Bio-economics of Climate Change Payments for Carbon Sequestration in Michigan This poster shows how strategies to mitigate global warming can also help Michigan farmers earn more money from their conservation practices. Threat of Global Warming Life on earth exists due to presence of gases like carbon dioxide (CO 2 ) that keep the earth’s surface warm by absorbing sun’s radiation reflected by it. The global carbon cycle keeps the optimum concentration of CO 2 in the atmosphere. Human activities – burning of fossil fuels and large-scale deforestation – have disrupted this natural cycle by sharply increasing the atmospheric CO 2 concentration. Carbon Sequestration – a solution Possible solutions to combat global warming include reducing CO 2 emissions (e.g. by burning less fossil fuels) and carbon sequestration – removing excess CO 2 from the atmosphere and storing it as other forms of carbon. Plants and trees absorb CO 2 from the atmosphere and convert it into biomass and soil organic matter through photosynthesis. Forestry, conservation tillage, and grass plantings are viable carbon sequestration activities. This produces the ‘the greenhouse effect’. CO 2 absorbs more heat in the atmosphere, leading to global warming, thereby increasing temperature, changing weather patterns, melting glaciers and polar ice, and raising sea level. Continued global warming may have adverse impact on national and international economies. Markets for carbon credits The Kyoto Protocol enacted in 2005, requires member countries to reduce carbon emissions by 5.2% below 1990 levels by Countries can achieve these targets by trading in carbon credits, which are units of carbon emissions reduced at source (measured in tons of CO 2 equivalent – tCO 2 e). These efforts have led to growth in carbon markets such as the European Union Emission Trading Scheme. In 2006, more than 760 million tCO 2 e were traded in this market, valued at $18.9 billion. Another market for carbon credits is the US based Chicago Climate Exchange. Carbon sequestration credits: Potential gains for Michigan landowners The growth in Michigan’s forests raises the state’s carbon sequestration potential. Michigan farmers can earn income by selling carbon credits from post-1990 forest plantations and post-1999 grass plantings and no-tillage practices. The estimated value of carbon credits from Michigan is $9.3 million/annum. As CO 2 emissions rise, there will be a higher demand for these carbon credits. CCX is a voluntary emission reduction and trading program whose members reduce their carbon emissions by 1% per year. Members include Ford, DuPont, IBM, Motorola, New Mexico, Chicago, and Universities of Minnesota and Iowa. Members that cannot reduce their own emissions can buy credits from other members that exceed their reduction targets and from farmers engaged in carbon sequestration. Since its 2003 inception, CCX has traded more than 15 million tons of carbon credits. The present price of carbon on CCX is $4/ton. Farmers can make money by selling carbon sequestration credits from forestry, conservation tillage, and grass plantings. In 2005, Iowa farmers sold 20,000 tons of carbon credits on the CCX from no-till farmland and grasslands. The University of Iowa, a CCX member, bought all these credits. As the map shows, Michigan can also earn CCX carbon payments for conservation tillage, grass planting, and forestry. Offsets for no-till or grasses Offsets for grasses only US Central Region for CCX Soil Offsets Realizing this value will require: ‘aggregator’: an organization that helps individual farmers link up and sell carbon credits on CCX. ways to reduce costs for monitoring and measuring carbon sequestration on farmers’ fields. Researchers are working on computer based models that can use satellite images to monitor and measure carbon sequestration on farmers’ fields. Contributing Authors Rohit Jindal (CARRS), John Kerr (CARRS), Stuart Gage (Entomology), Gene Safir (Plant Pathology), Brent Simpson (Institute of International Agriculture), David Skole (Forestry), and Terry Link (Office for Campus Sustainability). Data Sources Chicago Climate Exchange, Department of Natural Resources, Intergovernmental Panel on Climate Change, Michigan Land Resource Project, MSU (Office for Campus Sustainability), Natural Resource Conservation Service, United Nations Environment Program, UN Framework Convention on Climate Change, University of Michigan (SNRE), USDA (National Agricultural Statistical Service), US Environment Protection Agency, and USDA (Forest Service). Potential Income for Michigan Landowners from Carbon Sequestration *Calculations based on conservative sequestration estimate of 6 ton CO2 / acre for post-1990 timberland. CCX estimates of 0.50 ton CO2 / acre for both land under conservation reserve and for cover crops, and 0.75 ton CO2 / acre for woodlands. Chicago Climate Exchange (CCX) and Carbon Payments Sequestration (tons of CO 2 /acre) Total Sequestration (tons of CO 2 ) At CCX price ($4/ton CO 2 ) Land UseAcres Post-1990 Timberland325, ,6373,126,548 Land under Christmas Trees60, ,248580,992 Land under woody crops10, ,318105,272 Land under Conservation Tillage296, ,333593,332 Idle land for cover crops 607, ,9681,215,872 Woodland1,224, ,1783,672,712 Total2,526,007 2,323,6829,294,728 In November 2006, MSU joined the CCX as part of its commitment to promote ‘green’ technologies and reduce its own emissions of about 520,000 tons CO 2 e/year. As CCX prices continue to rise, MSU can help Michigan farmers sell additional carbon credits on the exchange, thus setting an example for all the Great Lakes states.