
  edited by R.N Sampson and D. Hair. Washington,
  D.C. American Forest.
• Feng, H, Zhao, J and Kling C. 2000. Carbon
  Sequestration in Agriculture Value and
  Implementation. Working Paper 00-WP 256, Center
  for Agricultural and Rural Development, Iowa
  States University.
• Feng, H, Zhao, J and Kling, C. 2002 The Time
  Path and Implementation of Carbon Sequestration,
  AJAE, 84, February 2002134-149.
• Gitz, V, Hourcade, J,C, Ciais, P. 2004.  Energy
  Implications of Optimal Timing of Biological
  Carbon Sequestration . The Energy Journal, 04
  August 2004.
• Grubler, A., N.Naicenovik, and W.D. Nordhaus,
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  2002.
• Intergovernmental Panel on Climate Change (IPCC).
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• Kurkalova, L, Kling, C, Zhao J. 2001.
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  Measurement Technology Carbon Sequestration in
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  Center for Agricultural and Rural Development,
  Iowa States University. 
• Kurkalova, L, Kling, C, Zhao, J. 2003. Multiple
  Benefits of Carbon Friendly Agricultural
  Practices Empirical Assessment of Conservation
  Tillage. Working Paper 03-WP 326, Center for
  Agricultural and Rural Development, Iowa States
  University.

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References

• McCarl, B.A 2003. Cost of Carbon Ideas and
  Research Direction. Presentation for Climate
  Change Segment of Advance Resources Class.
• McCarl, B.A, and Schneider, U.A. 2000.
  Agricultures Role in a Greenhouse Gas Emission
  Mitigation World An Economic Perspective.
  Review of Agricultural Economics 22 134 59.
• McCarl, B.A, Murray, B.C, Schneider, U.A. 2001.
  Influences of Permanence on the Comparative
  Value of Biological Sequestration versus
  Emissions Offsets. Working Paper 01-WP 282,
  Center for Agricultural and Rural Development,
  Iowa States University 
• Schneider, U.A, McCarl, B.A, Murray, B.C,
  Williams, J.R, Sand, R.D. 2001. Economic
  Potential of Greenhouse Gas Emission Reductions
  Comparative Role for Soil Sequestration in
  Agriculture and Forestry. Working Paper 01-WP
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• Schneider, U.A. 2002 "The Cost of Agricultural
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• West, T., Post, J.A and Marland, J. 2000. Review
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