Gregory Latta, Darius Adams,
Ralph Alig, Eric White
Oregon State University and USDA, Forest Service
FASOM Model Collaborators
EPA
Texas A&M Adam Daigneault
Bruce McCarl Jared Creason
Sarah Ohrel
Jerry Cornforth USDA
William Hohenstein
Nicholas Institute, Duke Jan Lewandrowski
EPRI
Brian Murray Steven Rose
Justin Baker RTI International
Robert Beach
Modeling the Carbon Offset Market
Brief Overview of FASOM model
Recent discussion of federal legislation
Boxer-Kerry (Senate): The Clean Energy Jobs and
American Power Act
Waxman-Markey (House): American Clean Energy
and Security Act
Cap and Trade in a Voluntary Context
Forest sector not capped
Sell offsets as carbon sequestered or emissions avoided
FOREST AND AGRICULTURE SECTOR OPTIMIZATION
(FASOM-
MODEL with GREENHOUSE GASES (FASOM-GHG)
LAND USE
CHANGES
FLOWS OF
FOREST SECTOR FEEDSTOCKS
MARKETS AND FOREST FOR BIOENERGY
AND ETHANOL
LAND BASE:
INVENTORY AGRICULTURE
SILVICULTURAL REGIME SECTOR MARKETS
ROTATION AND AG LAND BASE:
FOREST TYPE
CROPPING
MANUFACTURING TILLAGE METHODS
LIVESTOCK
ENERGY SECTOR
FEEDSTOCK MARKETS
4
Elements of FASOM Forest Sector
COMMODITIES (ENDOGENOUS)
SOFTWOOD LUMBER, HARDWOOD LUMBER, SOFTWOOD
PLYWOOD, OSB
PAPER PRODUCTS (14), MARKET PULP (4), RECYCLED
NATIONAL DEMAND FOR EACH COMMODITY
REGIONAL AND IMPORT SUPPLIES
PRODUCTION PROCESSES (PULP AND PAPER)
ALTERNATIVE FIBER MIXES
ALTERNATIVE TECHNOLOGIES (PULPING AND PRESSES)
TIMBER INVENTORY DATED FROM ca 2000
TIMBER GROWTH
MANAGEMENT CLASSES (11 IN SOUTH, 5 IN PNWW, 2
ELSEWHERE)
FOREST TYPES (6 IN SOUTH, 3 IN PNWW, 2 ELSEWHERE)
PARTIAL CUTTING
SILVICULTURAL AND LAND CONVERSION COSTS
Policy Background
US Greenhouse Gas Emissions
From: (EPA 430-R-10-006) Inventory of U.S. Greenhouse Gas Emissions and Sinks:1990 – 2008
http://www.epa.gov/climatechange/emissions/usinventoryreport.html
The Emissions Cap
http://www.epa.gov/climatechange/economics/pdfs/EPA_S1733_Analysis.pdf
http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf
The End Goal – Domestic (FASOM)
Figure 1: Total Domestic Forest and Agriculture Offset MACs for constant (a) and rising (b) prices
-1
(avg MtCO2e yr )
$50 $250
2010
2020
$40 $200 2030
2040
2050
$30 $150
$/tCO2e
$/tCO2e
$20 2010
$100
2020
2030
$10 2040 $50
2050
$- $-
0 200 400 600 800 1000 0 250 500 750 1000 1250 1500
MtCO2e/yr MtCO2e/yr
(a) (b)
U.S. EPA, 2009. Updated Forestry and Agriculture Marginal Abatement Cost Curves. Memorandum to John Conti, EIA, March 31, 2009.
The End Goal – International (GTM)
U.S. EPA, 2009. Updated Forestry and Agriculture Marginal Abatement Cost Curves. Memorandum to John Conti, EIA, March 31, 2009.
Putting It Together - HR2454 Analysis
Putting It Together - HR2454 Analysis
Putting It Together - HR2454 Analysis
The Fallout
So How Can We Improve?
One Way is to:
Model Cap and Trade in a Voluntary Offset Context
Forest sector not capped
Sell offsets as carbon sequestered or emissions avoided
What Issues Can We Address
Given that the language of the bill is vague at best
•We know that the Forest and Agriculture Sectors
will not be “capped”
•We also know that a Voluntary Carbon Offset
market exists
Modeling a Voluntary Carbon Offset
Market
Use an established protocol
Climate Action Reserve
Make enrollment in the market Voluntary
Land in the model would have to “opt in”
Land that does not “opt in” will have no control on
emissions levels (no penalty)
The FASOM Voluntary Forest Carbon Market
Rules
Requires 100 year commitment
Requires payments for emissions in addition to
payment for sequestration
Includes harvested product carbon
Baseline set to fixed carbon amount per hectare
Forestry Marginal Abatement Cost Curves
2010-2015 Forest Carbon Offset Curve 2030-2035 Forest Carbon Offset Curve
120 120
100 100
$/tonne CO2e
$/tonne CO2e
80 80
60 60
40 40
Mandatory Mandatory
20 Voluntary 20 Voluntary
0 0
- 100 200 300 400 500 600 700 - 100 200 300 400 500 600 700
millions of tonnes CO2e/yr millions of tonnes CO2e/yr
Afforestation Marginal Abatement Cost Curves
2010-2015 Forest Carbon Offset Curve 2030-2035 Forest Carbon Offset Curve
120 120
100 100
$/tonne CO2e
$/tonne CO2e
80 80
60 60
40 40
Mandatory Mandatory
20 Voluntary 20 Voluntary
0 0
- 100 200 300 400 500 600 700 - 100 200 300 400 500 600 700
millions of tonnes CO2e/yr millions of tonnes CO2e/yr
Ever increasing marginal cost curve
Notes: EPA 2005 = EPA, Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture, November 2005. ERS 2004 = USDA, Economics of
Sequestering Carbon in the U.S. Agricultural Sector, Apr. 2004. MS 2001 = Bruce A. McCarl and Uwe A. Schneider, “Greenhouse Gas Mitigation in U.S.
Agriculture and Forestry,” Science, vol. 294 (December 21, 2001), pp. 2481–2482. R 1997 = Kenneth R. Richards, Estimating Costs of Carbon Sequestration
for a United States Greenhouse Gas Policy (Boston: Charles River Associates, 1997). MR 1990 = Robert J. Moulton and Kenneth R. Richards, Costs of
Sequestering Carbon Through Tree Planting and Forest Management in the United States, General Technical Report WO-58 (USDA, Forest Service, 1990).
M 2007 = Bruce A. McCarl, “Agriculture in the Climate Change and Energy Price Squeeze, Part 2: Mitigation Opportunities” (presentation given at the 4th
USDA Greenhouse Gas Conference, Feb. 6-8, 2007).
FROM: Estimates of Carbon Mitigation Potential from Agricultural and Forestry Activities
Congressional Research Service, 7-5700, www.crs.gov, R40236
Existing Forest Marginal Abatement Cost Curves
2010-2015 Forest Carbon Offset Curve 2030-2035 Forest Carbon Offset Curve
120 120
100 100
$/tonne CO2e
$/tonne CO2e
80 80
60 60
40 40
Mandatory Mandatory
20 Voluntary 20 Voluntary
0 0
- 100 200 300 400 500 600 700 - 100 200 300 400 500 600 700
millions of tonnes CO2e/yr millions of tonnes CO2e/yr
Land Movement between Forest and Agriculture
Voluntary
Price Period CB GP LS NE RM PSW PNWW PNWE SC SE Total
0 2010-2030 -783 0 -1,877 -179 -2 0 0 -13 -2,242 -1,658 -6,753
15 2010-2030 -783 0 -1,877 918 1,700 400 0 187 -865 -921 -1,242
30 2010-2030 267 0 -1,873 3,849 1,700 400 0 187 4,295 -910 7,915
Mandatory
Price Period CB GP LS NE RM PSW PNWW PNWE SC SE Total
0 2010-2030 -783 0 -1,877 -179 -2 0 0 -13 -2,242 -1,658 -6,753
15 2010-2030 -606 0 -882 3,862 1,300 303 0 185 2,698 -79 6,780
30 2010-2030 3,278 0 350 5,162 1,800 303 0 192 13,185 3,638 27,907
Negative value indicates
net deforestation
Positive value indicates
net afforestation
thousand hectares thousand hectares
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0 to 4 0 to 4
5 to 9 5 to 9
10 to 14 10 to 14
15 to 19 15 to 19
20 to 24 20 to 24
25 to 29 25 to 29
In Market
30 to 34 30 to 34
35 to 39 35 to 39
Out of Market
40 to 44 40 to 44
45 to 49 45 to 49
50 to 54 50 to 54
Age in Years
Age in Years
55 to 59 55 to 59
60 to 64 60 to 64
65 to 69 65 to 69
$0 per tonne CO2e
$15 per tonne CO2e
70 to 74 70 to 74
75 to 79 75 to 79
80 to 84 80 to 84
85 to 89 85 to 89
Out of Market
90 to 94 90 to 94
95 to 99 95 to 99
over 100 over 100
thousand hectares thousand hectares
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
0 to 4 0 to 4
5 to 9 5 to 9
10 to 14 10 to 14
15 to 19 15 to 19
20 to 24 20 to 24
25 to 29 25 to 29
In Market
30 to 34 30 to 34
35 to 39 35 to 39
Out of Market
40 to 44 40 to 44
45 to 49 45 to 49
50 to 54 50 to 54
Age in Years
Age in Years
55 to 59 55 to 59
60 to 64 60 to 64
65 to 69 65 to 69
$5 per tonne CO2e
$30 per tonne CO2e
70 to 74 70 to 74
In Market
75 to 79 75 to 79
Age Class Structure of Existing Forest
80 to 84 80 to 84
Out of Market
85 to 89 85 to 89
90 to 94 90 to 94
95 to 99 95 to 99
over 100 over 100
Product Price Impacts
440
US Softwood Lumber Price
420
400 $0 CO2e
$15 Mandatory
380
$/mbf
$30 Mandatory
360
$15 Voluntary
340 $30 Voluntary
320
300
2000 2010 2020 2030
Conclusion
General
We need to pay attention to model users needs
How we structure the policy in the model is important
General
optional offset sales entry leads to fewer acres of afforestation and less response
from management of existing forests
prices effects in traditional products markets are notable and exaggerated when
C prices rise and are especially wide in a mandatory offset scheme
marginal cost curves of C are steeper in voluntary market--as some previous
econometric studies have suggested