Creating a Market for Carbon Emissions: Opportunities for U. S. Agriculture and Forestry, 1999 Environmental Conference Proceedings

Richard Sandor, Jerry Skees, Alice LeBlanc & Michael Walsh

Reducing greenhouse gases has become a major international objective. While the international community debates the Kyoto protocol, a number of countries have already announced that they will reduce greenhouse gases. The November 1998 Buenos Aires meeting on the Kyoto Protocol helped advance the trading approach as one means for reducing greenhouse gases. Since carbon dioxide is a major greenhouse gas, creating a market for carbon emissions is under consideration. Should such a market evolve, U.S. agriculture and commercial forestry could be big winners.

Emission allowance trading is a straightforward concept that is already operational on a national scale. The U.S. sulfur dioxide emissions market is a primary example. If a market evolves for greenhouse gas emissions, those who are now contributing to carbon emissions may be willing to pay others to sequester carbon (remove it from the atmosphere) as a permanent offset to emissions, or as a means of buying time to invest in technologies needed to reduce emissions. A market would also motivate technological improvements to both sequester carbon and reduce emissions. Forests and cropland in the US provide a number of effective alternatives for carbon sequestration including reforestation of marginal land and best management practices for soil tillage and commercial forestry.

Key steps in the development of a market for carbon sequestration include regulatory change that will create limits on greenhouse gas emissions, monitoring and measurement of carbon sequestered, creation of uniform standards for the commodity, development of a legal instrument that provide evidence of ownership, and emergence of informal spot markets, securities and commodities exchanges, organized futures market and over the counter markets.