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Appendix L
Agriculture
Some developing countries have reached the limits of land
expansion. India's population has more than doubled since 1950, but
cropland has only expanded by 15 percent or so. Crop yields have
increased, and multiple cropping has increased to enable more than
a doubling of agricultural product.
For a number of developing countries, this historical process
has not yet been completed, however. In parts of Southeast Asia,
most of sub-Saharan Africa, and parts of Latin America, notably
Brazil (and Colombia), cropland and pastureland expansion
continues.
Land Use and Carbon Sinks
Cropland and pastureland constitute significant carbon sinks
even though they do not store much carbon in vegetation. The carbon
in the soil for cropland and pasture is significant and can
actually be higher than for certain woodland types and for semiarid
savannah-type lands. Significant carbon is stored in animal stocks
as well.
Historically, cropland and pastureland expansion in the
temperate zone countries has tended to be "sink-reducing"
(expansion against forests) or "sink-neutral" (expansion on prairie
lands). In countries still in the expansion process, it is probably
on balance sink-reducing, but there is quite considerable expansion
that is either sink-neutral or sink-expanding. In addition, most of
the expansion on savannah-type land has probably also been
sink-expanding. Population change, technology, and government
policies affect land use patterns. Typically, as population grows
(with constant technology of production) relative to land
resources, cropland expands at the expense of other land uses. As
land best suited to cropland (and pasture)
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is settled (i.e., the frontier is closed), various land-saving
options are employed. Improved varietal technology (high-yielding
varieties) reduces the pressure on resources. The combination of
changing economic conditions and new technology brings cropland
expansion to a halt in developed countries. Cropland expansion in
farms in the United States stopped around 1920, and cropland area
has declined in recent years. (Farm production has tripled since
1920.) This is also true for pastureland. The same situation holds
in Europe generally.
Large areas of savannah-type land exist in sub-Saharan Africa
and in the local Cerrado-Llianos region in Brazil and Colombia
(with some in Bolivia and Paraguay). Agricultural research programs
in these countries have sought to achieve efficient land use
expansion and have been successful in facilitating land expansion
in the Cerrado regions in Brazil. This expansion has also been
fueled by subsidized credit, which has fueled expansion in the
Amazon, where it is sink-reducing. On balance, the agricultural
research systems in Brazil and Africa have facilitated expansion on
sink-neutral or sink-expanding areas. It is not clear that any
policies can materially change some of the land use patterns that
will occur in much of Africa over the next few decades. Populations
are growing at rapid rates, and few countries have effective family
planning. To the extent that improved agricultural technology can
be developed, it will alter the ultimate course of expansion of
cropped areas. Industrial development and nonfarm employment
opportunities for workers will, as well. Much of this expansion
will be sink-neutral, however, because savannah lands are not large
sinks. The most severe problems will be associated with
desertification and the management of shorter fallow systems on
savannah soils.
In developed and developing countries alike, however, even if
oil prices do not rise appreciably over the next two decades,
continued technological improvements are likely to bring some
biomass energy options into the competitive range. No major
breakthroughs are necessary (although some may be achieved).
Continued support for well-established plant breeding and agronomic
research programs is required to bring this biomass energy
option.
Agricultural Greenhouse Gas
Mitigation
General Options
For purposes of assessing the relative impacts of U.S. emission
controls and controls in other countries, the range of emission
reduction (million tons of carbon) from a 10 percent reduction in
rice production or ruminant production in different regions is used
in this analysis.1 The United States
is a minor contributor of CH4 from
rice paddies and contributes virtually
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Representative terms from entire chapter:
paddy land
Page 800
nothing from work animals. It is an important source of CH4 from other ruminant animals (as are
other industrialized countries).
The mechanisms by which reductions in CH4 emissions in the United States and in
other countries can be achieved include the following options:
1. Elimination of existing subsidies that stimulate more
of the activity than dictated by market equilibrium conditions.
2. Taxation of the CH4-emitting activity.
3. Quantitative regulation of activities (i.e., through
quotas on production and trade) or regulations regarding burning
and waste management.
4. Buyouts, either through purchase of assets (e.g., rice
paddy land, dairy cows, or pastureland) or payments to induce
alternative activities (e.g., paying rice farmers not to produce
rice, but allowing them to produce an alternative crop on the
land).
These mechanisms vary in effectiveness and cost per unit of
CH4 reduction achieved. The
lowest-cost option is generally option 1 because subsidies induce
inefficient resource use, and their elimination is actually an
economic gain. However, they exist because interest groups have
used political power to put them in place. Thus their elimination
has political implications.
Option 2 is costly from a consumer's standpoint because it
induces inefficient resource use due to market distortions. A
producer will produce less of a taxed good than an untaxed good.
Therefore from a consumer's standpoint, too little of the taxed
good is produced. Calculation of these inefficiency costs is
complex and requires estimates of supply and demand responses to a
tax.
Option 3 also causes inefficiency losses, and this option, too,
requires complex cost calculations.
Option 4 has the seeming merit of being directly calculable. For
example, a government agency might pay a rice farmer $100 per acre
not to produce paddy rice but allow him to produce an alternative
crop on the land. One could then compute the CH4 emission from an acre of paddy land and
arrive at a cost per ton of CH4
mitigated. Alternatively, a government agency might purchase rice
paddy land (for $5000 per acre) and leave it idle (or reforest it).
Then the investment could be amortized at alternative interest
rates, and a cost per ton of CH4
reduced can be obtained. The difficulty with this mechanism is that
other rice farms might respond to this action by producing more
paddy rice.
There are some options associated with farming practices,
particularly minimum tillage options, but the scope for extensive
adoption of these practices is limited because most farmers are
aware of them and have tested them. Where they have been found
effective, they have already been adopted.
Page 801
In addition, as with production practices generally, use of
these practices tends to depend on prices—especially the price
of energy.
It should be further noted that some options have consequences
that may be undesirable. Substitution of tractors for work animals
may eliminate CH4 emissions, but
constitutes an increase in fossil fuel use and CO2 emissions (and some increase in chemical
fertilizer use). Swampland drainage has consequences for wildlife
and species diversity (Matthews and Fung, 1987).
Options for Rice Paddies
Almost all of the approximately 1 million hectares (ha) of
production in the United States is irrigated paddy rice. All water
regimes, except upland, produce paddy rice (i.e., rice grown under
standing-water conditions). There are no practical options to grow
alternative crops in deep- and medium-water rainfed regimes.
Perhaps half of the shallow-water-rainfed and irrigated regimes
could be shifted to alternative crops but at some cost. Upland rice
is not an alternative crop to paddy rice. It is produced under
conditions quite different from paddy rice—usually on semiarid
land. Even if land is no longer being used for paddy rice, it is
highly unlikely to be planted with upland rice.
The United States has a little less than 1 percent of the
world's paddy rice land but produces about 1.3 percent of the
world's paddy rice. It accounts for approximately 20 percent of
world rice exports. Approximately 90 percent of the world's paddy
rice production is in Asia, with China, India, Indonesia,
Bangladesh, Thailand, Vietnam, and Japan being the leading
producers (International Rice Research Institute, 1988).
Several rice-importing countries intervene in rice markets with
high tariffs to protect domestic rice producers. The ratio of
domestic prices to world prices was over 7 in Japan in 1985. South
Korea, Taiwan, and most European economies also protect domestic
producers (with ratios of domestic to world prices greater than 2
(World Bank, 1987)). Elimination of this protection in these
countries would result in lower domestic prices, decreased domestic
production, more imports, and increased domestic consumption. World
rice prices would rise in response, and this would reduce
consumption marginally in other countries. The net effect of the
removal of such protection on global CH4 emissions would probably be quite
small.
Exporting countries, such as the United States, cannot maintain
domestic prices at levels above world prices except at high costs
to subsidize exports. Consequently, the United States has a
relatively modest program of subsidies to rice producers. A price
support program is in place, with support prices roughly 30 percent
above export prices (Gardner, 1987). Elimination
Page 802
of these subsidy programs would reduce U.S. production and
exports, but would be partially offset by increases in production
in other countries.
Taxation of paddy rice in the United States could be undertaken,
but would be difficult politically because subsidies are now in
place. It should be noted, however, that the other major
rice-exporting country, Thailand, has used a rice tax (called the
rice premium) for years to reduce rice exports, realize a higher
export price, and increase government revenues. If such a tax were
imposed on U.S. rice farmers (presumably after subsidies had been
eliminated) and the supply response elasticity to the tax were
significantly negative (Gardner, 1987), a reduction in U.S.
production and CH4 emissions could
be achieved. If domestic prices did not change (i.e., were
determined by world prices), domestic consumption would not change,
so the full effect would be felt in reduced exports. Because the
United States is a leading exporter, this could have an impact on
world rice prices. The cost of this tax would be loss of the export
revenue (10 percent of the value of production) minus the value of
other crops that could be produced on land formerly devoted to
paddy rice (0.95 × 10 percent of the value of production)
(Gardner, 1987). This assumes a demand elasticity of -0.5 and a
supply elasticity of 0.5 (see Barker and Herdt, 1985). Thus a 10
percent tax on U.S. paddy production would reduce emissions by
200,000 t C as CH4/yr (computed as 2
t C/ha). The cost would be 0.005 × 6 Mt × $300/t, or $9
million, giving a cost per ton of carbon of $45 (the cost per ton
CH4 is $16).
A quota system has been suggested as a way to reduce production
and has been used in a number of countries for other products. This
could also be applied to paddy rice producers (Johnson, 1990).
Licenses might be required to sell paddy rice; these could be
traded and the total available licenses to farmers reduced by 10
percent (or some other level). This option would have the same
costs as the tax option, provided the licenses were negotiable.
The buyout options for paddy rice in the United States are
actually the simplest to analyze. A government agency would have
two alternatives:
1. Purchase rice paddy land directly from farmers and
convert it to idle land or to some other use (e.g., it could plant
trees on the land, although some rice paddy land is probably poorly
suited to tree production);
2. Offer a payment to buy the land out of paddy production
for 1 or more years and allow farmers to produce an alternative
crop.
The option of buying paddy land out of production is the more
costly of the two, but it could complement other policies. Paddy
land would probably cost $7,000 to $10,000/ha. The annualized
interest costs at 3 percent would be $210 to $300, and
approximately 2 t CH4 (carbon
equivalent) would be mitigated. At 6 and 10 percent interest rates
the costs would be
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$420 to $600, and $700 to $1000. The cost per ton of carbon
mitigated would range from $150 to $500.
The option of yearly or multiyear arrangements to pay farmers
for not producing paddy rice but allow them to produce alternative
crops would depend on the suitability of the land for alternative
crops. For land where the substitution could be made easily,
payments could be modest (e.g., $100/ha). For land where drainage
and other modifications would be required, these payments could
rise to the full buyout option costs. Water pricing policies have
also affected paddy rice production in California. Farmers have
access to water at rates far below the real value of water. If
water were priced at market rates, much of the California rice
production would be uneconomical. It would be a wise policy for all
parties to devise a compensation scheme to enable more efficient
water pricing, and this would reduce rice production and CH4 emissions at little or no cost.
Other countries would incur similar costs if they were to
attempt to reduce rice production. It would be difficult to manage
the tax options in countries that do not export (where the tax can
be levied on the exported goods). Taxation leading to rice price
increases could also have severe implications for large low-income
populations, where rice is often the staple food. It would also be
difficult to manage a coupon or quota system in countries where
rice is consumed by the households producing it (most developing
countries).
Thus the realistic options in developing countries are the
buyout options, and these, if pursued in substantial degree, will
have the consequence of raising rice prices, which will induce more
conversion of nonrice areas to rice, partially offsetting the
effects of the reductions. The options for increasing upland
nonpaddy rice are quite limited, in part because little
technological progress has been made in upland rice production.
Options for Ruminant Products
A shift from ruminant products (dairy products, beef, and
mutton) to cereal-based products would reduce CH4 emissions. The United States is a major
producer and consumer of ruminant products, and several mitigation
options are open to it. In fact, a number of these options have
been pursued, although not to mitigate CH4 emissions. The United States, Canada,
and the European Economic Community (EEC) countries have been
intervening in dairy product markets for many years to achieve
prices to producers (and consumers) that are higher than
equilibrium market prices. This has been undertaken via import
controls in EEC countries and via support prices and regulated
trade in milk markets in the United States and in Europe as well
(Barichello, 1984).
When prices are supported above market equilibrium levels,
consumers
Page 804
wish to consume less and producers wish to produce more than
equilibrium levels. This results in the accumulation of surpluses
unless supply control measures are taken. Such surpluses have been
a common phenomenon in the United States, Canada, and Europe, and
in general, these countries have probably produced as much dairy
products as would have been the case in an unregulated market even
though consumers have consumed less (World Bank, 1987).
Quantitative supply control programs could be employed to reduce
both production and consumption further, however. Taxes on dairy
products or on meats, except for the normal sales taxes that affect
all foods, would also discourage consumption. Political factors,
however, produce subsidies and price support systems, not taxes, in
the United States and European economies (Johnson, 1990).
Livestock commodities other than dairy products have experienced
less government program intervention because of the high costs of
surplus storage.
The elimination of existing (costly) dairy support and feed
grain support programs (which indirectly support meat production)
in the United States (and the EEC) would lead to increased
consumption of ruminant products and probably to increased ruminant
production and CH4 emissions. A tax
on ruminant consumption and production would probably be
politically unacceptable. It could achieve CH4 mitigation, however. The cost of a tax
using standard measurement techniques (see Gardner, 1987) would
depend on supply and demand responses to the tax.
Estimates of demand responses (Gardner, 1987) range from -0.4 to
-0.7 (i.e., a 10 percent tax would reduce consumption by 4 to 7
percent). Few estimates of supply responses are available, but it
is reasonable to postulate a relatively high long-run supply
response. Thus a 10 percent tax could reduce consumption by roughly
5 percent (based on medium demand estimates) (Gardner, 1987).
Quota systems have been used to control dairy production in
Canada but have generally been costly to monitor and administer. If
effective, they have the same efficiency costs as the ruminant tax
option but different income options (Barichello, 1984).
Buyout options to reduce dairy product supply have also been
used in the United States. These options have generally been
ineffective because the compliance of nonparticipants cannot be
ensured.
Options for Work Animals
Approximately 300 million of the 970 million cattle and buffalo
worldwide are used primarily as work animals. Most south Asian and
sub-Saharan African farms are not yet mechanized. It is generally
thought that
Page 805
existing subsidy programs, particularly credit subsidies, induce
the substitution of machines (tractors) for animals and thus
encourage ''overmechanization."
Such subsidies could futher reduce the world's work animal stock
and thus CH4 emissions; however,
fossil fuel use could increase, reducing the greenhouse gas benefit
from the subsidies. Thus a trade-off between reduced CH4 and increased fossil fuel use must be
addressed. On balance, it is probably not wise to encourage more
mechanization in developing countries (Binswanger, 1986).
Options for Biomass Burning
Biomass burning—to clear land for agricultural production
or to carry out general farm management activities—contributes
to CH4 emissions. Burning in
sugarcane fields is a low-cost way to reduce trash and facilitate
harvest and processing. Rice straw and other plant residues are
sometimes burned to lower the cost of plowing and land preparation
even though burning reduces the amount of organic matter in
soil.
Thus, although some biomass burning by farmers may constitute
poor management, most burning by farmers is done for cost
considerations. Regulation of this burning (e.g., banning some of
the burning in specific situations) is probably not costly and in
some cases may actually bring about managerial improvement. Thus
selective judicious controls on biomass burning may be
cost-effective in CH4 (and N2O) mitigation.
Options for Biogas from Animal
Waste
Confined animal production systems require special waste
management practices and offer some potential for the production of
CH4 biogas. Most cities and counties
in developed countries regulate waste management largely for
pollution reasons. Waste from animals is used widely as a fuel in
many developing countries and as organic fertilizer in most
countries. Biogas projects have been implemented in many countries
but have not attained widespread use.
Further judicious regulations and technological improvements in
biogas production will achieve some mitigation of CH4 (and replacement of fossil fuel), but
these are not likely to be large effects.
Options for Fertilizers
Several studies of fertilizer demand estimate that a 10 percent
increase in price (from a tax) would decrease use by roughly 5
percent (Gardner, 1987). The efficiency cost of such a tax would be
only 0.0025 percent of the total fertilizer value if farmers were
in equilibrium and the long-run supply of
Page 806
fertilizer were perfectly elastic. If such a tax were applied on
all nitrogen fertilizer in the United States, it would have an
efficiency cost of $25 million and would reduce N2O emission by 50,000 t N/yr at a cost of
$500/t N.
Cost-Effectiveness Calculations
The cost-effectiveness of the policy measures described above is
summarized in Table 25.4. To determine the cost-effectiveness in
terms of CO2 equivalence, the U.S.
information in Table 25.4 is used, and CH4 and N2O
emission reductions are weighted by the global warming potential
factor (21 for CH4 and 190 for
N2O (per discussion of global
warming potential in Chapter 19). Therefore
Paddy rice:
(3 × 106 t C as CH4)(16 CH4/12 C)(21 CO2/1 CH4) =
84 × 106 t CO2 eq. ($100/t C as CH4)(12 C/16 CH4)(1 CH4/21
CO2) = $3.6/t CO2 eq.
Ruminants:
(4.5 × 106 t C as CH4)(16 CH4/12 C)(21 CO2/1 CH4) =
126 × 106 tCO2 eq. ($150/t C as CH4)(12 C/16 CH4)(1 CH4/21
CO2) = $5.4/t CO2 eq.
Fertilizer:
(0.05 × 106 t N as N2O)(44 N2O/28 N)(290 CO2/N2O) = 23
× 106 t CO2 eq. ($500/t N as N2O)(28 N/44 N2O)(1 N2O/290 CO2)
= $1.1/t CO2 eq.
Note
1. Throughout this report, tons (t) are metric; 1 Mt = 1 megaton
= 1 million tons.
References
Barichello, R. R. 1984. Analyzing an agricultural marketing
quota. Discussion Paper 454. Economic Growth Center, Yale
University, New Haven, Conn.
Barker, R., and R. Herdt. 1985. The Rice Economy of Asia.
Washington, D.C.: Resources for the Future.
Binswanger, H. 1986. Agricultural Mechanization: A Comparative
Historical Perspective. The World Bank Research Observer 1.
Washington, D.C.: World Bank.
Gardner, B. 1987. The Economics of Agricultural Policies. New
York: Macmillan.
Hayami, Y., and V. W. Ruttan. 1985. Agricultural Development, An
International Perspective. Baltimore: John Hopkins Press.
International Rice Research Institute. 1988. World Rice
Statistics. Los Ranes, Laguna, Philippines: International Rice
Research Institute.
Johnson, D. G. 1990. World Agriculture in Disarray. Chicago:
University of Chicago Press.
Page 807
Matthews, E., and I. Fung. 1987. Methane emissions from natural
wetlands: Global distribution, area and environmental
characteristics of sources. Global Biogeochemical Cycles
1:61–86.
World Bank. 1987. World Development Report. Washington, D.C.:
World Bank.
