Minnesota’s agriculture in a carbon constrained economy Bjorn Gangeness November 27, 2007

Climate Change in Context  Nearly inarguable evidence showing human influence in raising average global temps  The challenge of what to do and how  Solutions coming from different levels of government and citizen participation  Different sectors play different roles - energy generation to consumption to agricultural production

Minnesota’s emissions reduction goals  80% reduced carbon emissions below 2005 levels in 2050, 30% in 2025 (eq. to 45.3MMT)  Reductions could come from  efficiencies,  reduced energy use,  carbon offsets,  geologic capture and storage,  or terrestrial capture and storage

Carbon and Agriculture Source: bp.com

Carbon and Agriculture  Large agricultural industry in Minnesota overwhelmingly focused on corn and soy  New initiatives that will make perennial biofuel crops more attractive  Governor’s NextGen Energy Initiative  Reinvest in Minnesota – Clean Energy

New Crop Initiatives and Carbon  The problem is the extent in considering carbon sequestration in development  No mention of carbon stock goals  No anticipation of carbon cap and trade system  If addressed, perennial biofuels may develop more securely in an unsure marketplace

Reinvest in MN – Clean Energy  $46 million requested appropriation for 2008  $40 M for bioenergy crop easements  $6 M for administration  13,000 acres expected easements for a maximum 20 year payment of $3077/acre  Recognition of potential to work with other initiatives within the Federal Farm Bill  Tiered system of payments depending on type of practice implemented

Example of Tiered System Tier I ($1500/acre) Switchgrass Tier II ($2000/acre) At least 4 native prairie species Tier III ($3000/acre) At least 4 native prairie species and permanent easement status Tiers modeled on Conservation Security Program

Relevant Criteria Economic Efficiency Ecological Integrity Simplicity ($/MTCO2e) Viability Wildlife habitat Water Quality Biodiversity Manageable Understandable Complementary

Alternatives  No action – simply allow biofuels incentives to move forward on the current path  Integrate carbon credit system into the tiered payment structure based on BMPs  Set carbon stock increase goals for each tier Full Appropriation Assumed ($46M in 2008)

No Action Alternative  Economic Efficiency  acre goal but likely higher  1.6 MTCO2e/acre/yr 21,000 MT/yr or ~ 420,000 MT over 20 yrs ($95/MT)  Ecological Integrity  Monoculture  Perennial is good for WQ  Habitat is better than row-crop  Simplicity  Monoculture is easier to harvest, plant, manage

Carbon Credit Integration Tier I - Switchgrass (CCX 1 MT/acre- yr, $2.50 or $37.45 on ECFI 2010) Tier II - At least 4 native prairie species (CCX 1 MT/acre-yr, $2.50 or $37.45 on ECFI 2010) Tier III - At least 4 native prairie species and permanent easement status (CCX 1 MT/acre-yr, $2.50 or $37.45 on ECFI 2010) Changes to Tiers

Carbon Credit Integration  Addresses benefits of credit trading in each tier  No control over the carbon credit market so no price guarantees  Carbon markets are still voluntary, though a national system could change that

Carbon Credit Integration  Economic Efficiency  Minimal administrative fees to integrate and promote seeking of carbon credits for practices  Stacked payments make incentives more attractive  Ecological integrity  Grass species are not distinguished for in CCX  Simplicity  More complicated than No action, but stacked payments outweigh administrative consequences

Goal of Increased Carbon Stocks Tier I - Switchgrass (CCX 1 MT/acre- yr, $2.50 or $37.45 on ECFI 2010) Tier II - At least 4 native prairie species and wetland restoration (4.4 MT/acre-yr in wetlands) Tier III - At least 4 native prairie species, short rotation woody crops and permanent easement status (7MT/acre-yr in SRWC) Changes to Tiers

Goals of Increased Carbon Stocks  Higher sequestration goals per tier with mixed practices  Economic Efficiency  More diversified fuelstocks, less market sensitivity  Higher payments for higher sequestration rates  Ecological Integrity  Wetlands and SRWCs create more diverse habitat than simple grass species  Simplicity  The most complicated option

Recommendations  Train technical assistance providers in carbon markets  Follow the progress of the development of Midwest GHG Reduction Accord  Incorporate data from NextGen cellulosic pilot projects  Create flexibility within the RIM-CE structure that allows for more fluid transitions to alternative crops (among/between species)