USDA responds to the Consolidated Appropriations Act of 2023 by defining the role of agriculture and forestry in U.S. carbon markets. This analysis identifies key barriers and opportunities, proposing strategies to enhance market participation and ensure environmental integrity.
Key Findings
- Carbon Market Potential: Agriculture and forestry offer significant potential for greenhouse gas (GHG) reductions through carbon markets. However, barriers, including high transaction costs, conservative accounting, and limited demand, impede widespread participation.
- Credit Generation and Types: Carbon credits are generated through protocols defining eligibility, emissions sources, and measurement procedures. While 40+ protocols exist, only 18 have successfully generated credits domestically. Compliance and voluntary markets differ in regulatory frameworks, influencing credit supply.
- Supply and Demand Dynamics: Over the past decade, forestry projects dominated credit supply, while agricultural credits, primarily from livestock projects, remained limited. Recent shifts show a decrease in compliance credits but a surge in voluntary carbon offsets due to corporate GHG reduction goals.
- Quantification Challenges: Accurate GHG quantification in agriculture and forestry projects is hindered by dynamic ecosystems. Protocol designs address challenges like additionality and permanence, but technical barriers persist, requiring advancements in monitoring technologies.
- Barriers to Entry: Low participation is attributed to high transaction costs, conservative accounting, and limited demand. Farmer and forest landowner awareness is high, but participation rates remain disproportionately low due to various barriers.
Recommendations
- USDA Program Implementation: Establish the Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Program to evaluate protocols, register entities, and provide technical assistance, fostering a supportive ecosystem for market participants.
- Advisory Council Formation: Create an Advisory Council to guide the USDA in program implementation, ensuring diverse perspectives and expertise.
- Invest in Technological Solutions: Direct investments toward a soil carbon monitoring network, GHG research, and innovative tools, addressing quantification challenges and building confidence among market participants.
- Reduce Barriers through Existing Programs: Leverage existing USDA programs, such as NRCS and Climate Hubs, to offer technical assistance and support, facilitating market entry for agricultural and forestry producers.
- Promote Market Diversity: Encourage participation in various environmental credit markets beyond carbon, maximizing opportunities for farmers and landowners.
- Reduce Barriers through Existing Programs: Leverage existing USDA programs, such as NRCS and Climate Hubs, to offer technical assistance and support, facilitating market entry for agricultural and forestry producers.
- Promote Market Diversity: Encourage participation in various environmental credit markets beyond carbon, maximizing opportunities for farmers and landowners.