Agriculture could play a prominent role in U.S. efforts to address climate change if farms and ranches undertake activities that reduce greenhouse gas (GHG) emissions or take greenhouse gases out of 

the atmosphere. These activities may include shifting to conservation tillage, reducing the amount 

of nitrogen fertilizer applied to crops, changing livestock and manure management practices, and 

planting trees or grass. The Federal Government is considering offering carbon offsets and incentive payments to encourage rural landowners to pursue these climate-friendly activities as part of a 

broader effort to combat climate change. The extent to which farmers adopt such activities would 

depend on their costs, potential revenues, and other economic incentives created by climate policy. 

Existing Federal conservation programs provide preliminary estimates of the costs of agricultural 

carbon sequestration.

Figure 1 shows the contributions of broad categories of agricultural and forestry practices and land 

uses to GHG emissions for the United States in 2007, with red bars representing emissions and 

green bars representing sequestration, which takes carbon dioxide out of the atmosphere. Changes 

in these practices and rural land uses can shift both the red and green bars to the left, thereby helping 

to address climate change. These farming practice and land use changes also potentially affect farm 

profits, meaning that if climate policies aim to involve farmers voluntarily, they would likely need to 

include payment mechanisms to induce farmers to adopt relevant practices. 
Horowitz, John, and Jessica 

Gottlieb. The Role of Agriculture in Reducing Greenhouse 

Gas Emissions, EB-15, U.S. 

Department of Agriculture, 

Economic Research Service, 

September 2010. 

Recommended citation 

format for this publication:

ECONOMIC BRIEF The Role of Agriculture in Reducing Greenhouse Gas Emissions

UNITED STATES DEPARTMENT OF AGRICULTURE 2

Climate Change Policies Can Provide Roles for Agriculture

The Federal Government is considering a range of actions to reduce GHG emissions. In addition to 

possible Federal action, State governments and private organizations may also include agriculture as part of 

their efforts to reduce GHG emissions. The costs, benefits, and overall emission reductions of agricultural 

mitigation efforts depend on how climate change policy is structured and its stringency. 

Carbon Offsets in a Cap-and-Trade System

U.S. efforts to reduce GHG emissions could take the form of a nationwide cap-and-trade system on 

GHG emissions from the burning of fossil fuels, which account for 80 percent of U.S. emissions. Under 

this system, fossil fuel sources, such as oil refiners and electricity generators, must have a permit for every 

ton of emissions. The number of permits that the Government makes available would be the “cap.” 

Under proposed cap-and-trade systems, GHG permits would not be required for emissions arising from 

agricultural management practices or land use change. 

A cap-and-trade system could encourage agricultural mitigation by making agricultural activities eligible 

for offset credits. Depending on the eligibility rules for offset credits, farmers who increase their use of 

no-till practices or use nitrogen fertilizer inhibitors, for example, could receive credits for their reduced 

emissions. They could then sell these credits directly to the industrial sources covered by the cap-and-trade 

permit requirement or to brokers. Offset credits could be submitted by industrial sources in place of their 

required emission permits. 

2

Figure 1

Agricultural sector GHG emissions and sinks, 2007

CO2-e= Equivalent carbon dioxide. CO2-e is a measure of the global warming caused by all types 

of greenhouse gases, using the equivalent amount of carbon dioxide (CO2

) as the reference.

Note: A settlement, for our purposes, includes all developed land, including transportation 

infrastructure and human settlements of any size. Enteric fermentation refers to the microbial

fermentation process that occurs in an animal’s digestive system and produces methane (CH4) 

as a byproduct.

Source: Environmental Protection Agency, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 

1990-2007 (April 2009), tables 6-1 and 7-1; agricultural equipment emission source is from tables 3-13 

and 3-14.

-1,000 -800 -600 -400 -200 0 200 400

Agricultural soil management

Enteric fermentation

Manure management

Rice cultivation

Land converted to cropland

Biomass burning

Agricultural equipment

Cropland remaining cropland

Grassland remaining grassland

Land converted to grassland

Settlements remaining settlements

Forestland remaining forest

Million metric tons (CO2

-e)
The Role of Agriculture in Reducing Greenhouse Gas Emissions ECONOMIC BRIEF

3 ECONOMIC RESEARCH SERVICE

Options for Reducing GHG Emissions from Agricultural Enterprises 

and Increasing Carbon Sequestration on Agricultural Land

Reducing Greenhouse Gas Emissions 

From Crop and Livestock Production

Livestock and dairy operations emit greenhouse gases through the digestive processes of ruminants 

(primarily cattle and sheep) and through the decomposition of manure. Livestock managers can 

reduce methane emissions by changing livestock feeds. Dairy and hog producers can install digesters 

to capture methane produced during manure storage; the captured methane can then be used to 

generate electricity. Digesters reduce emissions by converting methane emissions that would have 

arisen under other methods of manure disposal into less-powerful CO2 and by generating energy 

that replaces CO2

 emissions that would have come from fossil fuel based electricity. 

Crop producers can change nutrient management practices to reduce emissions from nitrogen 

fertilizers and manure applied to farmers’ fields. Practices that help farmers reduce nitrogen 

applications without reducing yields include plant tissue testing, soil testing, precision application, 

use of slow-release fertilizers or nitrification inhibitors, and changes in application timing to better 

match plant uptake of nutrients (Smith et al., 2008). 

Farms and other agricultural enterprises emit CO2 when they burn gasoline or diesel in vehicles 

and machinery. If farmers improve operating efficiency or adopt farming techniques that use less 

fuel, such as no-till, they will reduce their fossil fuel-based GHG emissions. While reducing onfarm fuel use can improve farm profitability and reduce carbon emissions, the potential impact on 

overall GHG emissions is relatively low because fossil fuel use by agriculture is a small portion of 

total U.S. fuel consumption. 

Producing Renewable Energy on Agricultural Land

Farmers can also contribute to reducing GHG emissions by growing the feedstocks used for biofuels 

or by installing wind turbines or solar panels on their land. However, indirect land use effects arising 

from increased demand (in the case of biofuel feedstocks) or reduced supply (in the case of wind or 

solar power) of crops may lessen or even eliminate the emissions reduction (Fargione et al., 2008).

Increasing Carbon Sequestration on Agricultural Land

To increase carbon sequestration, farmers can adopt practices that increase crop residues left on 

the field and the volume of organic matter stored in the soil. These practices include switching 

from conventional tillage to conservation tillage or no-till, reducing or eliminating fallow as part of 

planned crop rotations, switching from annual to perennial crops, increasing field residues through 

irrigation, fertilization, planting hay or cover crops, or using additional organic material, such as 

manure. In some circumstances, these activities present a tradeoff between two greenhouse gases—

conservation tillage may increase both carbon sequestration, which mitigates climate change, and 

nitrous oxide emissions, which contributes to it (Johnson et al., 2007). If these practices reduce 

yields, then indirect land use changes may also occur.
ECONOMIC BRIEF The Role of Agriculture in Reducing Greenhouse Gas Emissions

UNITED STATES DEPARTMENT OF AGRICULTURE 4

The box “Options for Reducing GHG Emissions From Agricultural Enterprises and Increasing Carbon 

Sequestration on Agricultural Land” provides descriptions of agricultural activities that reduce atmospheric 

concentrations of GHG and could possibly be eligible for offsets. Reductions in fossil fuel use and the 

production of biofuel feedstocks or other renewable energy would likely not be eligible for offset credits.

Agricultural participation in proposed cap-and-trade markets would be voluntary and, therefore, a 

potential source of income for farmers. Farmers would be able to decide whether they wanted to undertake 

activities eligible for offset credits based on the costs of the offset activity and the prices of the offset credits 

they would earn. 

Incentive Payments for Reducing GHG Emissions

Another policy option is to offer direct incentives for agriculture’s mitigation activities, an approach 

similar to current Federal conservation programs, such as the Conservation Reserve Program (CRP). 

The Government would set rules for eligible practices and payment amounts, just as it does for other 

conservation programs. To offer incentive payments, the Government would set aside a pool of money or 

reserve permits to pay farmers for mitigation activities. 

Policies to Encourage Renewable Energy Production 

from Agricultural Sources

A variety of policies, such as the Renewable Fuel Standard, which ensures that transportation fuel sold 

in the United States contains a minimum volume of renewable fuel, or proposed Renewable Portfolio 

Standards, which would apply similarly to electricity production, encourage agricultural producers to 

grow the feedstocks used for biofuels or to provide land for wind or solar power generation.1

Existing Agricultural Programs Provide Insights

into Possible GHG Mitigation Policies and Costs

Existing Federal conservation programs provide insights into the costs of agricultural mitigation and yield 

lessons for the design of greenhouse offset contracts or incentive payments. The CRP and other programs, 

such as the Environmental Quality Incentives Program (EQIP) and the Wetlands Reserve Program, offer 

payments for activities similar or identical to the activities that would likely be eligible for GHG offsets. 

The Conservation Reserve Program (CRP)

CRP offers payments to farmers to voluntarily retire highly erodible or environmentally sensitive cropland 

from production for 10-15 years. Enrolled land is then planted to grass or trees, thereby reducing water 

pollution, improving wildlife habitat, sequestering carbon, and providing other environmental benefits. 

More than 34 million acres were enrolled in the CRP as of March 2008, either through general or 

continuous sign-up, making it the largest environmental program on private lands in the United States.2

The USDA Farm Service Agency (FSA) has estimated that those acres sequestered 48 million more metric 

tons of CO2 than if the land had remained in previous uses (FSA, 2008). 

Figure 2 shows the average per-acre annual payments that landowners received for general sign-up 

contracts under the CRP in 2008. Payments are highest overall in the Corn Belt, reflecting the higher 

opportunity cost of taking land out of crop production there. 

Total annualized CRP payments3

 can be combined with FSA estimates of sequestration rates (based in 

part on Eve et al., 2002) to provide preliminary evidence of the payments farmers would require to 

sequester carbon through land retirement. The total annual payments that CRP participants receive can 

also be considered a proxy for the costs they face for retiring cropland; presumably farmers would not 

participate in the CRP if their costs were substantially higher than the payments they receive. These cost 

estimates are shown in table 1. Estimated average sequestration costs through tree planting range from 

$7 to $32 per ton of CO2

 (all references are to metric tons). Average sequestration costs through grass 

planting are higher, ranging from $29 to $82 per CO2 ton, since the forgone agricultural income is 

roughly the same regardless of vegetation planted (for land enrolled in the CRP) but the amount of CO2

sequestered is lower. 

1

See http://www.ers.usda.

gov/Briefing/Bioenergy for a 

discussion of the economic and 

environmental impacts of biofuel 

policies. 

2

The Food, Conservation, and 

Energy Act of 2008 reduced CRP’s 

enrollment cap to 32 million acres 

as of October 2009.

3

In addition to the annual rental 

payments FSA makes to farmers 

enrolled in the CRP, participants 

may also be reimbursed for a 

portion of the costs of establishing 

a cover crop (e.g., planting grasses 

or trees). Total average annualized 

CRP payments are calculated by 

amortizing the cost share payments 

over 20 years at 5 percent and 

adding them to the average annual 

payments shown in figure 2.
The Role of Agriculture in Reducing Greenhouse Gas Emissions ECONOMIC BRIEF

5 ECONOMIC RESEARCH SERVICE

These costs indicate that if a carbon market were paying $13/ton of CO2 then owners of the average treeplanted CRP acre in 5 of the 10 regions (Northeast, Appalachia, Southeast, Delta, and Southern Plains) 

would have found it profitable to enter a carbon market. These estimates are averages, so a range of costs 

would be exhibited in the individual regions and we would expect at least some tree-planted acres to enter 

at this price in all regions. By way of comparison, the U.S. Environmental Protection Agency estimates 

that allowance prices associated with congressional cap-and-trade proposals would range from $12 to $41 

per ton CO2

 in 2013 and from $13 to $59 per ton of CO2 in 2020. 

Actual carbon sequestration levels and costs through land retirement may be lower or higher than these 

estimates. Only certain kinds of cropland are eligible for CRP payments, so some farms that could 

provide less costly sequestration may not have been eligible. Furthermore, eligible farms were selected 

for the program based on many criteria besides their carbon sequestration. These features would likely 

be changed under any new program that focused on climate benefits, thus providing less expensive 

carbon sequestration. On the other hand, for climate policies to effectively provide additional carbon 

sequestration through land retirement, farmers must enroll additional land beyond the current CRP. This 

effect could cause carbon sequestration costs to be higher than portrayed in table 1. 

The Conservation Reserve Program also provides evidence of the acreage that landowners would be likely 

to offer in a carbon market through individual practices. Figure 3 shows the acres enrolled in general signup CRP contracts by vegetation type and region. Grass predominates in all regions except the Southeast 

and Delta. The small proportion of trees in most regions suggests that farmers were willing to plant 

trees on only a relatively small proportion of accepted acres at prevailing CRP payment rates. This result 

Figure 2

Mean annual payment per acre for CRP general sign-up contracts, by vegetation 

type, March 2008

Source: USDA, Economic Research Service calculations based on Conservation Reserve 

Program data.

Mountain

Pacific

Corn Belt

Southern Plains

Southeast

Northeast

Appalachia

Northern

Plains

Delta

Lake States

$46.54$53.07$64.17$53.03

$66.16$62.55$65.81$63.96

$82.30

$88.33

$89.99

$96.16

$43.15$51.34$48.54$41.92

$62.83$47.88$71.70$59.25

$39.90$40.94$45.38$44.67

$42.56$42.15$43.78$44.36

$34.94

$32.87$37.20$39.01

$33.23$44.58

$35.12

$35.45

$49.92$57.43$58.17$55.97

Grass

Trees

Mixed vegetation

Wetland
ECONOMIC BRIEF The Role of Agriculture in Reducing Greenhouse Gas Emissions

UNITED STATES DEPARTMENT OF AGRICULTURE 6

Table 1

Estimated average costs of carbon sequestration through land retirement, 

based on CRP enrollment

Region Average cost per metric ton 

of CO2

-e (grass)

Average cost per metric ton 

of CO2-e (trees)

Northeast $57 $12

Appalachia $73 $11

Southeast $82 $8

Delta $29 $8

Corn Belt $68 $32

Lake States $68 $24

Northern Plains $43 $16

Southern Plains $38 $7

Mountain $55 $20

Pacific Coast $69 $15

CO2-e= Equivalent carbon dioxide. CO2-e is a measure of the global warming caused by all types of greenhouse 

gases, using the equivalent amount of carbon dioxide (CO2) as the reference.

Source: USDA, Economic Research Service calculations based on Conservation Reserve Program data.

Figure 3

Acres enrolled in general sign-up CRP contracts, by vegetation type and region, 

March 2008

Source: USDA, Economic Research Service calculations based on Conservation Reserve 

Program data.

Mountain

Pacific

Corn Belt

Southern Plains

Southeast

Northeast

Appalachia

Northern

Plains

Delta

Lake

 States

7,146,272

2,060,435

3,380,613

900,965

583,955

108,127

1,794,019

1,094,114

5,068,544

7,484,849

Chart Key

Grass

Mixed Trees

vegetation

Wetland

xx,xxx Total in region
The Role of Agriculture in Reducing Greenhouse Gas Emissions ECONOMIC BRIEF

7 ECONOMIC RESEARCH SERVICE

suggests that substantial numbers of tree-planted acres are likely to be offered to an offset market only if 

landowners receive higher payments than shown in table 1.

Policy decisions about whether a particular acre would be eligible for CRP enrollment and receive GHG 

offset credits would affect the owner’s willingness to participate in the offset market and/or the CRP, as 

well as the size of the payment required from each. 

Environmental Quality Incentives Program (EQIP)

EQIP provides payments to farmers who adopt a wide range of conservation practices for crop and 

livestock production. To participate, a producer enters into a contract to implement a specific conservation 

practice for 1 to 10 years. Per-acre EQIP payments for two of the supported practices that have the 

potential to contribute to GHG reduction efforts—conservation tillage and nutrient management—are 

shown in figure 4. 

EQIP paid out $42.5 million in 2008 for conservation tillage contracts on 2.7 million acres. If those farms 

sequestered 0.59 tons of CO2 per acre, an average estimate, then 1.6 million tons of CO2 would have 

been sequestered through conservation tillage, translating to an equivalent outlay of $27 per ton of CO2. 

As with the CRP calculations, actual costs of adopting no-till practices under a climate policy may be 

lower or higher, depending on the success of new policies in bringing in farms that have the lowest carbon 

sequestration costs but have not yet adopted no-till. 

Figure 4

Average payment per acre under EQIP contracts, by practice and region, 2008

Source: USDA, Economic Research Service calculations based on Conservation Reserve 

Program data.

Mountain

Pacific

Corn Belt

Southern Plains Southeast

Northeast

Appalachia

Northern

Plains

Delta

Lake

States

$21.44

$11.88

$16.27

$7.34

$12.77

$7.97 $30.61

$14.00

$8.73

$21.11

$10.45

$10.79

$15.08

$19.22

$24.42

$93.30

$29.10

$38.95

$51.03

$38.02

Nutrient management

Conservation tillage
ECONOMIC BRIEF The Role of Agriculture in Reducing Greenhouse Gas Emissions

UNITED STATES DEPARTMENT OF AGRICULTURE 8

EQIP paid out $35.7 million in 2008 for nutrient management contracts on 4.0 million acres. Many 

different nutrient management practices are supported by EQIP, so it is not possible to provide a simple 

estimate of the GHG mitigation resulting from these contracts. 

Conclusion

U.S. agriculture can contribute to efforts to reduce GHG emissions through increased carbon sequestration, 

reduced methane and nitrous oxide emissions, and increased renewable energy production. Although 

conservation programs have been developed and implemented to achieve a host of objectives beyond 

carbon sequestration, they share several key characteristics of proposed offset markets or other incentives 

for reducing agricultural GHG emissions, providing a glimpse of the potential farm response to policy 

incentives for reducing GHG emissions. Further research will develop more precise cost estimates from 

these programs and for a wider variety of mitigation activities. Forthcoming research will also help identify 

policy provisions that can encourage cost-effective agricultural efforts and will consider the economic 

implications of the simultaneous offering of both conservation programs and GHG offsets. 

References

Eve, M., M. Sperow, K. Howerton, K. Paustian, and R. Follett. “Predicted impact of management 

changes on soil carbon storage for each cropland region of the coterminous United States,” Journal of 

Soil and Water Conservation. 57(4): pp. 196-204, 2002.

Fargione, J., J. Hill, D. Tilman, S. Polasky, and P. Hawthorne. “Land Clearing and the Biofuel 

Carbon Debt,” Science 29 319(5867): pp. 1235-38, February 2008.

Johnson, J., A. Franzluebbers, S. Lachnicht Wyers, and D. Reicosky. “Agricultural opportunities to 

mitigate greenhouse gas emissions,” Environmental Pollution 150(1): pp. 107-24, 2007.

Smith, P., D. Martino, Z. Cai, D. Gwary, H. Janzen, P. Kumar, B. McCarl, S. Ogle, F. O’Mara, 

C. Rice, B. Scholes, O. Sirotenko, M. Howden, T. McAllister, G. Pan, V. Romanenkov, U. Schneider, 

S. Towprayoon, M. Wattenbach, and J. Smith. “Greenhouse gas mitigation in agriculture,” 

Philosophical Transactions of the Royal Society B 363: pp. 789-813, February 2008.

U.S. Department of Agriculture, Farm Service Agency. Conservation Reserve Program: Summary and 

Enrollment Statistics, 2008.

U.S. Environmental Protection Agency. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-

2007, 2009.

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To file a complaint of discrimination write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., 

Washington, D.C. 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD). USDA is an equal opportunity 

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This is the second in a continuing series of economic briefs on climate change and U.S. agriculture. You 

may also be interested in Agricultural Land Tenure and Carbon Offsets, EB-14, available at: www.ers.usda/

Publications/eb14/. For additional information, see the ERS Global Climate Change briefing room, at: 

www.ers.usda.gov/Briefing/globalclimate/.