1. Carbon Sequestration in Spring Wheat Producing Regions of the Northern Great Plains
Dean A. Bangsund
F. Larry Leistritz
North Dakota State University

2. Study Sponsors Plains CO2 Reduction (PCOR) Partnership
One of 7 regional partnerships throughout the U.S.
Collaboration of academic, private, and government partners
Evaluate and demonstrate CO2 sequestration technologies in the northern Great Plains
Funded by the National Energy Technology Laboratory, U.S. Department of Energy

3. Plains CO2 Reduction (PCOR) Partnership Region

4. PCOR Partners
Eagle Operating Inc.
Fischer Oil and Gas, Inc.
2/16/05

5. Spring Wheat Producing Regions of the Northern Great Plains

6. Production Background Northern Great Plains
Dependent on small grains (75% of planted acreage)
Historically used crop-fallow practices, currently shifting to conservation and no-till practices
Semiarid growing conditions, combined with marginal soils
Substantial participation in conservation programs

8. One-pass operations, either with air seeders or no-till drills in the spring, combined with minimal or no fall tillage, are the most common practice.

9. Carbon Sequestration Northern Great Plains
Past production practices depleted soil carbon (some estimates place loss at 6.5 tons/ac)
Technical limitations
afforestation not feasible
short growing season, semiarid conditions
Considered low-cost provider of carbon sequestration

10. Issues with Previous Research
Conversion of cropland to grass
modeled after CRP-type management restrictions
no revenue from sale of co-products (i.e., grazing or hay)
not cost-competitive with other alternatives
Operator characteristics treated in homogeneous manner
differentiation by size, debt, management skill, profitability, and risk tolerance?
does profitability influence carbon sequestration activities?

11. Issues with Previous Research
Gains in carbon (C) sequestration purported to occur with “low” incentive levels likely overstated
use of summer fallow quickly disappearing
least-costly and most frequently cited land management change is already occurring
use of conservation & no-till practices increasing
adoption is taking place without C incentives
above trends have implications for both baseline measurements and gains resulting from implementation of C payments

12. Goal
Examine economic potential of carbon sequestration on cropland in the northern Great Plains, with emphasis on:
valuing co-products from conversion of cropland to grass production
differentiating response to C incentives by farm-level profitability
including current level of tillage practices
using site-specific data/information

13. Study Region

14. Scope Three possibilities Three profitability groups
convert cropland to grass
switch tillage systems
keep existing practices
Three profitability groups
low 20%, average, high 20%
Four tillage systems
conventional (summer fallow)
conventional (continuous crop)
conservation
no-till

15. Empirical Model Where: Pc = price of carbon ($/metric ton)
R = rate of carbon sequestration (metric ton/acre)
r = discount rate
TC = transition cost of switching tillage systems
i = tillage system (conventional-summer fallow, conventional continuous crop, conservation, no-till, managed grass)
j = profitability class
and = producer net returns

16. Data/Modeling Crop and Grass Budgets Transition Costs all major crops
hay production from managed grass
projected yields
forecasted prices
specific field operations for each tillage system
adjustments to yields, prices, and production costs to reflect profitability differences
Transition Costs
yield and cost adjustments in first 3 to 5 years

17. Data/Modeling C Sequestration Rates Tillage System mt/ac/yr
conventional (summer fallow) 0.0
conventional (continuous crop) 0.04
conservation
no-till
managed grass

18. Key Assumptions Producers “willing and able”, whole-farm enrollment
Tillage practices proportionally distributed within profitability groups
Farm policy and conservation programs unchanged
Market-based carbon payments

19. Percentage of Planted Cropland
Current Conditions
Percentage of Planted Cropland
Tillage Practice
2003
Projected
(2024)
Conventional (summer fallow)
4.0
Conventional (continuous crop)
16.8
Conservation
46.2
58.7
No-till
33.0
41.3

20. Summer Fallow Acreage, Study Counties, 1986-2003

21. Baseline Projections Elimination of summer fallow by 2010
Conditions
Elimination of summer fallow by 2010
Continued adoption of conservation and no-till practices over next 20 years
No carbon incentives
Study region’s 1.1 million acres of planted crop land would sequester
121,000 metric tons (mt) of C annually (average)
2.4 million metric tons (mmt) of C over 20 years

22. Sequestration with C Incentives

23. Sequestration with C Incentives
Payment Rate ($/mt)
C Sequestered (mmt)
Percentage Increase over Baseline
0 (baseline)
2.42
- - - 10
2.51
3.5 25
3.13
29.3 50
4.87
101.0 75
5.63
132.2
100
6.09
151.3
125
6.42
164.9

24. Changes in Producer Activities
Low Profit Producers (control 15% of tilled land)
Carbon Price ($/mt)
Current Tillage 10 25 50
Conv-summer fallow
grass
Conv-continuous crop
Conservation
no change
No-till

25. Changes in Producer Activities
Average Profit Producers (control 56% of tilled land)
Carbon Price ($/mt)
Current Tillage 10 25 50
Conv-summer fallow
conv. (CC)
cons. till
grass
Conv-continuous crop
no change
Conservation
No-till

26. Changes in Producer Activities
High Profit Producers (control 29% of tilled land)
Carbon Price ($/mt)
Current Tillage 10 25 50 75
100
Conventional-CC
no change
cons. till
grass
Conservation
no-till
No-till

27. Discussion
Substantial gains in C sequestration over baseline levels not until C was $50/mt
To some extent, activities shown to occur as a result of C incentives in other studies have already occurred
elimination of summer fallow
adoption of conservation and no-till practices
Segregating producers by profitability
large acreage shifts based on ‘average’ profitability measures were avoided
(e.g., C=$25/ton, low profit, switch to grass; average profit, switch tillage systems; high profit, no change)

28. Discussion
Treatment of co-products for converting cropland to grass has broad implications
Conversion to grass can be economical when co-product revenues are included (allowed)
Permanent (managed) grass represents greatest technical potential in some regions
Sufficient livestock industry present to complement additional forage in most regions

29. Conclusions
Producer profitability is likely to influence some land management decisions
C-friendly practices are being adopted in the absence of C incentives
Managed grass could provide a viable alternative to crop production

30. Conclusions
Economic assessments more valuable when using site-specific data
Results sensitive to key parameters
C sequestration rates
Input and product prices
Transition costs

31. Conclusions
Gains in C sequestration were shown to occur with low incentive levels, but at levels less than previously suggested
Spring wheat producing regions of the northern Great Plains can offer low-cost CO2 mitigation through C sequestration

32. Contact Information
Dean Bangsund
Larry Leistritz
Reports from NDSU Dept. of Agribusiness and Applied Economics can be obtained by contacting
Carol Jenson
(office)
(fax)
or access the following web site:

33. For Information on the PCOR Partnership
Contact:
Edward N. Steadman Senior Research Advisor PCOR Partnership Project Manager Energy & Environmental Research Center
Visit the PCOR Partnership Web Site at: