1. The Climate Change Challenge for Agriculture Presentation to the Kyoto Mechanisms Seminar March 14, 2003 by Dr. R. J. MacGregor Agriculture and Agri-Food Canada At issue is how the world will manage its carbon and nitrogen stocks sustainably

2. 2 International Trade & Development Food Safety and Food Quality Environment Science and Innovation Renewal Business Risk Management The APF elements: The Agriculture Policy Framework (APF) is our basis for moving forward...

3. 3 Environment: Farm Environmental Planning Managing: - pests, - nutrients - nuisances - land and water Environment: Farm Environmental Planning Managing: - pests, - nutrients - nuisances - land and water Water Nutrients Pathogens Pesticides Soil Erosion Organic matter Biodiversity Wildlife habitat Species at risk Wildlife damage Air Particulates Greenhouse gases Odours Innovation Biofuels, Bioproducts Bioprocesses Innovation Biofuels, Bioproducts Bioprocesses …to promote sustainable and profitable resource use...

4. 4 …where addressing climate change is about contributing to environmental solutions that are economically sustainable Climate change is all about managing the carbon and nitrogen cycles Agriculture is based on using energy from the sun for photosynthesis to transform carbon & nitrogen into food, fibre and bio- products consumed by humans Agriculture Policy Framework links goals for environmental management and innovation to better manage natural resources, based on carbon and nitrogen cycles

5. 5 Climate change is a global challenge …changing how we manage C & N All nations, industries and citizens need to learn to sustainably manage carbon, nitrogen and other sources of greenhouse gases Agriculture has an important role in these cycles (20% of global emissions) The challenge is to learn to profitably recycle rather than extract carbon and nitrogen Canada has opportunities to use its leadership in agricultural GHG science to create advantages in world markets

6. 6 Reduce Remove Replace Greenhouse gas emissions Innovate to replace fossil fuels with bio-based energy, chemicals and materials Atmospheric C to store in soils and perennial crops Agricultural GHG Management Adapt Use science, innovation & business risk management to adapt to climate change Agriculture has many unique opportunities to manage greenhouse gases...

7. 7 Gas% of Emissions CO 2 3% CH 4 41% N 2 O56% Agriculture’s primary energy source is the sun, not fossil fuels. …because agriculture’s biological processes make us different from energy users

8. 8 We have opportunities to reduce emissions and improve productivity Emissions represent inefficient use of resources: –Increasing efficiency can improve the economic performance and reduce the environmental footprint of agriculture. Some opportunities are to: Improve nutrient use efficiency Improve efficiency of livestock feeding For 2008-12 -- 1 Mt emissions reductions (mostly N2O & CH4) We can make efficiency gains now, but more science and technology are needed: to improve understanding and control of nitrous oxide and methane emissions to pave way for better management practices and technologies

9. 9 We have opportunities to remove carbon dioxide from the air in ways that enhance sustainable resource use Improve management of soil & grazing lands Improve marginal land management –Promote permanent cover/perennial growth, agroforestry, etc (Greencover is a start providing 1.1 MT) Invest in science improve sequestration techniques & measurement position ourselves to consider other land bases (eg. Wetlands) in order to support public policy development 10 Mt BAU sink to maintain For 2008-12 -- 7.7 Mt incremental sinks

10. 10 We have opportunities to innovate to replace conventional with renewable feedstocks to link us with future economic growth Innovation in biofuels, bioproducts & bioprocesses –Use ethanol & biodiesel to address current emissions: Encourage policies for Canadian ethanol/biodiesel market and industry development that keeps sourcing, production & benefits in Canada, and builds industrial base for future. –Put in place building blocks for future technology Research, technology development, demonstration and industry development to improve efficiency of grain- based ethanol in short-term and cellulosic ethanol in the medium term Invest in research, analysis and industrial development to lay foundation for long-term transition to renewable bioproducts & bioprocesses

11. 11 200020102020203020402050 0 remove replace reduce Annual impact of mitigative strategies (relative to business-as-usual) Our strategy must be built on the fact that many Kyotos are required

12. 12 BAU without Sinks BAU with Sinks 35 40 45 50 55 60 65 70 75 199019992010 Potential reductions from BAU (5 to 20 Mt) [with incentives] 6% below 1990 Gap (6.5 Mt) Incentives are needed to send the right signals For the first commitment period, we know we can contribute MT CO 2 e

13. 13 There is a strong role for agriculture in the Federal Plan for Mitigation... First steps- Building the Foundation on Solid Science Increase awareness: Baseline study of awareness level and small programs to increase knowledge of agriculture’s role in climate change and GHG emission Develop GHG mitigation & science programs: Shelterbelts, Biofuels, Model Farms, GHG Mitigation (soil, nutrients, livestock), Manure technology, Carbon measurement/verification International: Win recognition of agricultural sinks in Kyoto Protocol New Steps - To Realize the Potential Develop emissions trading system: Agriculture has opportunity to participate in market for offsets (provides flexibility to firms in a DET system) Develop climate friendly technology: Invest in promising areas such as ethanol from cellulose feedstocks, bioenergy, bioproducts Encourage renewable biofuels: Expand use of ethanol and biodiesel in transportation with potential benefits for agricultural sector Building core knowledge: Develop economically viable mitigation methods by investing in science and economic analysis

14. 14 … and the Federal Plan acknowledges the potential ActionEstimated result (2008-12) Business as Usual (BAU) sink10 Mt/y Current programs -AP2000, Greencover & APF5.8 Mt/y Next steps - emissions reductions 1 Mt/y - sinks 9 Mt/y TOTAL 24.8 Mt/y Counting everything in the National Inventory is only one challenge, attribution for program delivery is another major issue

15. 15 The Federal Plan identifies offsets as the incent mechanism for the agricultural sector The sector indicated they preferred a market mechanism to more traditional instruments We made the case and the “door is open” to developing an offset system that will work for agriculture domestically Getting Articles 3.4 in Kyoto was the key to unlocking this door To be successful, offsets must make economic sense, as well as environmental sense

16. 16 The sector will need to be involved in the design of a workable offset system - become familiar with the issues... Offsets must be real –They have to provide sinks or emission reductions that will be counted in the national inventory - IPCC rules will be important They must be measurable and verifiable –Science is the key and we have good start, but more required (NCGAVS, model farms, GHGMP, CCFIA, BIOCAP etc.) Probably need to be project based –An entity will have to develop a plan to show they can provide real offsets: ex ante review, ex post verification, certification They must be additional/surplus & occur in 2008-12 –Over and above “business as usual” in the commitment period –Need to be differentiated from other incentives or requirements –There is a policy against providing “credit for early action” –This is the “baseline” issue and critical to whole system and dealing with continuum and saturation

17. 17 200020102020203020402050 … and there is more to a system... They must be calculated on a net-net basis “Leakage” will need to be accounted for The system must be affordable –Transaction costs must be kept low relative to the value of the offsets - @ $10/t this may be a challenge The role of numerous players will need to be sorted out –producers, registry, government, auditors, aggregators, futures/commodity markets, insurance industry etc.

18. 18 … and more issues of particular interest to agriculture Permanence and Liability are critical issues for the sector wrt. soil sinks At Calgary Credit Workshop agricultural participants did not support the transfer of the liability for emission reductions from covered sector to agricultural sector Problem is that building sinks depends not only on management choices - but also on the weather It may not prove economic to maintain them on a long term basis - producer wants flexibility also

19. 19 What are the next steps? Development of an Offset System within a DET/covenant world for Large Industrial Emitters (LIE) –options –rules –analysis –consultations Best guess - we will need to have pretty good idea on “if” and “how” an offset system would work by this fall!!!!!!

20. 20 Doubling of CO 2 (2050 under business as usual) But we also need to think about adaptation because we can’t move fast enough to avoid some impacts Expected changes –Warmer temperatures, drier or wetter conditions, more extreme events Assess impacts & plan to manage risks. –Build knowledge base, networks & planning systems. –Assess impacts and adaptation strategies for key policies e.g. water infrastructure & drought management –water supply & infrastructure –financial risk management –food safety, disease management/eradication