Provisions Supporting Ecosystem Services Markets in U.S. Farm Bill Legislation

Provisions Supporting Ecosystem Services

Markets in U.S. Farm Bill Legislation

/name redacted/

Specialist in Agricultural Policy

December 15, 2009

Congressional Research Service

7-....

www.crs.gov

RL34042

CRS Report for Congress

Prepared for Members and Committees of Congress

Provisions Supporting Ecosystem Services Markets in U.S. Farm Bill Legislation

Summary

Environmental goods and services are the benefits society obtains from the environment and

ecosystems, both natural and managed, such as water filtration, flood control, provision of

habitat, carbon storage, and many others. Farmers’ participation in providing these types of goods

and services began in earnest in the 1990s with the development of watershed approaches

incorporating nutrient credit trading and wetlands mitigation banking, and continued with the

more recent development of voluntary carbon credit markets. These efforts have triggered further

interest in the possibility of developing market and trading opportunities for farmers and

landowners as a source of environmental offsets. These services would be in addition to the food

and fiber services traditionally supplied by the agriculture and forestry sectors. Congress is

expressing growing interest in developing such market-based approaches to complement existing

federally supported programs that promote conservation in the farm and forestry sectors, as well

as to complement existing and/or emerging environmental regulations or natural resource

requirements that may affect the agriculture and forestry sectors.

The enacted 2008 farm bill (P.L. 110-246, the Food, Conservation, and Energy Act of 2008)

contains a new conservation provision that seeks to facilitate the participation of farmers and

landowners in environmental services markets by directing USDA to develop technical guidelines

for measuring farm- and forestry-based environmental services. This provision focuses first on

carbon storage and indirectly references various agriculture and forestry provisions in some

legislative initiatives that are being considered as part of the broader climate change debate,

which have highlighted the perceived need for uniform standards and ways of measuring

emissions reduction and increases in carbon storage in the agriculture and forestry sectors. These

types of provisions could expand the scope of existing land-based conservation programs and

facilitate the development of private-sector markets for a range of environmental goods and

services from farmers and landowners.

Among the possible questions that may emerge as these agriculture and forestry provisions are

either implemented as part of U.S. farm conservation policy, or considered as part of a broader

climate change initiative, are the following: Can agricultural interests effectively provide

environmental services along with traditional food and forestry services? How would uniform

standards address differences within production areas, types of resources, and ecosystems? What

is the role of USDA as the lead federal agency in establishing technical guidelines for the

agriculture and forestry sectors? How would collaboration work between other participating

federal agencies? How would the agreed-upon decisions and standards work within existing

regulatory authorities, and within possible forthcoming regulatory authorities, such as proposed

climate change options currently being debated in Congress? What role should federal agencies

play in establishing environmental services markets?

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Provisions Supporting Ecosystem Services Markets in U.S. Farm Bill Legislation

Contents

What Are Ecosystem Services Markets?......................................................................................1

Example: Carbon Markets.....................................................................................................3

Example: Water Quality Markets...........................................................................................3

Example: Habitat/Conservation Markets ...............................................................................4

What Are the Benefits and Barriers?............................................................................................4

What Is the Recent Congressional Action? ..................................................................................5

Enacted 2008 Farm Bill.........................................................................................................5

Climate Change Legislation ..................................................................................................7

Other Related Actions ...........................................................................................................8

What Are Some Possible Considerations? ...................................................................................9

Tables

Table 1. Possible Range of Services and Regulatory Drivers........................................................2

Contacts

Author Contact Information ...................................................................................................... 10

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Provisions Supporting Ecosystem Services Markets in U.S. Farm Bill Legislation

T

he enacted 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246)

includes a new conservation provision that seeks to facilitate the participation of farmers

and landowners in environmental services markets, covering a range of farm and forestry

services, including improved water and air quality, increased carbon storage, and habitat

protection. The inclusion of this provision could expand the scope of existing farmland

conservation programs and facilitate the development of private-sector markets for agricultureand forestry-based environmental goods and services.

In part, congressional interest in this area has developed in response to increased attention to the

agriculture and forestry sectors’ contributions to existing environmental pollution and resource

degradation. For example, the U.S. Environmental Protection Agency (EPA) reports that

agriculture is the leading source of water pollution in U.S. lakes and rivers, and a major

contributor of pollution in U.S. estuaries. EPA also reports that agriculture contributes to an

estimated 6% of all greenhouse gas emissions in the United States. At the same time, some in

Congress are suggesting that U.S. farm support programs should do a better job promoting

environmental benefits and also complying with domestic support constraints called for by the

World Trade Organization. The agriculture and forestry sectors are also being regarded as a

possible source of carbon capture and storage within the broader climate change debate.

The development of market-based approaches to farm conservation and land management might

complement existing and/or emerging environmental regulations or natural resource requirements

affecting the agriculture and forestry sectors, as well as complement existing federally supported

programs that promote conservation in the farm and forestry sectors. Environmental goods and

services from the agriculture and forestry sectors might also provide for environmental

improvements and mitigation at a relatively lower cost, compared to mitigation in other sectors of

the economy. Environmental services markets may also offer additional financial opportunities to

farmers and landowners.

What Are Ecosystem Services Markets?

Ecosystem (or environmental) goods and services are the benefits society obtains from the

environment and ecosystems, both natural and managed, such as water filtration, flood control,

provision of habitat, carbon storage, and many others (Table 1). In most cases, these constitute

“free services” since landowners and managers are not compensated in the marketplace.1

However, as many such services have become degraded over time, there is growing recognition

that they should be sustained or substituted by market capital, similar to investing in water

treatment plants and engineered flood control systems. One solution would be to create markets,

often developed through regulation, so that providers of environmental services can be

compensated in private markets for the services they provide. This could offer a potential

business opportunity to the farm and forest sectors, which may be able to provide for such

services and participate in the market, for example, by creating, restoring, preserving function and

value in a natural resources area, or by capturing and storing carbon before gases that contribute

to global climate change are released into the atmosphere. These services would be in addition to

the food and fiber services traditionally supplied by the agriculture and forestry sectors.

1

For more general information, see World Resources Institute, Millennium Ecosystem Assessment, Ecosystems and

Human Well-being, 2005, http://www.millenniumassessment.org/en/index.aspx.

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Table 1. Possible Range of Services and Regulatory Drivers

Tradable Resource/Credit (Type of Service)

Regulatory Driver

Wetland, stream, aquifer recharge, forests, buffers, stormwater controls, habitat/biodiversity

(e.g, habitat creation/preservation, water filtration, flood control and protection, water/air

pollution controls, runoff reduction)

Federal and/or state

Nutrients (e.g, runoff reduction, water pollution controls)

State

Carbon/greenhouse gas (e.g., capture, storage/sequestration, methane destruction; air

pollution controls)

State (and possibly

federal)

Renewable energy (e.g., biofuels generation, fuel substitution)

State

Water and development rights (e.g., alternative land and natural resource preservation,

habitat creation/preservation, aesthetic value, recreational use)

State, county, or local

Source: CRS, information from American Farmland Trust and World Resources Institute.

The market for environmental goods and services involving the agricultural and forestry sectors

began mostly through various pilot programs starting in the 1990s. The development of voluntary

carbon credit markets and watershed approaches incorporating nutrient credit trading, along with

wetlands mitigation banking, have involved the farm and forestry sectors. These programs

provide a market for farmers to sell carbon or nutrient farm-based offsets to emitters/dischargers

that are looking to buy offsets to mitigate their own emissions/discharges. These efforts have

triggered interest in other types of tradable permits and credits, including habitat credit trading

and other types of conservation banking. USDA identifies environmental markets with relevance

to the agriculture and forestry sectors to include water quality, air quality, wetlands, endangered

species, greenhouse gases, and developmental rights.2 Often the impetus for these efforts may be

linked to a “regulatory driver” specific to an actual or anticipated environmental regulation or

natural resource requirement, such as requirements in the Clean Water Act (CWA), Endangered

Species Act (ESA), or other state or local regulation. Other incentives may include market drivers

that make trading environmental services financially attractive, or the desire to cultivate

community goodwill.

The participation of agriculture and forestry in emerging environmental services markets is

gaining wide support within the farm community and its supporting organizations and agencies,

as well as among the regulatory agencies and some environmental groups.3 As part of its

recommendations for the 2007 farm bill, the U.S. Department of Agriculture (USDA) proposed to

further facilitate the development of environmental services markets in ways that would more

effectively involve the farm and forestry sectors. Both the House- and the Senate-passed versions

of the 2008 farm bill included similar provisions as part of the conservation title in their

respective bills. A version of this provision is in the enacted 2008 farm bill (for further discussion,

see section titled “Enacted 2008 Farm Bill”).

Information and examples of ecosystems services markets that have involved the participation of

U.S. farmers and landowners include voluntary markets for land-based reductions or storage of

2

USDA, 2007 Farm Bill, Conservation and Environment Theme Paper, June 2006, http://www.usda.gov/documents/

FarmBill07consenv.pdf.

3

See, for example, Ann Sorensen, “Ecosystem Service Markets in Agriculture,” May 2007, http://www.aftresearch.org/

aaas; two presentations at USDA’s Ag Outlook forum by Ginny Kibler, “Water Quality Trading Basics,” and Carl

Lucero, “USDA Farm Bill Conservation—Supply Side of Trading,” March 2007; and presentation material distributed

by staff at Environmental Defense.

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carbon, water quality improvements, and preservation or restoration of habitat, as briefly

described below.

Example: Carbon Markets

Farmer participation in voluntary carbon credit trading programs has been growing rapidly. As of

mid-2009, participation involved an estimated roughly 10,000 farmers across about 35 states

covering more than more than 10 million acres.4 The two largest programs providing for farmbased carbon offsets are programs operated by the North Dakota National Farmers Union and the

Iowa Farm Bureau. The National Farmers Union program involves more than 4,000 producers in

more than 30 states, with more than 5 million acres of farmland enrolled. The Iowa Farm Bureau

involves 5,000 to 6,000 producers also in more than 30 states, with more than 5 million acres

enrolled. Most projects are located within the Central and Midwestern states. Other similar

programs are operated by the Illinois Conservation and Climate Initiative, the Environmental

Credit Corporation (based in Indiana), the Upper Columbia Resource Conservation and

Development Council (Northwest), and Terrapass (based in California). Among the types of

practices that are eligible to participate are no-till crop management; conversion of cropland to

grass; managed forests, grasslands, and rangelands; new tree plantings; anaerobic digesters and

methane projects; wind, solar, or other renewable energy use; and forest restoration.

Example: Water Quality Markets

Water quality trading programs involve the participation of an estimated more than 300 farmers in

programs across six states.5 These include initiatives such as those by the Southern Minnesota

Beet Sugar Cooperative, the Grassland Areas Farmers (California), the Rahr Malting Company

(Minnesota), the Great Miami River Watershed (Ohio), and the Red Cedar River (Wisconsin),

among others. These programs cover some or all of the following types of nutrient runoff

reduction activities: cover cropping; reduced fertilizer use; conservation tillage; tree-plantings;

buffers; drainage management; and wetlands mitigation trading. 6 Most water quality trading

programs are initiated at the local or state level, often involving EPA, and cover impaired waters

as well as unimpaired waters to maintain water quality standards. In general, EPA supports

trading of nutrients and sediment load, as well as cross-pollutant trading of oxygen-demanding

pollutants. EPA also works with USDA’s Natural Resources Conservation Service (NRCS) and, in

2006, signed a partnership agreement to establish uniform trading standards, along with

supporting other collaborative efforts.7 USDA programs related to water quality trading include

funding for best management practice (BMP) installation and farmland conservation practices,

technical assistance, and tool development and outreach efforts; USDA is also developing a

4

Statements by the National Farmers Union and the Iowa Farm Bureau/AgraGate to House Agriculture Committee

staff, May 18, 2009.

5

Information from EPA based on EPA-supported projects in 2008. Does not include the Tar-Pamlico in North Carolina

since not enforceable through a CWA permit.

6

H. L. Breetz et al., Water Quality Trading and Offset Initiatives in the U.S.: A Comprehensive Study, Dartmouth

College, http://www.dartmouth.edu/~kfv/waterqualitytradingdatabase.pdf; and EPA’s website at http://www.epa.gov/

owow/watershed/trading.htm. Also see CRS Report RS21403, EPA's Water Quality Trading Policy.

7

USDA, “USDA and EPA Sign Water Quality Credit Trading Agreement,” October 13, 2006,

http://www.nrcs.usda.gov/news/releases/2006/usdaepawqagreement.html. The agreement text can be found at

http://www.epa.gov/owow/watershed/trading/mou061013.pdf.

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handbook for NRCS field staff and partners to explain and support various types of trading,

including water quality trading, wetlands trading, and carbon offsets. 8

Example: Habitat/Conservation Markets

Habitat or conservation markets and trading are still mostly under development. In April 2007,

the U.S. Fish and Wildlife Service, USDA’s NRCS, and the Association of Fish and Wildlife

Agencies signed a partnership agreement to promote habitat credits that could offer incentives to

landowners who preserve and enhance the habitat of endangered or at-risk species. Among the

stated objectives of this agreement is to develop and adopt common definitions, standards, and

measurement protocols. 9 Habitat credits or “conservation banking” act like a savings account,

where credits are earned for land preservation of habitat and credits can then be sold to land use

industries or others who are required to mitigate the loss of habitat under the ESA and other laws

that restrict or prohibit development. This is conceptually similar to wetlands and stream

mitigation banking, which allows for compensation of adverse impacts of development activities

(“compensatory mitigation”) to wetlands, streams, wildlife refuges, or other aquatic resources.

Such allowances, whether through wetlands or conservation banking, typically involve creating,

restoring, enhancing, or preserving function and value in a natural resources area, often within the

context of meeting a federal, state, or local regulatory requirement.

What Are the Benefits and Barriers?

The development of market-based approaches has been widely touted as a possible source of

additional farm income, whether through the sale of tradable credits or from other types of

payments, such as recreational use or hunting fees. This could offset or partially offset the costs of

pollution abatement incurred by farmers who make environmental improvements on their

farmlands. In some cases, adopting alternative production practices could also result in on-farm

cost savings, such as the use of renewable fuel generated on-farm. Market-based approaches are

also often viewed as encompassing broader societal benefits by complementing existing farm

conservation programs and evolving regulatory approaches intended to address environmental

improvements in the farm and forestry sectors.

USDA recognizes that creating markets for ecosystem services could increase farmer investments

in environmental stewardship and provide for environmental services including clean air and

water, carbon sequestration, and improved wildlife habitat, among other conservation benefits.10

However, USDA also reports that there are several existing barriers that may prevent the

development of fully functioning markets for agricultural environmental services and may be

difficult or costly to overcome. 11

8

9

EPA, EPA Water Quality Trading Evaluation—Final Report, October 2008, http://www.epa.gov/evaluate/wqt.pdf.

The agreement text can be found at http://www.fws.gov/endangered/pdfs/Credit_Trading_MOU.pdf.

10

See, e.g., M. Ribaudo, “Creating Markets for Environmental Stewardship: Potential Benefits and Problems,” Amber

Waves, USDA’s Economic Research Service, Sept. 2008; and M. Ribaudo et al., The Use of Markets to Increase

Private Investment in Environmental Stewardship, ERR-64, Sept. 2008, http://www.ers.usda.gov/publications/err64/.

11

Ibid. Also see USDA, 2007 Farm Bill, Conservation and Environment Theme Paper, June 2006, at

http://www.usda.gov/documents/FarmBill07consenv.pdf; and Ribaudo, M. and C. Jones, “Environmental Credit

Trading: Can Farming Benefit,” Amber Waves, USDA’s Economic Research Service, Feb. 2006.

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These impediments include but may not be limited to:

•

uncertainty quantifying, measuring, and valuing credits;

•

low demand for or discounted value of credits from agricultural sources because

of uncertainty about the measurement and value of these credits;

•

low participation in the farm and forestry sectors due to uncertainty over the

value of environmental credits compared to the cost of pollution abatement;

•

reluctance by farmers and landowners to participate in a regulatory-based

program;

•

small quantity of benefits that can be provided by individual farmers or

landowners;

•

high transaction costs;

•

performance risks and liability;

•

lack of information about program benefits and how to participate;

•

lack of monitoring and enforcement; and

•

uncertainty about whether conservation and environmental improvements that

were initially funded through other publicly funded programs, such as cost-share

programs administered by USDA, will be allowed to be traded.

What Is the Recent Congressional Action?

Enacted 2008 Farm Bill

The 2008 farm bill (P.L. 110-246, the Food, Conservation, and Energy Act of 2008) contains a

new conservation provision that seeks to facilitate the participation of farmers and landowners in

environmental services markets by directing USDA to develop technical guidelines for measuring

farm- and forestry-based environmental services. This provision focuses first on carbon storage

and indirectly references various agriculture and forestry provisions in some legislative initiatives

that are being considered as part of the broader climate change debate, which have highlighted the

perceived need for uniform standards and ways of measuring emissions reduction and increases

in carbon storage in the agriculture and forestry sectors.

In the managers report on the 2008 farm bill, the conferees state that “the largest barrier to

participation [in emerging environmental services markets] is the lack of standards and

accounting procedures that make transparent the benefits that are being produced and marketed.”

To address this concern, the enacted bill contains a new provision in the bill’s conservation title

that seeks to “establish technical guidelines that outline science-based methods to measure the

environmental services benefits from conservation and land management activities in order to

facilitate the participation of farmers, ranchers, and forest landowners in emerging environmental

services markets” (Sec. 2709, Environmental Services Markets).

The intended purpose of these technical guidelines is to develop (1) a procedure to measure

environmental services benefits; (2) a protocol to report environmental services benefits; and (3)

a registry to collect, record, and maintain data on the benefits measured. The provision also

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requires that USDA provide guidelines for establishing a verification process as part of the

protocol for reporting environmental services, but it allows USDA to consider the role of third

parties in conducting independent verification. In carrying out this directive, USDA is directed to

work in consultation with other federal12 and state government agencies, nongovernmental

interests,13 and other interested persons as determined by USDA.

The inclusion of this provision could expand the scope of existing farmland conservation

programs by facilitating the development of private-sector markets for a range of environmental

goods and services from farmers and landowners. Although the provision covers a range of farm

and forestry services, including improved water and air quality, increased carbon storage, and

habitat protection, among other types of environmental services, it explicitly gives priority to first

establishing guidelines related to participation in carbon markets.

Both the House- and Senate-passed farm bills (H.R. 2419) proposed versions of this provision in

their respective bills. Although the two versions differed in scope and in overall approach, both

were similar in their intent to establish a framework to develop consistent standards and processes

for quantifying farm- and forestry-based environmental services. The House-passed provision

(Sec. 2407) proposed to establish a USDA-led Environmental Services Standards Board, which

would provide contracts, cooperative agreements, and grants to develop consistent standards and

processes for quantifying environmental benefits from the farm and forestry sectors, thus

establishing a framework to develop such standards and processes.14 The Senate-passed version

(Sec. 2406) also directed USDA to establish a framework to develop consistent standards and

processes that would facilitate the marketability of farm- and forestry-based environmental

services, but differed in that it directed USDA to “give priority” to providing assistance to farmers

and landowners participating in carbon markets. The Senate version differed also in that it called

for a “collaborative” process involving governmental and nongovernmental representatives. It

also required a series of progress reports to Congress, which were subsequently not included in

the enacted bill.

The House, Senate and conference versions of this provision differed in terms of funding. For

FY2008-FY2012, the House bill authorized $50 million to be appropriated for this provision,

whereas the Senate bill authorized such sums as are necessary annually. However, the enacted bill

does not specifically address funding; instead, the manager’s report states that USDA is expected

to “fulfill the intent of this section with resources available to the Department.” In contrast,

USDA’s farm bill recommendations requested authorization of $50 million in mandatory funds to

cover the types of tasks addressed in this provision.

In December 2008, USDA announced it would create a federal government-wide “Conservation

and Land Management Environmental Services Board” to assist USDA with the “development of

12

In the House- and Senate-passed versions of this provision, other federal agencies were identified as including the

Departments of Interior, Energy, Commerce, and Transportation; the Environmental Protection Agency; and the Army

Corps of Engineers.

13

Identified as including farm, ranch, and forestry producers; financial institutions involved in environmental services

trading; and institutions, nongovernmental organizations, and private sector representatives with relevant expertise or

experience.

14

The House provision is similar to that proposed by USDA as part of its farm bill recommendations. See USDA,

USDA’s 2007 Farm Bill Proposals, Jan. 31, 2007, at http://www.usda.gov/documents/07finalfbp.pdf; USDA, 2007

Farm Bill, Conservation and Environment Theme Paper, June 2006, at http://www.usda.gov/documents/

FarmBill07consenv.pdf.

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new technical guidelines and science-based methods to assess environmental service benefits

which will in turn promote markets for ecosystem services including carbon trading to mitigate

climate change.”15 A federally chartered public advisory committee will advise the board, and will

include farmers, ranchers, forest landowners, and tribal representatives, as well as representatives

from state natural resource and environmental agencies, agriculture departments, and

conservation and environmental organizations. USDA’s press release also announced that USDA

was establishing a new Office of Ecosystem Services and Markets (OESM), which will be

located within the Office of the Secretary. OESM will provide administrative and technical

assistance in developing the uniform guidelines and tools needed to create and expand markets

for ecosystem services in the farming and forestry sectors. At a May 2009 briefing, USDA’s Sally

Collins indicated that official meetings and proceedings of the USDA-led Environmental Services

Board, as well as formal actions within OESM, have been delayed by leadership changes due to

the Administration’s transition.16

Climate Change Legislation

Aside from the 2008 farm bill, other legislative initiatives might also facilitate the development of

environmental services markets involving the farm and forestry sectors—particularly in the areas

of carbon storage and emissions reduction—as part of the ongoing climate change debate.

Starting in the 110th Congress, Congress debated a range of climate change policy options that

would have either mandated or authorized a cap-and-trade program to reduce greenhouse gas

(GHG) emissions.17 These actions have continued in the 111th Congress. Some proposals dovetail

with provisions enacted as part of the 2008 farm bill, including a provision that directs USDA to

develop guidelines and standards for quantifying carbon storage by the agriculture and forestry

sectors, among other farm bill provisions that indirectly encourage emissions reductions and

carbon capture and storage.

The current cap-and-trade proposals would not require emission reductions in the agriculture and

forestry sectors. However, many of these proposals would allow for regulated entities (e.g., power

plants) to purchase carbon offsets, including those generated in the agriculture and forestry

sectors.18 The inclusion of these provisions as part of a cap-and-trade framework could provide

financial incentives to encourage additional land-based conservation activities involving the

agriculture and forestry sectors. For example, the provisions could allow farmers and landowners

to participate in this emerging market by generating (and selling) carbon offsets and credits

associated with carbon capture and storage, emissions reductions, and/or other implemented

environmental improvements on their farm or forested lands. These allowances and credits could

be sold to regulated facilities (e.g., power plants) covered by a cap-and-trade program to meet

their emission reduction obligations. Under some cap-and-trade proposals, certain segments of

the agriculture and forestry sectors also might receive proceeds from the sale of allowances,

15

USDA, “USDA Announces New Office of Ecosystem Services and Markets,” Release No. 0307.08, Dec. 18, 2008.

16

Statements by Sally Collins, Director of USDA’s Office of Ecosystem Services and Markets, to National Capital

Society of American Foresters: Luncheon and Program, May 14, 2009.

17

A cap-and-trade program provides a market-based policy tool for reducing emissions by setting a cap or maximum

emissions limit for certain industries. Sources covered by the cap can choose to reduce their own emissions, or can

choose to buy emission credits that are generated from reductions made by other sources.

18

In the context of these legislative proposals, a carbon offset is a measurable avoidance, reduction, or sequestration of

carbon dioxide (CO2) or other GHG emissions, expressed in carbon-equivalent terms.

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credits, and auctions to further promote and support activities in these sectors that reduce, avoid,

or sequester emissions.19

Many of these bills contain language highlighting the perceived need for uniform standards and

ways of measuring emissions reduction and increases in carbon storage in the agriculture and

forestry sectors. Such initiatives generally stipulate that measurements of emissions reductions

and carbon uptake should be real, verifiable, additional, permanent, and enforceable. However,

there is considerable uncertainty about the accuracy of measuring and verifying emissions

reductions and carbon storage using various forestry and agricultural and land management

practices. This uncertainty has led some to question the potential for carbon offset projects in the

agriculture and forestry sectors, but these types of projects are nonetheless being considered as

part of a cap-and-trade program. The new conservation provision in the 2008 farm bill (see

previous section) that seeks to establish technical standards and accounting procedures for

environmental services generated in the agriculture and forestry sectors is intended to address

such measurement, verification, and monitoring issues.

For more information, see CRS Report R40896, Climate Change: Comparison of the Cap-andTrade Provisions in H.R. 2454 and S. 1733, and CRS Report RS22834, Agriculture and Forestry

Provisions in Climate Change Bills in the 110th Congress. For information on the measurement,

verification, and monitoring challenges in the agriculture and forestry sectors in the context of

evolving carbon markets, see CRS Report RS22964, Measuring and Monitoring Carbon in the

Agricultural and Forestry Sectors.

For other general information on the current GHG policy debate and legislative proposals, see

CRS Report R40896, Climate Change: Comparison of the Cap-and-Trade Provisions in H.R.

2454 and S. 1733, and CRS Report R40556, Market-Based Greenhouse Gas Control: Selected

Proposals in the 111th Congress.

Other Related Actions

A separate provision enacted as part of the Energy Independence and Security Act of 2007 (P.L.

110-140) directs the Department of the Interior to conduct a national assessment and a

methodology to assess carbon sequestration and emissions from ecosystems (Section 712,

“Assessment of Carbon Sequestration and Methane and Nitrous Oxide Emissions from

Ecosystems”). Once completed, this assessment will provide additional information regarding the

two primary greenhouse gases associated with agricultural practices: methane and nitrous oxide.

DOI’s national assessment will address the quantity of carbon stored in and released from

ecosystems, and the annual flux of covered greenhouse gases in and out of ecosystems. The

methodology to assess carbon sequestration and emissions from ecosystems will cover

measuring, monitoring, and quantifying GHG emissions and reductions, and provide estimates of

sequestration capacity and the mitigation potential of different ecosystem management practices.

Identified components of the national assessment are (1) determining the processes that control

the flux of covered greenhouse gases in and out of each ecosystem; (2) estimating the potential

for increasing carbon sequestration in natural and managed ecosystems through management

19

In the context of these legislative proposals, a set-aside allowance refers to a set percentage of available allowances

under the overall emissions cap that is allocated to non-regulated entities, in this case domestic agriculture and forestry

entities.

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activities or restoration activities in each ecosystem; (3) developing near-term and long-term

adaptation strategies or mitigation strategies that can be employed; and (4) estimating the annual

carbon sequestration capacity of ecosystems under a range of policies in support of management

activities to optimize sequestration.

In conducting its assessment and developing the underlying methodology for the assessment,

EISA directs DOI to consult with other agencies, including USDA, EPA, the Department of

Energy, the Department of Commerce, and other relevant agencies. DOI is directed to develop its

methodology for conducting the assessment, and then to release its national assessment. To date,

the report has not yet been released.

What Are Some Possible Considerations?

Among the principal questions regarding the inclusion of these types of provisions as part of any

major legislative initiative is whether the agriculture and forestry sectors can effectively provide

environmental goods and services along with the more traditional food, fiber, and other services

these sectors already provide. The inclusion of these provisions could also raise certain

procedural or implementation questions as Congress debates future farm policy or as it continues

to consider the role of the agriculture and forestry sectors in climate change legislation.

•

Standards-setting process/implementation. Aside from establishing the board

discussed earlier, how will USDA implement its new farm bill directive for

establishing uniform standards, accounting procedures, protocols, and registries

for quantifying farm- and forestry-based environmental services? Can USDA

accomplish its task using available agency resources?

•

Jurisdictional issues. What are the advantages of establishing USDA as the lead

role? What lead role will USDA play, given the mostly regulatory authority and

statutory obligations of other likely participating federal agencies? Might putting

USDA as the lead create conflict of interest as both the regulator and promoter of

standards? Are there other jurisdictional issues, such that this provision needs to

be referred to other authorizing congressional committees? How might existing

state and local programs implemented by other agencies be affected? How will

the collaborative effort between USDA and the other participating federal

agencies be put into practice? How will disagreements be addressed and resolved

among all federal partners?

•

Consistency with existing and possible future authorities and initiatives. Will

the agreed-upon decisions and standards resulting from such an effort be binding

among all federal agencies? What assurances are there that these decisions will

not override the authorizing legislation regulating water and air quality, and

wildlife habitat? Will regulatory agencies with authorizing legislation have the

flexibility to not adopt the standards authorized by the board or other

collaborative process, if they violate the individual agencies’ authorizing statutes,

or contain regulations, such as measurement protocols? What are the possible

implications if these decisions and standards are inconsistent with other existing

regulatory guidelines and authorities? Will such a standard-setting framework

and the agreed-upon standards be consistent with, or readily adapted to, other

possible future regulatory initiatives, such as those involving climate change? If

possible future climate change initiatives do not provide for carbon offsets and

Congressional Research Service

9

Provisions Supporting Ecosystem Services Markets in U.S. Farm Bill Legislation

credits from the agriculture and forestry sector, will the agreed-upon standards be

enforceable within the existing voluntary carbon market? What are the potential

implications if these decisions and standards are inconsistent with other possible

forthcoming regulatory guidelines and authorities?

•

Standards. Will uniform standards be national, regional, local, or site-specific in

scope? How will uniform standards address differences within different

production areas, types of resources, and ecosystems? Will established protocols

and management practices take into account these differences? Will these

standards consist of an assigned value? Given the wide range in the types of

environmental services, how will outcomes or benefits be measured and

expressed as standards? Will there be penalties for non-compliance?

•

Federal versus marketplace functions. What roles should government agencies

play in actually establishing environmental services markets involving

agriculture and forestry? What roles will be strictly within the purview of the

private-sector and independent credit markets? Is there a federal role beyond

developing the reporting and credit registries that would require the board to act

as intermediary between sellers and buyers? Who will be responsible for

oversight of third party verification and certification, and for assigning market

value to tradable credits within an environmental services market? Will the

federal agencies play a role in market oversight, enforcement, risk management,

and capital investment? What other types of federal assistance may be needed to

further facilitate the development of environmental services markets?

•

Congressional reporting/timeline. How and when will the agencies involved in

setting standards be expected to report their accomplishments to Congress?

Should reporting requirements be included as part of these provisions?

•

Market barriers. How effectively do the current proposals address the types of

barriers that have been identified by USDA and others that may prevent the

development of environmental goods and services markets?

•

Possible unintended consequences. Might establishing a market-based approach

shift governmental and/or industry priorities away from addressing more serious

environmental problems by allowing some industrial facilities to buy relatively

lower-cost farm-based carbon credits rather than pay for on-site pollution

abatement at the facility? Might a market-based program shift USDA resources

away from established farm conservation programs?

Author Contact Information

(name redacted)

Specialist in Agricultural Policy

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

10

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