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Rewarding farmers can help climate


December 9, 2010
By University of Maryland

December 6, 2010,
College Park, MD – Financially rewarding farmers for using the best fertilizer
management practices can simultaneously benefit water quality and help combat
climate change, finds a new study by the University of Maryland’s Center for
Integrative Environmental Research (CIER).

December 6, 2010,
College Park, MD – Financially rewarding farmers for using the best fertilizer
management practices can simultaneously benefit water quality and help combat
climate change, finds a new study by the University of Maryland’s Center for
Integrative Environmental Research (CIER)
.

The researchers conclude
that setting up a “trading market,” where farmers earn financial incentives for
investing in eco-friendly techniques, would result in a double environmental
benefit – reducing fertilizer run-off destined for the Chesapeake Bay, while at
the same time capturing carbon dioxide headed for the atmosphere.

The study, Multiple
Ecosystem Markets in Maryland
, advises the state’s Department of the
Environment
how to set up a “nutrient trading market,” as proposed in the 2008
state climate action plan. This nutrient trading would operate alongside
markets that sell carbon dioxide credits. The CIER study examines the effects
of operating both markets simultaneously.

In these markets,
farmers who reduce pollutants below a set level would earn credits. They would
sell these credits to other operators, such as sewage and water treatment
facilities or power plants that have difficulty meeting environmental targets.
No direct government subsidies would be involved.

“Everybody can and
should win from these markets,” says principal investigator Matthias Ruth, who directs
the University of Maryland’s Center for Integrative Environmental Research.
“This could represent an extra revenue stream for farmers, as well as an
incentive to use the best nutrient practices that can help clean up the bay and
fight climate change. Taking these conservation steps costs the farmers money,
and at the very least a reimbursement for their investment is well-deserved.”

Maryland is one of a
handful of states considering whether to create these multiple markets.

One key question for
policy-makers is whether farmers who achieve reductions in watershed pollution
while also capturing CO2 should be able to sell credits in both markets and, in
effect, get dual payments for single action.

The study does not
recommend a particular answer to this question, but offers policy-makers a
series of scenarios – estimates of how the systems will work if farmers can
participate in only one or both markets, and whether there should be thresholds
before they can take part.

Another key question is
whether sufficient carbon dioxide will be captured and traded to justify
creation of the market. To determine this, CIER and the World Resources
Institute
developed a dynamic systems model and projected the likely volumes of
carbon dioxide involved.

Specific findings
include:

  • A “nutrient trading
    market” would lead to the capture of between one and two million metric tons of
    carbon dioxide each year by 2030, depending on how the market is set up;
  • In total, captured
    carbon would range from 12.5 to 21.6 million metric tons by 2030;
  • Only a portion of
    captured carbon would be traded in markets, depending on the stringency of the
    market rules; most likely, between seven and 23 percent of captured carbon
    would be sold;
  • Nutrient markets would
    generate more revenue for farmers than carbon dioxide markets. If rules limited
    participation to only one of these, carbon prices would have to be five to
    eight times higher than nutrient prices for farmers to forgo trading in nutrients
    and opt instead for carbon.

“As a practical matter,
the carbon market will usually offer less financial reward than nutrient
trading, because there isn’t that much CO2 captured in this way,” explains
report co-author Rebecca
Gasper, a CIER researcher. “To earn one water credit, a farmer must
eliminate one pound of run-off pollutant. To earn one carbon credit, involves a
reduction of one metric ton of CO2. It’s a lot easier for a power plant
operator to achieve that than a farmer.”

As an example of a best
management practice providing the dual environmental benefit, the report points
to conservation buffers – putting a green swath of trees or other plants
between farm and stream to absorb run-off and filter out pollutants.  But,
this green buffer can also help capture carbon dioxide, and so help the state
meet its CO2 reduction goals. Other practices likely to generate dual
environmental benefits include conservation tillage, cover crops and wetland
restoration.

The nutrient trading
market would work similarly to the one set-up to reduce carbon emissions under
RGGI, the multi-state Regional Greenhouse Gas Initiative that Maryland has
joined.

The fulcrum of the
nutrient market is a target level called the Total Maximum Daily Load. It’s the
maximum amount of phosphorous and nitrogen that Maryland farmers can allow to
run into streams. The U.S. EPA is expected to finalize this target in December.
If a farmer uses more eco-friendly methods and produces lower levels of
pollutants that fall below this target, these can be sold as credits to someone
else who is running above the target level. These would be traded in the
nutrient market.

“Setting up this system
will require a delicate hand,” says Ruth. “Farmers taking part will face a
steep learning curve, and if the system’s too complicated or burdensome,
they’ll likely not take advantage of it.”

“In carefully thinking
through the options for how to operate and potentially combine nutrient and
carbon markets, Maryland is moving out in front as a national leader,” Gasper
says. “Linking multiple markets is appealing because of its potential for
preserving and restoring ecosystems – particularly if other Bay states decided
to participate or set up their own programs”

A copy of the full
report is available online: http://www.cier.umd.edu/documents/Multiple_Ecosystem_Markets_MD.pdf.


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