Source: UNIVERSITY OF CALIFORNIA, BERKELEY submitted to NRP
ECONOMIC EFFICIENCY AND POLICY DESIGN CHALLENGES OF CARBON MARKETS IN US AGRICULTURE
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
ACTIVE
Funding Source
AFRI COMPETITIVE GRANT
Reporting Frequency
Annual
Accession No.
1030872
Grant No.
2023-67023-39815
Cumulative Award Amt.
$646,167.00
Proposal No.
2022-09999
Multistate No.
(N/A)
Project Start Date
Jun 15, 2023
Project End Date
Jun 14, 2027
Grant Year
2023
Program Code
[A1651]- Agriculture Economics and Rural Communities: Environment
Recipient Organization
UNIVERSITY OF CALIFORNIA, BERKELEY
(N/A)
BERKELEY,CA 94720
Performing Department
(N/A)
Non Technical Summary
This project studies the possibility of mitigating greenhouse gas emissions from theagricultural sector through the use of carbon markets that pay agriculturalists for reducingtheir emissions. The first phase of the work is to develop a general frameworkbased on economic modeling that describes which "mitigation pathways" (soil sequestration,anaerobic digesters, etc.) have the greatest potential for emissions reduction benefit andthe least potential for unintended consequences when used as voluntary emissions offsets.This creates a roadmap for future research by directing attention to the biggestchallenges and the most promising mitigation pathways from an economic and policymakingpoint of view. The second phase provides deeper analysis of specific case studies,with leading candidates being changes in the use of synthetic fertilizer and the use of anaerobic digesters for livestock manure. The insights from the work will help inform the design of these markets and inform stakeholders about pitfalls and opportunities to advance carbon mitigation in the agricultural sector.
Animal Health Component
100%
Research Effort Categories
Basic
(N/A)
Applied
100%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
13304303010100%
Knowledge Area
133 - Pollution Prevention and Mitigation;

Subject Of Investigation
0430 - Climate;

Field Of Science
3010 - Economics;
Goals / Objectives
The goal of the project is to describe how carbon markets that pay for mitigation can be designed to foster GHG mitigation in the agriculture sector, accounting for incentive and measurement challenges.The objectives are:1. Develop a framework for evaluating the suitability of offsets in carbon markets associated with various mitigation pathways. This is to be an economic model that delineates incentive problems in policy design, and incorporates insights from existing literature to characterize the benefits and problems associated with the main agricultural GHG mitigation pathways.2. Provide deeper analysis of specific mitigation pathways. The plan is to study anaerobic digesters and nitrous oxide emissions from croplands, but other applications may emerge.
Project Methods
This is a research project. The main methods are theoretical economic modeling and data analysis. The methods are standard tools of economics, including principal-agent modeling and public finance based welfare analysis. Data analysis will use biogeochemical models to produce output that is then analyzed using statistical models including regression analysis. Other data analysis will use regression analysis to estimate cost functions or production functions.

Progress 06/15/23 to 06/14/24

Outputs
Target Audience:At this phase of the project, we have not disseminated any results. Ongoing work is still early relative to results. Changes/Problems:We have not encountered any major problems or changes. What opportunities for training and professional development has the project provided?The PI and a PhD graduate student are working closely on this project. The work provides mentorship and the material will be included in the PhD student's dissertation. How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period we plan to further enhance the high-level economic model. We plan to draft a working paper on the N2O application that focuses on a subset of mitigation actions that are best represented within ARMS data with a focus only on maize. The work we have to date does not properly model soil site heterogeneity or local weather patterns. We plan to merge in that information into our analysis and update the outputs we have from Daycent in order to have a richer model. We then plan to draft a paper so that we can get peer feedback on the approach.

Impacts
What was accomplished under these goals? Regarding the first goal, we have developed a prototype economic model including novel graphical analysis. The purpose of this model is to provide a high level taxonomy of potential inefficiencies around policy alternatives. This is a working prototype model that we will continue to enhance. Regarding the second goal, our focus in this reporting period has been on the nitrous oxide emissions application. As planned, we have used the Daycent model and ARMS data from the USDA to characterize an initial distribution of N2O emissions that result from changes in farmer practice for all sites in the ARMS data that grow maize. This initial crop serves as proof of concept and generates the output we need to analyze with our economic model.

Publications