The Cost Of Carbon Emissions

Regardless of where you stand on climate change, new legislation could create new markets that could benefit Florida growers and landowners. Under so-called cap-and-trade law, greenhouse gas (GHG) emitters must reduce emissions or obtain allowances for the amount of pollution they can emit. If the emitter exceeds the cap of its allowances, it could buy additional allowances from companies that have not exceeded their cap and have allowances to spare or buy offsets from entities that have the ability to sequester carbon or other GHGs. The idea is that those exceeding their limits will be penalized and therefore incentivized to produce more efficiently and cleanly.

Soils, some crops, and timberland all sequester carbon, keeping it from entering the atmosphere. Few argue that costs for items like energy, fertilizer, and products produced by heavy industries would go up under cap and trade, but some growers could partially offset the rising costs by selling just that — offsets.

Florida’s Potential

According to research by UF/IFAS, there is strong potential for GHG mitigation in the southeastern U.S. because of vast forested acres and the opportunity to plant and convert biomass into biofuels. In 2003, forests covered 47%, and crop and pasture lands covered 24.5% of Florida’s 34.6 million land acres. This provides the state a huge potential to play in the cap-and-trade game if and when such a system is passed. Work is being done now to calculate just how much carbon the state can sequester.

Some farm groups have seen the area of carbon sequestration as an opportunity, as long as future legislation spells out how agriculture offset projects will be administered and used in cap and trade.

Even before cap and trade is passed, some believe Florida growers could benefit by selling offsets on the voluntary markets through exchanges like the Chicago Climate Exchange or Green Exchange. Transactions can also happen directly between a buyer and seller (known as an over-the-counter market). In the meantime, some land owners are laying the groundwork for future carbon offset projects on their property by taking a carbon inventory.

EcoAsset Solutions, a wholly-owned subsidiary of Lykes Bros., is an advisory company helps growers interested in learning what their GHG inventory is and what types of carbon offset projects they might be able to pursue.

John Wakefield, senior vice president of EcoAsset Solutions, says the company grew out of Lykes Bros.’s own interest in determining their GHG profile and decision to eventually embrace the carbon market.

“We wanted to get our arms around our own GHG profile with respect to our ag operations and realized we were unique because we had a landowner’s perspective,” he says. “That was kind of the birth of EcoAsset Solutions, in that we saw a niche market that needed somebody dedicated to serving.”

EcoAsset Solutions can work with growers to first determine their GHG inventory, or in other words, calculate how much emissions an operation is producing each year. Then the company can help design a project to reduce emissions, which could include things like using precision ag to reduce inputs. Next, a third-party auditor must verify that the GHG inventory is accurate and that the project would reduce carbon or other GHG such as nitrogen dioxide.

“Once a project is verified by the third-party auditor, we can help the grower or landowner take the offset to the marketplace and sell it on an exchange like the Chicago Climate Exchange or to a private entity looking to buy specific types of offsets.”

Trees And Soil

According to EcoAsset’s chief environmental scientist Sandra Kling, citrus growers could see opportunities in the carbon market in three areas — young trees, in the soil, and through maximizing efficiencies.

“Whether or not citrus trees are a carbon sink really depends on the age of the trees,” she says. “If they are mature trees and not growing, they are carbon neutral. The opportunity would lie with new plantings for the first 20 years.

“Also, we estimate that the gross annual carbon sequestration rate for citrus is about 4 metric tons of carbon dioxide equivalents per acre per year. Notably, a grower would also need to calculate the GHG emissions related to growing on that acre and net that from the gross number. One metric ton of carbon dioxide is equivalent to one carbon credit.

“Really where the most opportunities lie in the carbon market for growers right now are with gaining efficiencies. Precision agriculture offers some opportunities with variable rate fertilizer applications. Using organic fertilizers and more efficient irrigation methods like drip are other examples of opportunities with efficiency.”

Up To Speed

While Lykes Bros. has not sold any carbon offsets yet, Wakefield notes that the company is studying where opportunities exist on their lands.

“Lykes is like a lot of others interested in the carbon market,” he says. “Right now they are getting up to speed and looking for opportunities on their land. As soon as climate change legislation becomes clearer and more predictable, they will have done the groundwork to develop an offset project and get it certified and jump into the market.”

Wakefield believes that the prices of offsets will rise when and if cap-and-trade legislation is passed. The key, he says, is the legislation must more specifically point out agriculture’s important place in GHG mitigation.