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[Senate Hearing 107-1019]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 107-1019
 
            CARBON SEQUESTRATION: MEASUREMENTS AND BENEFITS

=======================================================================

                                HEARING

                               before the

             SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND SPACE

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 23, 2001

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                      U.S. GOVERNMENT PRINTING OFFICE

88-841                       WASHINGTON ; 2003
_______________________________________________________________________
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  MAX CLELAND, Georgia
GEORGE ALLEN, Virginia               BARBARA BOXER, California
                                     JOHN EDWARDS, North Carolina
                                     JEAN CARNAHAN, Missouri
                  Mark Buse, Republican Staff Director
               Kevin D. Kayes, Democratic Staff Director
                                 ------                                

             SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND SPACE

                    GEORGE ALLEN, Virginia, Chairman
TED STEVENS, Alaska                  JOHN B. BREAUX, Louisiana
CONRAD BURNS, Montana                JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia
KAY BAILEY HUTCHISON, Texas          JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        MAX CLELAND, Georgia
                                     JOHN EDWARDS, North Carolina
                                     JEAN CARNAHAN, Missouri

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 23, 2001.....................................     1
Statement of Senator Brownback...................................     1
Statement of Senator Wyden.......................................    33

                               Witnesses

Bonnie, Robert, Economist, Environmental Defense.................    24
    Prepared statement...........................................    26
Coda, Mike, Director, Climate Change Program, the Nature 
  Conservancy....................................................    18
    Prepared statement...........................................    22
Heydlauff, Dale E., Senior Vice President for Environmental 
  Affairs, American Electric Power Company.......................     2
    Prepared statement...........................................     5
Kadyszewski, John, Winrock International Institute for 
  Agricultural Development.......................................    11
    Prepared statement...........................................    15
Kimble, John, Ph.D., Soil Scientist Researcher, U.S. Department 
  of Agriculture.................................................     8
    Prepared statement...........................................     9

            CARBON SEQUESTRATION: MEASUREMENTS AND BENEFITS

                              ----------                              

                        WEDNESDAY, MAY 23, 2001

                                       U.S. Senate,
            Subcommittee on Science, Technology, and Space,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:08 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Sam 
Brownback, presiding.

           OPENING STATEMENT OF HON. SAM BROWNBACK, 
                    U.S. SENATOR FROM KANSAS

    Senator Brownback. I call this hearing to order. I want to 
thank the official Chairman of this Subcommittee, who is 
currently Senator Allen--we will see what ends up taking 
place--for allowing me to investigate further the science 
behind an important environmental process that is called carbon 
sequestration.
    As many of you know, I have offered legislation to 
encourage conservation practices in agricultural lands and 
forests that convert atmospheric carbon dioxide into carbon 
trapped in soils and trees. This is a very positive process 
that not only helps reduce the threat of global climate change, 
but also improves the quality of our soil, water, air, and 
wildlife habitat. In that sense, it is a no-regrets policy. We 
can do this regardless of what people may think about the issue 
of global climate change and this will have a positive impact 
on the overall society, certainly on the soils and the 
environment.
    Scientists estimate that carbon sequestration, biofuel 
production, and better land and animal management in the U.S. 
could reduce between 123 and 295 million metric tons of carbon 
per year from the atmosphere. To put this number in some 
context, EPA reports that from 1990 to 1997 carbon dioxide 
emissions grew by 11 percent or 138 million metric tons of 
carbon dioxide.
    If we aggressively implement carbon sequestration, we can 
not only level off U.S. emissions, we can actually begin to 
reduce current concentrations, all by simply using well-
established conservation practices.
    With all there is to gain from carbon sequestration, the 
question becomes why have we not embarked on a course of action 
to encourage this approach both here and abroad? Part of the 
answer comes from the fact that the issue of climate change has 
become a very polarizing force here in Washington, with the 
focus almost exclusively aimed at the Kyoto treaty, which many 
of us do object to.
    I believe there is a more positive approach. Instead of 
focusing on that on which we cannot agree, we should pursue 
areas where agreement is possible. This is especially true when 
you consider the co-benefits that can be achieved by pursuing 
these alternatives. It is irresponsible for both the political 
left and right to abandon taking steps on the issue of global 
climate change simply because we cannot completely agree.
    In this spirit, I have asked you all here today to share 
your knowledge and expertise on the scientific validity and 
benefits of carbon sequestration. There are those who are still 
unsure as to how significant carbon sinks can be. There are 
those who are just not familiar with the issue of carbon 
sequestration or all the science that has already been done on 
this topic. I hope that you will be able to shed some light on 
these concerns and I certainly thank you for coming forward and 
being willing to testify here today.
    We have a series of votes that we are still on in the U.S. 
Senate and another one was just called, a 10-minute roll call 
vote. I think what I will do is introduce the panel and then go 
and do this vote and come back. I tell you what, if I could get 
somebody to tell me when there are 3 minutes left in the vote, 
then we will proceed, and then we will go into recess for a 
short period of time and then I will come back to resume the 
hearing.
    I had to do this yesterday and I think I was back and forth 
three times. So I apologize to the panel, I apologize to the 
people watching, but that is just where we are in trying to get 
this tax cut on legislation passed.
    The panel consists of: Mr. Dale Heydlauff, Vice President 
of Environmental Affairs, American Electric Power; Dr. John 
Kimble, a soils scientist researcher, U.S. Department of 
Agriculture, Lincoln, Nebraska; Mr. John Kadyszewski--help me; 
is that right?
    Mr. Kadyszewski. That is right.
    Senator Brownback. Boy, I am good.
    --Advisor to the President of Winrock International 
Institute for Agricultural Development, out of Arlington, 
Virginia; Mr. Mike Coda, Director of Climate Change Program for 
The Nature Conservancy out of Arlington, Virginia; and Mr. 
Robert Bonnie, economist with the Environmental Defense and 
Washington, D.C.
    Mr. Heydlauff, let us go ahead and start with your 
testimony. Give us a couple of minutes of that and then I will 
probably have to slip out and we will go into a recess. Or if 
you can even summarize in a very short period of time and we 
will take your full testimony into the record.

          STATEMENT OF DALE E. HEYDLAUFF, SENIOR VICE 
 PRESIDENT FOR ENVIRONMENTAL AFFAIRS, AMERICAN ELECTRIC POWER 
                            COMPANY

    Mr. Heydlauff. I would be happy to do that, Mr. Chairman, 
and thank you very much for inviting me to be a part of this 
hearing.
    First of all, I should say at the outset that I am sure 
those trips between here and the Capitol have kept you nice and 
trim. We completely subscribe to the statement that you just 
made in your opening comments about the value of carbon 
sequestration investments both internationally and 
domestically, for purposes not only of addressing the concerns 
about global climate change, but also because of all the 
ancillary economic and environmental benefits that are 
associated with them.
    My name is Dale Heydlauff. I am Senior Vice President for 
Environmental Affairs at American Electric Power Company. We 
are headquartered in Columbus, Ohio. We are today the largest 
investor-owned electric utility in the country. We serve 9 
million people around the world. We are the largest consumer of 
coal and the third largest consumer of natural gas in the 
United States. If you add that together, that also makes us the 
largest emitter of carbon dioxide.
    It is a result of that fact that we have been following the 
global climate change issue for quite some time. I have 
actively monitored the debates myself, both internationally and 
domestically, for over 13 years. Our chairman has been 
personally involved in both the study of this topic from a 
scientific and economic and technological standpoint, as well 
as engaged in discussions with policymakers about the right 
kind of policy responses.
    It was in that vein in 1995 that we signed a participation 
accord with the U.S. Department of Energy under the Climate 
Challenge Program to undertake a wide range of activities to 
reduce, avoid, or sequester greenhouse gas emissions. After 
that initial commitment, we continued to look for cost-
effective ways to mitigate greenhouse gas emissions and it was 
in 1996 that The Nature Conservancy came to us and said: We 
have a couple of wonderful opportunities we would like to talk 
to you about, a project in Panama and one in Bolivia. We 
evaluated them, decided to do the project in Bolivia, which is 
today the largest carbon sequestration project of its kind in 
the world.
    It is that project that I wanted to talk about today and in 
doing so try to answer the questions that you posed to the 
panel, or at least to me specifically. The first is what 
motivated us. I have already touched on that. To a certain 
extent, it is simply a way in which we could on a proactive 
basis begin to address the concerns about climate change.
    But also, importantly, as we were monitoring the debates 
about climate change, we knew that the concept of joint 
implementation, or the ability of firms or developed country 
nations to undertake projects in developing countries and 
transfer the carbon credit or benefit of that back to meet any 
future compliance obligations the nation or the individual firm 
might have, was very controversial, but yet one that we have 
been a very strong proponent of, simply because of the economic 
efficiencies involved in being able to identify and undertake 
carbon mitigation wherever you can do so at the least possible 
cost.
    Ironically, at the time we did not realize how 
controversial carbon sequestration or sink enhancement projects 
were. But since we had been arguing pretty strongly for the 
inclusion of joint implementation in similar kinds of contexts, 
our chairman and the board said: let us do this project, and 
let us do it primarily to prove a policy point. Let us make it 
a showcase to the world so that they can see if, structured 
properly, how projects like this can be included in the broad 
portfolio of global responses to the climate change issue.
    I am very proud of what we have done in Bolivia and what we 
have subsequently done as an extension of that in Brazil, the 
project that we are very pleased you were able to see this last 
December, Senator.
    Senator Brownback. It was a very impressive project, very 
impressive.
    Mr. Heydlauff. Thank you very much.
    We learned a lot from Bolivia. We expanded on it in Brazil.
    Senator Brownback. Mr. Heydlauff, I am going to put the 
Committee into recess while I go and vote, and then the people 
that are here to testify can stand down for a period of time 
and then I will be back as soon as I can to continue with the 
hearing. Thank you.
    [Recess from 2:17 p.m. to 2:42 p.m.]
    Senator Brownback. The hearing will come back to order. 
Thank you for waiting for me. We just passed the biggest tax 
cut in 20 years, so I had to take a minute or two.
    [Applause.]
    A few applauses anyway. It is a lot going on, a lot 
happening.
    Mr. Heydlauff, go ahead and finish your presentation. Then 
we will go on through the rest of the panel.
    Mr. Heydlauff. Thank you very much, Mr. Chairman. I think I 
left off talking about how we had done this showcase project to 
prove to the world its viability as a climate change mitigation 
option. We did it by building into the project several critical 
components that we thought were necessary and important for it 
to be viewed as a legitimate project.
    We then asked the world to come and scrutinize it. So one 
of the first things we did is we tried to identify with The 
Nature Conservancy the very best experts in the field of 
monitoring and verification for terrestrial ecosystems, and we 
found Winrock International. I will not preempt their 
testimony, but I would tell you that I do not think there is 
anyone better at coming up with accurate quantification of 
carbon benefits projects like this.
    The second thing we did is we realized that it had to be 
sustainable over a long term, addressing the issue of 
permanence. Permanence is both an accounting issue, to make 
sure if you have any change in the carbon stock over time you 
account for that in the amount of credit that accrues to those 
who are the investors, but it also in this context is a 
financial sustainability aspect, to make sure that the 
government in this case, which owns the property, has the means 
by which to continue to protect it for the long term.
    So one of the things we did in that regard is establish a 
permanent endowment fund that will continue to provide revenue 
to cover, we hope, the ongoing protection activities of the 
project.
    We also realized that it was critical that we replace the 
revenue and jobs that had gone to--that local communities had 
relied on with other alternative forms of economic assistance 
and, frankly, assistance that is more sustainable over time. So 
we have provided things such as revolving loans to these local 
communities for agrobusinesses, hearts of palm plantations, 
animal husbandry, other kinds of more sustainable activities 
for these local communities to replace the jobs and the tax 
revenue that would have come as a result of the destruction of 
the forest through the logging activities.
    Now, in addition, about a half of the rangers that we hired 
to patrol the park and protect it came from these local 
communities.
    We think on balance--and I want to summarize very quickly 
and allow my colleagues to speak--that we have a project here 
that was developed with great care, a project that we believe 
can withstand the scrutiny of the world and will be viewed as a 
very cost effective, but legitimate as well, response to the 
climate change issue.
    But more importantly, and I think Mike Coda in his 
testimony will touch on this, the ancillary economic and 
environmental benefits associated with this project in all 
honesty probably overwhelm the carbon benefits. It is in that 
context that I hope the world will look at these when they 
judge them and not be too narrow about it, recognize that there 
are lots of other benefits that can accrue to the world 
literally in terms of preserving biodiversity and helping to 
inspire sustainable development of investments in developing 
countries.
    I did want to conclude also by commending you, Mr. 
Chairman, for your leadership in developing both the 
international and the domestic carbon conservation acts. These 
pieces of legislation, should they be enacted, which we 
certainly hope they will be, will serve as highly effective 
incentives to see additional kinds of investments like ours 
around the world and domestically.
    Thank you very much.
    [The prepared statement of Mr. Heydlauff follows:]

  Prepared Statement of Dale E. Heydlauff, Senior Vice President for 
         Environmental Affairs, American Electric Power Company
    Mr. Chairman and Members of the Committee, my name is Dale 
Heydlauff. I am the Senior Vice President for Environmental Affairs at 
American Electric Power Company. AEP is a multinational energy company 
based in Columbus, Ohio. AEP owns and operates more than 38,000 
megawatts of generating capacity, making it one of America's largest 
generators of electricity. We are the largest consumer of coal and the 
third largest consumer of natural gas in the U.S. AEP provides retail 
electricity to more than 9 million customers worldwide and has more 
than $55 billion in assets, primarily in the U.S. with holdings in 
select international markets.
    Given AEP's reliance on coal and natural gas to produce reliable 
and affordable electricity for our customers, we are one of the largest 
emitters of carbon dioxide emissions in the country. This recognition 
led us to be a proactive participant in several industry-government 
programs over the past several years that are designed to reduce, avoid 
or sequester greenhouse gas emissions. The most significant of these 
actions is the Climate Challenge Program, a voluntary partnership 
between the electric utility industry and the Department of Energy. The 
Climate Challenge Program caused us to conduct a comprehensive 
assessment of all the available, cost-effective steps that we could 
take as a company to mitigate greenhouse gas emissions. After 
consummating our Participation Accord with the U.S. Department of 
Energy in February 1995, AEP continued to search for opportunities to 
go beyond our initial commitments.
    In the spring of 1996, The Nature Conservancy presented to us a 
proposal to invest in a carbon sequestration project in Bolivia that 
could be submitted to the United States Initiative on Joint 
Implementation for approval. The USIJI program is a collaboration 
between several federal agencies to foster greenhouse gas mitigation 
projects around the world. The Nature Conservancy had partnered with a 
conservation organization in Bolivia, the Friends of Nature Foundation, 
in the development of the Noel Kempff Mercado Climate Action Project. 
This project doubled the size of an existing national park, the Noel 
Kempff Mercado National Park, thus preserving one of the most 
biologically diverse areas in the world. The project components include 
the following:

   Park Expansion and Short-term Protection: The project began 
        with the indemnification and retirement of logging concessions 
        sold by the Government of Bolivia to timber companies who were 
        actively engaged in harvesting trees in a 2 million acre area 
        adjacent to the western and southern boundaries of the Park, 
        thus halting the greenhouse gas emissions resulting from this 
        activity. Following this action, the Government of Bolivia 
        formally expanded the boundaries of the Noel Kempff Mercado 
        National Park to encompass this area. The project then called 
        for the establishment of the necessary infrastructure (e.g., 
        guard houses, boats, trucks, etc.) and trained personnel to 
        effectively patrol the Park.

   Community Assistance: Funding of sustainable development 
        activities in local communities adversely affected by the 
        cessation in logging activities through the loss of jobs and 
        tax revenue. Over half of the Park rangers were hired from 
        local communities. The project established revolving loan funds 
        for micro enterprises, such as heart-of-palm plantings, agro 
        forestry projects, animal husbandry and bee keeping for honey 
        production. In addition, the project has provided funding to: 
        enhance health care programs with a dedicated physician, 
        emergency medical air service, purchase of an ambulance and 
        radio system, and stocking of pharmacies with needed medicines; 
        and install potable water supplies and sanitation systems; 
        improve schools; repair roads and bridges; and establish better 
        communications systems.

   Monitoring & Verification: Retention of Winrock 
        International, the foremost expert in carbon monitoring and 
        verification of terrestrial ecosystems, to accurately measure 
        and report on the level of carbon dioxide captured as a result 
        of the project. Using thorough field measurement procedures at 
        625 established carbon plots in the Park and an advanced dual 
        camera aerial videography technology developed by the 
        University of Massachusetts, the monitoring and verification 
        program has quantified with a high degree of precision how much 
        carbon existed in the project area prior to commencement of the 
        project and how much carbon is captured as a result of the 
        project. The project is projected to capture over 14 million 
        metric tons of carbon over its 30-year life.

   Long-term Protection: The project created a permanent $1.5 
        million endowment fund to ensure the long-term financial 
        sustainability of the project. In addition, the project has 
        invested in a few income-generating ventures to augment the 
        returns from the endowment fund. These include establishing an 
        ecotourism destination in the Park, complete with lodging 
        facilities and a visitors center, as well as investments in 
        for-profit Bolivian companies that produce and sell organic, 
        sustainably produced coffee and chocolate candies, and 
        mushrooms. The project also made investments to enhance the 
        scientific research capabilities of the Friends of Nature 
        Foundation to assist the income generating enterprises and 
        improve their ability to discover and genetically reproduce new 
        species of flora and fauna in Bolivia.

   Leakage Prevention: The project has also invested in 
        sustainable forest management practices for timber companies 
        and has worked with the Government of Bolivia to make certain 
        that the logging activities that were being undertaken within 
        the control area were not relocated to another area in Bolivia 
        and that existing logging activities were not expanded as a 
        result of the retirement of the logging concessions in the 
        project area.
Biodiversity Benefits of the Project
    The Noel Kempff Mercado Climate Action project protects 4 million 
acres in one of the most biologically diverse areas in the world. A 
remote wilderness rising from Amazon rainforests to spectacular cliffs 
and waterfalls, the Park harbors several hundred species of rare and 
endangered wildlife. Bridging dry and wet ecological communities, the 
Park is home to more than 130 species of mammals (including rare river 
otters, river dolphins, tapirs, spider and howler monkeys, giant 
anteaters and endangered jaguars, including a population of rare black 
jaguars), 620 bird species (including 9 species of macaw, possibly the 
highest number of species in any one protected area), and 70 species of 
reptiles (including black caiman and giant armadillos). The area 
encompasses five important ecosystems ranging from Amazonian 
rainforest, gallery forest and semi-deciduous tropical forest to 
flooded savanna and cerrado. A rich variety of grasses, orchids (110 
different species), and tree species bloom throughout the year. The 
diversity of the park's flora and fauna make it an ideal natural area 
for biological research and an outstanding attraction for ecotourism 
activities.
AEP's Motivation to Invest in Project
    The project represents an extension of AEP's ongoing efforts to 
find innovative, cost-effective ways to mitigate greenhouse gas 
emission increases. The company was motivated to invest in the project 
by a desire to demonstrate to policymakers around the world that joint 
implementation projects in general and carbon sequestration projects in 
particular should be included in the broad portfolio of global 
responses developed to address concerns about global climate change. 
Actions like the Noel Kempff Mercado Climate Change Action project have 
enormous potential for proactively addressing existing environmental 
and economic challenges in developing countries, while also arresting 
the growth in global greenhouse gas emissions. We believe we have 
proven with this project that avoided deforestation is a legitimate and 
verifiable climate change mitigation option that can return 
considerable ancillary environmental and economic benefits to the host 
country.
    After undertaking this project, AEP invested in the Guaraquecaba 
Climate Action Project with The Nature Conservation and the Society for 
Research of Wildlife and Environmental Education, a Brazilian 
conservation organization, which will restore and protect approximately 
20,000 acres of partially degraded and/or deforested Atlantic coastal 
rainforests in Brazil. Like the Noel Kempff project, the Guaraquecaba 
project will produce significant net carbon benefits that are 
scientifically quantifiable and long lasting; protect biodiversity and 
ecosystems and improve local environmental quality; and promote 
sustainable development by creating economic opportunities for local 
people. We were delighted that Senator Brownback, his son and staff, 
and staff officials from this committee, were able to visit this 
project site and see its natural beautiful and potential as a carbon 
action project last December.
Scientific Support for Carbon Sequestration
    The Intergovernmental Panel on Climate Change in its Third 
Assessment Report found that forest protection and restoration can play 
an important role in combating global climate change. According to the 
report, ``Forests, agricultural lands, and other terrestrial ecosystems 
offer significant carbon mitigation potential.'' The conservation of 
threatened forests, like the lands protected by the Noel Kempff Mercado 
Climate Action project, can help avoid greenhouse gas emissions that 
would have otherwise resulted from deforestation. The report also notes 
that forest projects, if implemented properly, ``can have social, 
economic and environmental benefits beyond reductions in atmospheric 
carbon dioxide.'' These ``ancillary benefits,'' also known as co-
benefits, include the provision of employment opportunities and the 
protection of vital plant and animal habitats. In short, the most 
recent scientific assessment validates the results of the Noel Kempff 
Mercado Climate Action Project.
Conclusion
    AEP accepts the views of most scientists that enough is known about 
the science and environmental impacts of global climate change for us 
to take actions to address its consequences. We were a leader in the 
development of the Climate Challenge program, and have augmented our 
early commitments under this program with the largest carbon 
sequestration project in the world in Bolivia and another similar 
project in Brazil. Collaborative efforts such as these should serve as 
a catalyst for similar initiatives to protect diverse and rich 
ecosystems, and demonstrate the cost-effective mitigation of greenhouse 
gas emissions.
    According to the IPCC, the destruction of tropical forests around 
the world results in approximately 22 percent of annual global carbon 
dioxide emissions caused by human activities. The U.S. Department of 
State has estimated that for the past twenty years, an average of 38 
million acres of tropical forests have been destroyed each year. 
Combining concerns about climate change with the critical need to 
preserve the incredibly rich biodiversity present in these forests 
makes policies that provide financial incentives for the protection of 
tropical forests very important.
    Mr. Chairman, AEP commends you for your insight and leadership in 
introducing legislation to do just this. The International Carbon 
Conservation Act and the Domestic Carbon Conservation Act are precisely 
the kind of policy tools that are needed to encourage actions to offset 
greenhouse gas emissions through improved land management and 
conservation. We also need international negotiators to provide full 
crediting for avoided deforestation activities in any international 
climate change agreement designed to address rising atmospheric 
concentrations of greenhouse gases.
    Thank you for the opportunity to testify today on this important 
issue.

    Senator Brownback. Thank you very much, and I look forward 
to discussion with you on some of these issues as we go through 
the panel.
    Dr. Kimble, a soil scientist researcher, USDA. Dr. Kimble, 
thank you for joining us today. Pull that microphone close to 
you, if you would.

  STATEMENT OF JOHN KIMBLE, PH.D., SOIL SCIENTIST RESEARCHER, 
                 U.S. DEPARTMENT OF AGRICULTURE

    Dr. Kimble. Yes, sir. Mr. Chairman, thank you for the 
opportunity to appear today to discuss soil carbon and research 
related to such measurements. The work on soil carbon has been 
going on for many years. In fact, much of the early work in 
soils dealt with soil organic matter, which is primarily made 
up of soil organic carbon.
    The importance of soil carbon to the farming community has 
been long recognized. In the 1938 Yearbook of Agriculture, 
Soils and Men, William Albrech wrote a chapter entitled ``Loss 
of Soil Organic Matter and Its Restoration.'' The opening to 
the chapter says: ``This article tells why soil organic matter 
in the soil may be considered our most important natural 
resource.''
    The discouraging thing is that for years, even though many 
understood the importance of soil carbon, management practices 
continued to delete the carbon. We have now renewed our 
appreciation of soil organic carbon and are looking at ways to 
reverse its decline. A group of us has produced ten books 
related to the issues of soils, greenhouse gases, and carbon 
sequestration. A recent one is directly related to the topic of 
this hearing, ``Assessment Methods for Soil Carbon,'' this book 
that is laying here. I am not hawking books; I am just holding 
it up. No royalties.
    Soils vary widely over the landscape. Their spatial 
variability has led to the critique that it is too costly to 
accurately measure its properties. In fact, we have well-
developed tools, including models, soil survey maps, to measure 
properties at points and to scale from these point measurements 
to large areas. Soil survey maps delineate soils in the 
landscape into describable units.
    It should be remembered that all biological systems vary. 
If we want to know the amount of carbon in the people in this 
room, we could weigh everyone, calculate the total carbon in 
the room assuming the amount of carbohydrates, bone, protein, 
and everything was the same, knowing that it is not. So we take 
an estimate.
    Variability exists and we have to develop tools to deal 
with it effectively. We need to describe similarities and not 
always focus on variability in soils. Carbon measurements are 
made on a regular basis as part of soil fertility sampling, 
over two million samples a year. The carbon measurements are 
used to determine the amount of herbicides and pesticides that 
we can apply to the land, so we do apply and accept the values 
that we are measuring.
    Data acquired from long-term no-till fields clearly shows 
that the level of carbon in soils has increased over time. One 
long-term no-till farmer in Illinois has doubled his soil 
organic carbon in a period of about 15 years. Last week I was 
in southern Virginia talking to several farmers and they have 
shown dramatic increases in carbon there. All of this is not 
research plots, but agriculture fields using good conservation 
practices.
    A special publication of the Soil Scientist Society of 
America, ``Soil Carbon Sequestration and the Greenhouse 
Effect'' provides numerous examples of measurable rates of 
change of soil organic compound. Dr. Ron Follett and several 
co-authors reports an average rate of change of 910 kilograms 
carbon per hectare per year in the top 20 centimeters of land 
in the CRP program. In the same publication, Keith Paustan and 
his co-authors describe how carbon cycle models, in their case 
Century, can be used to make regional assessments of soil 
carbon. CQESTR, a model under development and tested by ARS, 
NRCS, and others, will allow farmers and land managers to 
estimate the effects of alternate management systems and 
practices on rates of carbon sequestration.
    The use of remote sensing coupled with modeling has a great 
potential to improve our measurements and estimate capacity. 
Therefore, it is important to integrate mapping and monitoring 
techniques with predictive models for different soils and eco-
regions. Soil surveys provide essential information for 
sampling and could be refined to improve their use for this 
purpose. Scientists from ARS and DOE are working with NRCS and 
others to develop simple field testing equipment that we can 
use for rapid measurement of soil organic matter in the field.
    In conclusion, the bottom line is that we know how to 
measure soil carbon changes over time, the scientific processes 
of measurement is now verifiable, and point data can be scaled 
to larger areas with models. We can also couple remote sensing 
data with the models to improve their output. we can measure, 
estimate, and predict changes in carbon with the tools at hand, 
which include field sampling, models, and statistics.
    Our focus should be to get the conservation practices on 
the ground that will lead to increases in soil carbon. This 
will simultaneously advance our goals of sustainable farming 
systems and improved water and air quality.
    That completes my statement, Mr. Chairman. Thank you.
    [The prepared statement of Dr. Kimble follows:]

 Prepared Statement of John Kimble, Ph.D., Soil Scientist Researcher, 
                     U.S. Department of Agriculture
    Mr. Chairman and Members of the Subcommittee. Thank you for the 
opportunity to appear today to discuss soil carbon measurement 
processes, methods used to measure soil carbon changes, and the 
research related to such measurements. I am a research soil scientist 
with the Natural Resources Conservation Service in Lincoln, NE. The 
work on soil carbon has been going on for many years. In fact, much of 
the early work in soils dealt with soil organic matter, which is 
primarily made up of soil organic carbon. The importance of soil carbon 
to the farming community has long been recognized. In the 1938 USDA 
Yearbook of Agriculture Soil and Men, William Albrech wrote a chapter 
entitled ``Loss of Soil Organic Matter and its Restoration.''. The 
opening to the chapter says, ``This article tells why organic matter in 
the soil may be considered our most important natural resource.'' Other 
questions raised in this chapter included whether levels of soil 
organic matter should be maintained or raised to maintain fertility. 
The answer even then was that the levels, at a minimum, should to be 
maintained. The discouraging thing is that for years, even though many 
understood the importance of maintaining soil carbon, management 
practices continue to deplete soil carbon. We have now renewed our 
appreciation for soil organic carbon and are looking at ways to reverse 
its decline. Increasing soil carbon has many farm benefits (improved 
productivity and sustainability) and off-farm benefits (improved water 
and air quality).
    I have been working with colleagues for the last 12 years on issues 
related to soil carbon changes and its measurement and verification. 
NRCS has been investigating the role that agriculture can play in the 
sequestration of carbon in the soil both as soil organic carbon (SOC) 
and soil inorganic carbon (SIC). We have published 10 books related to 
the issue of soils, greenhouse gasses, and carbon sequestration. A 
recent one is directly related to the topic of this hearing: Assessment 
Methods for Soil Carbon edited by R. Lal, J. M. Kimble, R. F. Follett, 
and B.A. Stewart.
    Soils vary widely over the landscape. Their spatial variability has 
led to the critique that it is too costly to accurately measure its 
properties. In fact, we have well-developed tools (including models and 
soil survey maps) to measure properties at points and to scale up from 
those point measurements to large areas. Our National Soil Survey 
Program inventories soils in the landscape into described units. This 
inventory is pivotal in this scaling.
    Data acquired from long-term (5+ years) no-till fields clearly 
shows that the level of carbon in soil has increased over time. One 
long-term no-till farmer in Illinois has doubled his SOC in a period of 
about 15 years. He did this not on research plots but on agriculture 
fields using good conservation practices. A special publication of the 
Soil Science Society of America Soil Carbon Sequestration and the 
Greenhouse Effect provides numerous examples of measurable rates of 
change of soil organic carbon.
    Based on sampled data, ARS senior scientist Dr. R. Follett and 
several co-authors reported an average rate of change of 910 kg SOC 
-1 in the top 20 cm of soil that was taken out of production 
and put in the Conservation Reserve Program (CRP). This land was in the 
13 state-region of the historic grasslands. Using soil maps we can 
estimate the amount of carbon in the entire region. A total of 5.14 
million metric tons carbon per year was accumulating in the top 20 
centimeters of CRP land in this region. The rates would vary along the 
temperature gradient form the south to the north and along the moisture 
gradient from the east to the west. This variability can be explained 
and understood when such data is scaled to larger areas. In the same 
publication Keith Paustain and his co-authors describe how carbon cycle 
models can be used to make regional assessments of soil carbon. They 
have completed assessments in Iowa using the Century model and are 
working on similar projects in several other states.
    The book Assessment Methods for Soil Carbon provides papers from 
United States and international scientists on all aspects of soil 
carbon measurement and estimation. The areas of sampling, sample 
preparation, spatial variability, the use of soil surveys, methods to 
determine carbon in the laboratory, (carbon) pool sizes and turn over 
rates, effects of soil erosion, procedures to model and scale data as 
well as numerous other related topics are addressed. These papers along 
with numerous others in the scientific literature provide a large 
database of information to develop rates of soil carbon accumulation 
and change associated with site-specific agricultural management 
practices.
    There remain a number of research areas that need continued work. 
We need to continue to improve our analytical methodology both in the 
laboratory and in our field sampling techniques. We need to develop 
better statistical techniques to scale data from single point data to 
larger areas. Scaling can be improved as we increase the use of remote 
sensing and other techniques. We need to develop and improve sampling 
protocols to reduce variability. We need to build on the data needed to 
understand soil carbon conditions at the site, regional, and national 
levels. Soil surveys provide essential information for sampling and 
could be refined to improve their use for this purpose.
    The Century model has been used to take point data and scale it up 
to make regional assessments. Other models, named CQESTR (pronounced 
sequester), are under development and being testing by the USDA 
Agricultural Research Service, the Natural Resources Conservation 
Service, and others. CQESTR will allow farmers and land managers to 
estimate the effects of alternative management systems and practices on 
rates of carbon sequestration. These models also help us look at 
changes and make predictions about rates of fluxes of greenhouse gases.
    The various models need to be validated against ground plots where 
actual measurements are made. This validation has been done in a major 
project in Canada called the ``Prairie Soil Carbon Balance Project.'' 
In this study a large group of farmers got together and showed that 
with a combination of models and field trials, changes can be 
predicted. The study found that carbon gains in the 0-30 cm soil layer 
averaged 1.21 tons/ha with direct seeding. The carbon gains ranged from 
1.56 tons C/hectare in the humid direct seeded fields to 0.82 tons C/
hectare in the semiarid areas. The gains were also found to vary with 
clay content. The rates were measured on actual plots in fields that 
were farmed as a part of normal farming operations. The study showed 
that the amount of both above- and below-ground biomass increases with 
direct seeding (no-till). As we continue to increase the amount of 
above-ground biomass, we can expect more carbon to be returned to the 
field and converted to soil organic carbon. The system will build upon 
itself.
    The use of remote sensing coupled with modeling has great potential 
to improve our measurement and estimation capacity. We know that soil 
carbon is not randomly distributed over the landscape. It is highly 
correlated with clay content and other soil properties that we can map. 
Therefore, it is important to integrate mapping and monitoring 
techniques with predictive models for different soils and ecoregions.
    The understanding of soil carbon dynamics is advancing. We now know 
we must look at more than the total carbon pool in the soil. We need to 
look at each of three carbon pools that are found in soil. These are 
the labile pool, which has a turn over rate of less than a year; the 
intermediate pool, which has a turn over rate of 10 to 100 years; and 
the stable pool, which has a turn over rate of 100 to 1000+ years. If 
we are to create and maintain a sustainable environment, our goal for 
soil carbon should be to increase the intermediate and stable pools. 
Management strategies need to be developed and applied to reach this 
goal. Farm policy that encourages conservation and no-till systems, 
crop rotations, particularly with grass or small grains, cover crops, 
and appropriate use of organic amendments such as manure and compost 
will help. Plant breeding may also help with varieties that will put 
more carbon into plant root systems and in forms that are more 
resistant to microbial breakdown.
    In conclusion, the bottom line is that we know how to measure soil 
carbon changes over time. We have been measuring it as part of our 
research for a long time. The scientific process of measurement is now 
verifiable, and the point data can now be scaled to larger areas with 
models. We can also couple remote sensing data with the models to 
improve their output. We can measure, estimate, and predict changes in 
carbon with the tools at hand, which include field sampling, models, 
and statistics. Our focus should be to get the conservation practices 
on the ground that will lead to increases in soil carbon. This will 
simultaneously advance our goals of sustainable farming systems and 
improved water and air quality.
    Mr. Chairman, that completes my statement. I would be happy to 
answer any questions.

    Senator Brownback. Thank you, Dr. Kimble, and I look 
forward to talking with you about measuring carbon for a 
potential carbon market and how we might do that.
    Mr. Kadyszewski with Winrock International. Thank you for 
joining us and I look forward to your testimony.

            STATEMENT OF JOHN KADYSZEWSKI, WINROCK 
           INTERNATIONAL INSTITUTE FOR AGRICULTURAL 
                          DEVELOPMENT

    Mr. Kadyszewski. Mr. Chairman, thank you for the invitation 
to explain our measurement methods. It is a privilege to be 
asked to make a contribution to your deliberations.
    Winrock International is a nonprofit organization with its 
headquarters in Arkansas and offices in more than 40 countries. 
We use good science and economics to increase economic 
development opportunities, sustain natural resources, and 
protect the environment in the United States and around the 
world.
    Today I want to describe our experience with the 
measurement and verification of carbon. Our experience clearly 
demonstrates that forestry and agroforestry projects can be 
measured accurately, to known levels of precision, at costs 
well below the expected value of the emissions reduction 
credits. I will focus my comments today on carbon 
sequestration, although I have included additional information 
in my written testimony on biofuels and other clean energy 
options.
    About one-third of the total atmospheric loading of carbon 
dioxide over the past century and 20 to 25 percent of current 
annual global emissions are a result of the loss of carbon in 
forests and soils. New approaches to the management of 
vegetation, cover and soils across the landscape could store 
substantial amounts of carbon and provide other environmental 
benefits.
    Winrock began its carbon measurement work in 1992 with the 
development of peer-reviewed methods and procedures for 
forestry and agroforestry systems. These methods and procedures 
have been field-tested on a variety of projects at multiple 
locations in the United States and around the world and can be 
downloaded free from our web site. We are now measuring and 
monitoring carbon storage in private projects covering a total 
of more than a million acres, including those developed by 
environmental organizations such as The Nature Conservancy and 
private companies like American Electric Power and Sinergy.
    We are continuously seeking and reviewing comments on our 
methods and procedures, and we make modifications whenever 
better approaches are identified. We plan to issue a revised 
version later this year that reflects our practical experience 
and the improvements that have been made over the past few 
years in the methods. It will be jointly produced with the 
Center for International Forest Research in Bogor, Indonesia, 
and again will be available free through our web site.
    Why do we submit our methods for peer review? Why do we 
cooperate with other research institutions? Why are our methods 
free? We believe that transparent and replicable measurement 
methods and procedures are key elements of any trading system. 
Ultimately, the integrity of the trading system depends on 
there being agreement about what to measure and how to measure 
it. The sooner we can define broadly accepted methods and 
procedures for measurement and verification and ultimately 
certification, the sooner markets can begin to help reduce 
emissions.
    I thought it might be helpful to describe what Winrock does 
when we design a measurement and monitoring plan for a specific 
land use change or forestry project. The amount of carbon 
stored by a project is the difference between what would happen 
with the project and what would happen without the project. 
First we meet with the landowner or the project developer to 
review past land uses and projections of likely future land 
uses if the project is not developed.
    Then we discuss how the project plans to store carbon or 
reduce carbon emissions. We use the information collected from 
these discussions to help set the baseline and to estimate what 
effects the project will likely have on carbon stocks in each 
carbon pool. For example, the carbon pools for a forest system 
include trees, under story, litter, dead wood, soil, and roots.
    Based on the expected carbon credits and the cost to 
measure these carbon benefits, we discuss with the project 
proponent which pools to measure. You are not required to 
measure all pools where you expect to gain carbon, but you must 
measure pools where you are unsure or where you expect to lose 
carbon. We also discuss the frequency of monitoring, quality 
control of measurement, and how data will be stored. These 
projects are going to last for 50 to 100 years. Data storage is 
important.
    The next step is to design a statistical sampling regime 
that will achieve accurate measurements at a level of precision 
set by the project proponent. This step requires that we 
classify the land where the project will be implemented and 
determine the variability within each class. We can then 
determine the number of plots needed to achieve our target 
precision level. There is a tradeoff between precision and the 
number of sample plots.
    We then describe the exact procedure to be used for making 
each measurement. This step is critical so that measurements 
can be verified. I believe we have some pictures here of some 
of the methods. For each plot, we georeference that plot. So 
for example, in the 634,000 hectare Bolivian project we have 
put out 625 permanent plots. These plots are satellite-located 
so we can go back to them in future years, 100 years in the 
future if we want to.
    Senator Brownback. Would you put them up on that stand 
there, if you could, for other people to be able to see, too.
    Mr. Kadyszewski. This picture that is now on the stand is 
showing one of the field people taking a measurement of the 
mean breast height diameter of the tree. So once we have 
established a permanent plot, we actually go in and measure the 
trees in that plot.
    For under story, we put down a ring that is a predetermined 
size so that we can clip all the vegetation within that ring, 
collect it, and measure it.
    This photo shows the georeferencing part of the exercise. 
That would be the center of the plot. We use nested plots so 
that we can measure trees of different diameters at different 
distances from that center point. We also use that center plot 
for a line intersect technique for looking at deadwood. We 
basically run a cord along the ground and look at all the 
pieces of wood that intersect with that cord, weigh them, and 
use that to determine a deadwood pool.
    For soil samples, we dig four individual pits at different 
locations in the plot. We blend the soils, we take density 
readings out of the side of the holes that have been dug. These 
methods are all specified: how you dig, how you pound, exactly 
the procedures you follow are defined of each one of these 
measurements, so that we can have replicable results. Again, 
our target is somebody else has to be able to come in there 
besides us, use the same procedure, and come up with the same 
number.
    In our methods, we also address project duration questions 
and the risk of loss. For loss risk, for example fires, storms, 
droughts, we have been working with some of the insurance 
companies to estimate how much is lost in your average 20-year 
fire or your 50-year flood, so that it will be possible for 
insurance programs to be set up for buyers to insure based on 
the measurements of what is actually happening.
    For example, in Mexico we just finished some measurements 
on fire damage in what were supposedly the worst fires in 
Mexican history in 1998. We found that even on the worst sites 
it was only 70 percent loss of carbon.
    The process is sound, complicated, and expensive, and but 
in practice the cost of measurement is not a significant burden 
on project sponsors. For forestry projects measurement costs 
achieved to date have been less than 25 cents per ton of carbon 
for precision levels of about plus or minus 6 to 8 percent of 
the mean, with a 95 percent confidence interval.
    In the United States, existing forest and soil inventory 
data collected by USDA in programs mentioned by Dr. Kimble 
allows us to estimate variability within each stratum and 
minimize the number of plots we need to measure in order to 
achieve our target level of precision.
    Fact sheets that describe representative projects that we 
are measuring besides the Bolivia project can be downloaded 
from our web site at www.winrock.org.
    Projects can also be done on crop and pasture lands. For 
example, planting trees along rivers and streams can produce 
substantial carbon benefits and reduce nutrient loadings. 
Farmers and ranchers facing regulatory action to reduce runoff 
may find that carbon credits can make it cost-effective to 
plant trees along waterways and reduce runoff.
    It is also possible to increase carbon stocks in soils by 
changing tillage practices and cropping systems. The challenges 
of monitoring are different when the primary increase in carbon 
stocks will be in soils rather than above-ground biomass and, 
although there is general agreement that crop and pastureland 
can be managed to increase carbon storage in soil and there is 
much practical evidence, there is less agreement on how best to 
measure those changes and what the costs will be.
    We have been developing and field testing methods and 
procedures for agricultural systems and we know it is feasible 
to accurately measure carbon storage to known levels of 
precision at predictable costs for ag soils projects as well as 
forestry projects. However, in the practical world there are 
only a handful of non-forestry projects being voluntarily 
reported at this time in the U.S. under the 1605[b] program. 
Practical experience under real field conditions is limited for 
measurement in soils.
    The fixed costs involved in design and implementation of a 
measurement plan for forestry or ag systems mean measurement 
costs per ton of carbon will be higher for smaller projects. 
One way to push down measurement costs is to cooperate. For 
example, we have been talking with RC&D councils in various 
parts of the country. They can design a project for a region in 
which members can voluntarily participate and share the costs 
of monitoring. Each participant can then have accurate 
measurements at lower individual costs, spreading the benefits 
to smaller farmers and landholders.
    Winrock is also working to push down the costs of 
measurement. With our own funds and support from the Electric 
Power Research Institute and its member utilities, we have been 
developing lower cost monitoring methods using aerial digital 
photography and videography. Part of the expense of this type 
of measurement is getting people on the ground out in the 
field, and when you are working in a large rain forest and you 
design your scopes of work for taking those samples you have 
fishermen, hunters, and people to carry the soil samples out of 
your sites. If we can do this remotely, we can push the cost 
down.
    Digital imagery allows us to do more than just cut the 
monitoring costs. It also helps us to measure the other 
environmental benefits from projects that store carbon. 
Quantification of these other ecosystem services could provide 
additional sources of revenue for farmers and landowners.
    What are the benefits? Overall, emissions trading for 
carbon could yield there positive outcomes. The primary 
objective is to reduce levels of carbon dioxide in the 
atmosphere, but a second benefit is the potential mitigation of 
impacts on people and agricultural production systems. The 
third benefit is the environmental and social co-benefits.
    The mitigation benefits I am talking about result because 
landowners can use revenues from emissions trading to implement 
new management practices. Higher carbon content in soils and 
vegetation usually will help agricultural production systems 
adjust to changes in climate, can reduce the impact of changes 
in rainfall patterns and severe weather events. We believe 
carbon credits are likely to lead to changes in land management 
practices at relatively low values for carbon credits, $20 per 
ton of carbon or less.
    By environmental co-benefits, I mean such things as 
watershed protection, wetlands and habitat restoration, 
reductions in runoff and non-point pollution, biodiversity 
protection, things that Dale mentioned in his comments as the 
other benefits that have been produced in Bolivia beyond what 
is being measured and reported.
    By social benefits, we mean the new sources of income for 
rural landowners and the potential to strengthen rural 
communities. These are also benefits built into the Bolivia 
project.
    In closing, Winrock's experience with measuring carbon 
storage across a range of projects shows it can be measured 
accurately, to known levels of precision, at costs well below 
the expected value of the resulting emissions reduction 
credits.
    Thank you.
    [The prepared statement of Mr. Kadyszewski follows:]

Prepared Statement of John Kadyszewski, Winrock International Institute 
                      for Agricultural Development
    Mr. Chairman, thank you for the invitation to describe the peer-
reviewed methods and procedures we have developed and field tested for 
measurement and verification of carbon stored in agricultural and 
forest systems and the work we have done on measurement of emissions 
avoided through the use of clean energy sources. It is a privilege to 
be asked to make a contribution to your deliberations
    Winrock International is a non-profit organization with its 
headquarters in Arkansas and offices in more than 40 countries. We use 
good science and economics to increase economic opportunities, sustain 
natural resources and protect the environment in the United States and 
around the world.
    Today, I want to describe our experience with the measurement and 
verification of carbon. Our experience clearly demonstrates that 
forestry and agroforestry projects can be measured accurately to known 
levels of precision at costs well below the expected value of the 
emissions reduction credits. Similarly, emissions avoided through the 
use of clean energy sources can be measured and calculated although 
clear rules will be needed for how to set and measure baselines.
    Overall, emissions trading for carbon could yield three positive 
outcomes: (1) reduced levels of carbon dioxide in the atmosphere, (2) 
potential mitigation of climate change impacts on people, agricultural 
production systems, and ecosystems, and (3) environmental and social 
co-benefits. By environmental co-benefits, I mean such things as 
watershed protection, wetlands and habitat restoration, reductions in 
run-off and non-point pollution, and biodiversity protection. By social 
benefits, I mean new sources of income for rural landowners and the 
potential to strengthen rural communities.
    In the case of land use change and forestry projects, we believe 
carbon credits are likely to lead to changes in land management 
practices at relatively low prices for carbon credits. In the case of 
clean energy systems, the value for carbon credits would have to be 
higher to bring about significant changes in the attractiveness of 
private investment.
    Approximately one third of the total atmospheric loading of carbon 
dioxide over the past century and 20 to 25 percent of current annual 
global emissions results from the loss of carbon in forests and soils. 
New approaches to the management of vegetation cover and soils across 
the landscape could store substantial amounts of carbon and provide 
other environmental benefits. Landowners can use revenues from 
emissions trading to implement new management practices. Higher carbon 
content in soils and vegetation usually will help agricultural 
production systems adjust to changes in climate and can reduce the 
impact of changes in rainfall patterns and severe weather events.
    Winrock began its carbon measurement work in 1992 with the 
development of peer-reviewed methods and procedures for forestry and 
agroforestry systems. These methods and procedures have been field-
tested on a variety of projects at multiple locations in the United 
States and around the world and can be downloaded for free from our 
website. We are now measuring and monitoring carbon storage in a number 
of private projects covering a total of more than a million acres, 
including those developed by environmental organizations such as the 
Nature Conservancy and private companies like American Electric Power 
and Cinergy. Also, we are aware of other companies in Asia and around 
the world that have independently adopted our methods and procedures.
    We continuously seek and review comments on our methods and 
procedures and make modifications when better approaches are 
identified. We plan to issue a revised version later this year that 
reflects our practical experience and the improvements that have been 
made over the past few years. It will be jointly produced with the 
Center for International Forest Research (CIFOR) in Bogor, Indonesia 
(part of the CGIAR network) and again available free through our 
website.
    Why do we submit our methods for peer review and why do we 
cooperate with other research institutions? Transparent and replicable 
measurement methods and procedures are key elements of any trading 
system. Ultimately, the integrity of the trading system depends on 
there being agreement about what to measure and how to measure it. 
Multiple approaches to emissions trading have been discussed at 
international negotiating sessions over the past few years and several 
countries have announced domestic trading systems. Similarly, some 
private companies have acted early and have created internal trading 
systems for emissions, including carbon dioxide. The sooner we can 
define broadly accepted methods and procedures for measurement, 
verification and certification, the sooner markets can begin to help 
reduce emissions.
    I thought it might be helpful to describe what Winrock does when we 
design a measurement and monitoring plan for a specific land use change 
or forestry project. The amount of carbon stored by a project is the 
difference between what would have happened with the project and what 
would have happened without the project. First, we meet with the 
landowner or project developer to review past land uses and projections 
of likely future uses if the project is not developed. Then we discuss 
how the project will store carbon or reduce carbon emissions. We use 
the information collected from these discussions to help set the 
baseline and to estimate what affects the project will likely have on 
carbon stocks in each carbon pool. We divide carbon stocks into pools. 
For example, the carbon pools for a forest system could include trees, 
under story, litter, dead wood, soil, and roots, although the actual 
pools selected depend on the project.
    Based on the expected carbon credits and the cost to measure carbon 
benefits, we discuss with the project proponent which pools to measure. 
You are not required to measure all pools where you expect to gain 
carbon but you must measure pools where you are unsure or where you 
expect to lose carbon. We also discuss the frequency of monitoring, the 
way we propose to assure quality control, and how data will be stored.
    The next step is to design a statistical sampling regime that will 
achieve accurate measurements at a level of precision set by the 
project proponent. This step requires that we classify the land where 
the project will be implemented and determine the variability within 
each class. We can then determine the number of plots needed to achieve 
the target precision. There is a tradeoff between precision and the 
number of sample plots. We describe the exact procedure to be used for 
making each measurement. We also address project duration and risk of 
loss.
    The process sounds complicated and expensive but in practive the 
cost of measurement is not a significant burden on project sponsors. 
For forestry projects, measurement costs achieved to date have been 
less than $0.25 per ton of carbon for precision levels of about 6-8 
percent of the mean with 95 percent confidence. In the United States, 
existing forest and soil inventory data collected by USDA allows us to 
estimate variability within each stratum and minimize the number of 
plots we need to measure to achieve target levels of accuracy and 
precision.
    Fact sheets that describe representative projects we are measuring 
can be downloaded from our website at www.winrock.org.
    Projects can also be done on crop and pasture lands. For example, 
planting trees along rivers and streams can produce substantial carbon 
benefits and reduce nutrient loadings. Farmers and ranchers facing 
regulatory action to reduce run-off may find that carbon credits can 
make it cost-effective to plant trees along waterways.
    It is also possible to increase carbon stocks in soils by changing 
tillage practices and cropping systems. The challenges of monitoring 
are different when the primary increase in carbon stocks will be in 
soils rather than above-ground biomass. While it has been relatively 
easy to obtain consensus around standard methods and procedures for 
measuring carbon stored in forestry and agroforestry projects, the same 
has not been true for agricultural soils. Although there is general 
agreement that crop and pastureland can be managed to increase carbon 
storage in soil, there is less agreement on how best to measure changes 
and whether measurement will be cost effective.
    We have been developing and field testing methods and procedures 
for agricultural projects and have determined that it is feasible to 
accurately measure carbon storage to known levels of precision at 
predictable costs. However, there are only a handful of non-forestry 
projects being voluntarily reported, and practical experience under 
real project conditions is limited. We estimate the costs of 
measurement for soil sequestration projects to be higher per ton of 
carbon, although still below the expected value of the emissions 
reduction credits they can produce.
    The fixed costs involved in the design and implementation of a 
measurement plan for forestry or agricultural systems mean measurement 
costs per ton of carbon will be higher for smaller projects. One way to 
push down measurement costs is to cooperate with your neighbors. For 
example, we have been talking with RC&D Councils in various parts of 
the country. They can design a project for a region in which members 
can voluntarily participate and share the costs of monitoring. Each 
participant can then achieve high levels of accuracy and precision at 
lower individual cost.
    Winrock is also working to push down the costs of measurement. With 
our own funds and support from the Electric Power Research Institute 
and its member utilities, we have been developing lower cost monitoring 
methods using aerial digital photography and videography. Digital 
imagery allows us to do more than just cut monitoring costs. It helps 
us to measure the other environmental benefits from projects that store 
carbon such as habitat protection and restoration, watershed 
improvement, and reductions in non-point pollution. Quantification of 
these other ``ecosystem services'' could provide additional sources of 
revenue for farmers and landowners.
    Since the early 1990's, companies have been encouraged to take 
voluntary actions to reduce emissions of greenhouse gases. Companies 
can report voluntary actions to the Energy Information Administration 
within the Department of Energy. So far, land use change and forestry 
projects have accounted for only about 5 percent of the reported 
credits achieved through voluntary projects, mostly for afforestation 
and reforestation projects. Most projects being reported are energy 
projects.
    We have been particularly interested in the measurement and 
monitoring of emissions avoided through the use of biofuels or smaller, 
distributed clean energy systems. By small, we mean projects with power 
capacity of a few watts per system (as with photovoltaic panels) to as 
much as 100 MW. Expanded use of biomass fuels for energy production 
could produce substantial carbon benefits and new sources of revenues 
for farmers and landowners. Monitoring of emissions avoided through the 
use of biofuels is relatively straightforward. Determining the energy 
required to produce the biofuel is somewhat more challenging. Because 
solar and wind resources are intermittent sources of supply, they 
present special measurement challenges, especially when connected to a 
power grid.
    For many categories of forestry projects, the Energy Information 
Administration provides tables with estimated carbon storage values 
that forest project sponsors can use if they do not wish to make actual 
measurements. One question we are frequently asked by landowners and 
project sponsors is whether the tables provided are accurate indicators 
of expected carbon storage. We explain that the tables are based on 
forest inventory data collected to produce a national inventory. As 
such, an individual project may do better or worse than the average. It 
has been our experience that most projects that people want to measure 
do better than the tables because they are usually managing the 
resource for such a ``product''.
    Another frequently asked question concerns how much carbon could be 
potentially stored in forestry and land use change projects in the 
United States. The U.S. government has produced several reports that 
describe carbon storage potential. In general, these estimates do not 
include economic valuations of current land use and we believe 
overestimate the economically viable carbon storage options.
    In closing, Winrock's experience with measuring carbon storage 
across a range of projects shows it can be measured to known levels of 
accuracy and precision at costs well below the expected value of the 
resulting emissions reduction credits.
    I would be happy to answer any questions.

    Senator Brownback. Thank you very much. That was excellent 
and I look forward to questioning you further about that.
    Mr. Mike Coda, Climate Change Program with The Nature 
Conservancy. Mr. Coda.

 STATEMENT OF MIKE CODA, DIRECTOR, CLIMATE CHANGE PROGRAM, THE 
                       NATURE CONSERVANCY

    Mr. Coda. Thank you very much, Senator Brownback. I want to 
thank you for chairing this hearing at a very important time in 
this debate and I think it will help us move the issue of 
carbon sequestration forward. I really want to commend you for 
that and for the time you have spent in learning about this 
issue and in visiting our project in Brazil.
    Our organization, The Nature Conservancy, is a biodiversity 
conservation organization. We are the largest conservation 
organization in the United States. We have considerable 
experience in the area of carbon sequestration. We have been 
involved in pilot projects, some of which have already been 
referred to, in Brazil, Belize, Bolivia, and the United States, 
and on these projects we have worked with other leading 
conservation organizations, groups that specialize in carbon 
measurement such as Winrock, governmental entities, and major 
corporations such as General Motors, British Petroleum, and 
American Electric Power. We have participated actively in the 
international discussions over these issues and our comments 
are based on real world experience as well as academic 
analysis.
    My discussion of carbon sequestration and its benefits for 
the environment will focus on two areas: first, the impact on 
the buildup of greenhouse gases in the atmosphere; and second, 
the impact on biodiversity conservation and other key 
environmental imperatives. In each of these two areas, we 
believe that carbon sequestration can make an important 
contribution.
    First I would like to talk about the benefits to the 
climate. Approximately 22 percent of the annual output of 
greenhouse gases comes from the land use sector. This is a fact 
that is not often focused upon in the climate change debate, 
but it is something that has been verified by the IPCC in their 
reports and by others. So this area is very important in terms 
of developing a program to address potential climate change.
    In addition, there is not only the potential to reduce 
current emissions from forestry and agriculture, but also to 
sequester through reforestation some greenhouse gases already 
in the atmosphere.
    Carbon sequestration aimed at improving land use also has 
many other attractive aspects for climate change policy. It can 
be implemented rapidly and begin to have an impact on annual 
emissions almost immediately. While additional research and 
development in the cost of measurement of climate benefits of 
carbon sequestration is necessary, current techniques are 
certainly accurate enough to support the types of legislation 
currently being considered.
    Carbon sequestration also holds the promise of noticeably 
reducing the cost to the economy of addressing potential 
climate change, which is something that has to be on all of our 
minds as we discuss this issue.
    In addition to the positives related to climate change 
policy, a properly structured carbon sequestration program can 
also provide a major boost to biodiversity conservation, as 
well as leading to other potential environmental benefits like 
watershed protection and the prevention of soil erosion. You 
have heard a description of two projects involving The 
Conservancy and American Electric Power, in which funding from 
corporations looking to reduce their impact on the climate was 
used to protect globally significant natural areas that would 
otherwise have been deforested. Without climate change as a 
motivation for these donors, The Conservancy would never have 
been able to raise the funds necessary for these projects.
    To raise almost $10 million for a conservation of a single 
threatened forest in Bolivia is virtually unheard of in the 
conservation movement. You have some photos of this area here. 
You can see the natural beauty of the area, and then also from 
a biodiversity standpoint the blue and yellow macaw is down to 
less than a thousand in terms of its numbers in the world and 
this is one of the few places of remaining habitat. This is the 
kind of thing that, with this mechanism, we can make some 
progress on protecting.
    Senator Brownback. Mr. Coda, how big is this project? This 
is the Bolivian project, I believe?
    Mr. Coda. I think it is about 300,000 hectares in total.
    Mr. Heydlauff. It is 4 million acres. It is roughly the 
size of the State of Massachusetts.
    Senator Brownback. That is impressive. Is most of it of 
this nature, of the type that we have got up here in the 
pictures? First of all, it is forested region?
    Mr. Coda. Yes.
    Mr. Heydlauff. Largely. One of the things that The Nature 
Conservancy was really attracted to with this project as part 
of its Parks in Peril program was actually the diversity of the 
area. Some of it is Amazonian rain forest, but it actually goes 
to what is known as a dry chaca area that is quite a different 
type of ecosystem altogether. It is a fairly wide variety, but 
much of it is--it is all tropical forest, which experiences a 
high degree of rainfall and a deep foliage, with a very 
substantial variety of species: 620 different bird species, for 
example; 120 different mammal species; 70 different reptile 
species; 4,000 different plant species, many of which are 
endangered species; 110 different orchids in this park.
    The biological diversity is actually stunning. When I first 
went there, I guess I had somewhat of a spiritual experience, 
because I thought this is probably what the Garden of Eden must 
have looked like before man started tampering with the Earth, 
because it was just so teeming with life in all of its 
dimensions.
    It affects in a very unique way all of your senses. You 
hear things you have never heard before, you see things you 
have never seen before, you feel things you have never felt 
before. It is probably not uncommon to what you experienced in 
the Guaraquecaba project in Brazil, except this is on a much 
larger scale and it is far, far more remote than the 
Guaraquecaba project is down in Brazil.
    Senator Brownback. Mr. Coda, not to interrupt your 
testimony too much more, but how much did you raise resources-
wise to do this project in Bolivia?
    Mr. Coda. The total cost of the project was about $9.5 
million.
    Senator Brownback. And you were able to raise that, where 
you would not have and could not do that sort of fundraising 
for a project for this scale before?
    Mr. Coda. There is no way we could have put this together.
    Senator Brownback. What did those resources entitle you or 
enable you to be able to do?
    Mr. Coda. We were able to retire the forest concessions 
that the government of Bolivia had let on the land, which the 
government wanted to do but did not have the funds to do. Then 
we were able to set up an endowment for the long-term 
management of the project. Then finally, as Mr. Heydlauff 
referred to earlier, we were able to provide some additional 
assistance to the local community, grants for microenterprises, 
heart of palm plantations, agroforestry kinds of activities, 
because we wanted to make sure that this was also a benefit to 
the community. We were able to refurbish the school, to build a 
medical center for the community--do all this while having a 
very cost-effective carbon project.
    Senator Brownback. What were the forest concessions? How 
many acres or hectares had there been given to concessions that 
you were able to buy back?
    Mr. Coda. I do not remember exactly. Dale, do you?
    Mr. Heydlauff. It was two million acres.
    Senator Brownback. Two million acres.
    Mr. Heydlauff. Approximately two million. There was an 
existing national park of two million acres and then an 
adjacent property area of about equivalent size. One of the 
nice things about the project is it gave the park a natural 
boundary that they did not have before, which is critical for 
helping to protect the park. There is a river boundary now to 
the west and the southern end of the property that did not 
exist before.
    But there was two million acres of logging concessions that 
had been sold by the government to timber companies for 
harvesting. Senator, it is kind of tragic when you first saw--
when we first got involved, it was before we had retired all 
the concessions. We saw some of the ongoing logging activities 
and they did not have a clue about sustainable forestry. They 
literally were clearcutting the forest to harvest essentially 
three species of trees, red oak, mahogany, and hearts of palm 
trees, and just leaving the debris to decay on the ground.
    Senator Brownback. So you were able to basically do two 
million acres in addition to the current national project that 
was there for $7.5 million?
    Mr. Coda. Yes, yes. It is amazing.
    Senator Brownback. That is. Please go on.
    Mr. Coda. That is what really got us excited about this 
mechanism as a potential way to help conservation, because 
deforestation throughout the tropics is a terrible 
environmental problem and it really does not have a lot of 
economic value to it. So it only takes a small effort to give 
value to the forests, such as American Electric Power 
recognized, to turn that around and we can protect these areas.
    Senator Brownback. So you did that for under four dollars 
an acre?
    Mr. Coda. Yes.
    Senator Brownback. Please go on.
    Mr. Coda. I should emphasize, most of the activities that 
conservationists have encouraged for years to protect 
biodiversity also have a significant carbon benefit. We have 
been talking about the protection of tropical forests for a 
long time. These forests are the focus of the world's 
biological diversity and are under pressure everywhere. At the 
same time, they are also particularly carbon-rich and the 
burning and destruction of these forests is responsible for a 
good deal of the percentage, the 22 percent of CO2 emissions 
the come from land use. So protecting them will not only help 
the atmosphere, but they will also further biodiversity 
conservation.
    There is also, there is a possibility at some point down 
the line that the happy coincidence between what is good for 
biodiversity and other environmental objectives and what is 
good for the atmosphere will end. You can foresee the day of 
genetically engineered, fast growing tree plantations designed 
simply to sequester carbon. That is why The Nature Conservancy 
and other groups feel it is very important that support for 
carbon sequestration be targeted at the protection and 
restoration of natural forests and improved agricultural 
practices and that incentives not be provided to projects that 
would involve the replacement of natural systems, no matter 
what their carbon impact. I should note that the bill you have 
introduced is structured in precisely that manner.
    In addition to this principle, we also believe it is 
important that any incentive program for carbon sequestration 
be focused on projects that truly have a benefit to the 
atmosphere. This means the projects promoted should meet the 
following tests: they need to be additional to what would have 
happened anyway; they need to avoid displacing a carbon-
reducing activity to another area, thus with no net benefit to 
the atmosphere; we need to make sure the climate impact is 
measurable, and, as John said, that is becoming easier and 
easier; and we need to make sure the project has a long-term 
impact.
    Our hope is that the benefits from the incentives created 
in your legislation can also be focused on projects that 
effectively address this issue and I believe they will be.
    For years, just in summing up, for years conservationists 
have argued that the environment provides services to the 
economy that are not valued by our market system. A forest 
often protects a watershed for a major city, prevents soil 
erosion from steep hillsides in a storm-prone area, provides an 
attractive area for ecotourism that benefits the economy of 
local communities, and, particularly in tropical rainforests., 
harbors unusual plant and animal life that may help in the 
development of medicinal drugs.
    These forests are also critical to the functioning of the 
climate on our planet. Through legislation such as that that 
you have sponsored, we in the conservation community see the 
potential for the first time to recognize the economic 
contribution that comes from these forests, and our hope is 
that once this value begins to be recognized society will come 
to see these forests differently. It is for this reason that 
The Nature Conservancy applauds your efforts to shape a carbon 
sequestration program and we look forward to working with you 
as these efforts move forward. Thank you.
    [The prepared statement of Mr. Coda follows:]

  Prepared Statement of Mike Coda, Director, Climate Change Program, 
                         the Nature Conservancy
    My name is Mike Coda. I am Vice President and Director of the 
Climate Change Program at The Nature Conservancy. The Nature 
Conservancy is a non-profit conservation organization founded in 1951. 
The Conservancy's mission is to protect rare and endangered plants, 
animals, and natural communities that represent the diversity of life 
on earth by protecting the lands and waters they need to survive. The 
Nature Conservancy is the largest conservation organization based in 
the United States. Throughout its history, the Conservancy has 
protected more than 12 million acres of land in North America and 
millions more in Latin America, Asia, and the Pacific. The Nature 
Conservancy owns or manages approximately I million acres of land in 
the United States, comprising the largest system of private nature 
preserves in the world. Although it is known primarily in the U.S. as 
organization that buys land to create nature preserves, the Conservancy 
also engages in working with private landowners to improve land 
management practices, and works with local communities to help them 
determine their environmental future. Outside the United States, we 
work with in-country conservation partners, local governments, 
multilateral institutions, U.S. government agencies, and private sector 
firms to foster support for conservation and develop additional sources 
of funding. The Conservancy has more than 1.2 million members and has 
at least one office in every state and in many other countries.
    I am happy to be here today to discuss the potential environmental 
benefits of carbon sequestration. Our organization has considerable 
experience in this area. We have been involved in pilot projects of 
this type in Brazil, Belize, Bolivia, and the United States. On these 
projects we have worked with other leading conservation organizations, 
groups that specialize in carbon management, governmental entities, and 
major corporations such as General Motors, British Petroleum and AEP. 
We have participated actively in the international discussions over 
these issues. Our comments are based on real world experience as well 
as academic analysis.
    My discussion of carbon sequestration will focus on two aspects--
(1) the impact on the build-up of greenhouse gases in the atmosphere 
and (2) the impact on biodiversity conservation and other key 
environmental imperatives. In each of these two areas, carbon 
sequestration can make an important contribution.
    Let me first talk about the benefits to the climate. Fossil fuels 
are responsible for the bulk of emissions from human activity and will 
need to be addressed in order for society to have a chance to avoid 
significant climate change. However, approximately 22 percent of the 
annual output of greenhouse gases come from the land use sector, 
primarily the result of deforestation in tropical areas and emissions 
from agricultural activity. Thus, solutions addressing the land use 
sector are also needed. Making this area even more important, there is 
not only the potential to reduce current emissions from forestry and 
agriculture but also to sequester through reforestation some greenhouse 
gases already in the atmosphere. The IPCC estimates that as much as 10 
percent of projected worldwide emissions between the years 1995 and 
2050 could be offset by reforestation. This represents as much as 65 
gigatons of carbon.
    Serious analysis of the magnitude of the effort required to 
stabilize atmospheric concentrations of carbon dioxide also supports 
the need for policies promoting carbon sequestration. If the U.S. were 
to try to reduce its carbon dioxide emissions to 1990 levels, this 
would require a reduction of almost 11 percent from emission levels in 
the year 1998. Taking into account that fossil fuel emissions are 
growing because of rising demand for energy, we will need an even more 
significant reduction if we are to reach the levels that we emitted in 
1990. We will certainly need all the tools available, including carbon 
sequestration, to achieve this objective.
    Carbon sequestration aimed at improving land use also has many 
attractive attributes for climate change policy. Unlike some proposed 
solutions, it can be implemented rapidly and begin to have an impact on 
annual emissions almost immediately, depending on the scale of the 
program. While additional research and development to lower the cost of 
measurement of the climate benefits of carbon sequestration projects is 
necessary, current techniques are certainly accurate enough to support 
the types of legislation currently being considered. You will hear more 
on this subject from Winrock. Finally, carbon sequestration holds the 
promise of noticeably reducing the cost to the economy of addressing 
potential climate change. For example, cost estimates for compliance 
with the Kyoto Protocol typically range between $25 and $200 per ton 
carbon. Several pilot forest carbon sequestration projects, including 
ones in which The Nature Conservancy is involved, are already being 
implemented with costs typically less than $10 per ton carbon.
    In addition to positives related to climate change policy, a 
properly structured carbon sequestration program can provide a major 
boost for biodiversity conservation as well as leading to other 
potential environmental benefits like watershed protection and the 
prevention of soil erosion. You have heard a description of two 
projects involving The Nature Conservancy and American Electric Power 
in which funding from corporations looking to reduce their impact on 
the climate was used to protect globally significant natural areas that 
would otherwise have been deforested. Without climate change as a 
motivation for these donors, The Nature Conservancy would never have 
been able to raise the funds necessary for these projects. To raise 
almost $10 million for the conservation of a single threatened forest 
in a far-off country like Bolivia is virtually unheard of within the 
conservation movement. In fact, it is an amount almost equal to what 
Congress appropriated in the last fiscal year for the Tropical Forest 
Conservation Act, the principal U.S. government program designed to 
protect tropical forests throughout the world.
    Most of the activities that conservationists have encouraged for 
years to protect biodiversity also have a significant carbon benefit. 
The protection of tropical forests has long been a priority because 
these forests are the focus of much of the world's biological diversity 
and are under pressure everywhere. At the same time, tropical forests 
are particularly carbon-rich and the burning and destruction of these 
forests around the world is a major source of carbon dioxide emissions. 
Protecting them will help the atmosphere and further biodiversity 
conservation. In the U.S., protection of the old growth forests of the 
Northwest has been a major priority for conservationists. Again, these 
forests are, in general, some of the most carbon-rich on the planet. 
Protecting them avoids an enormous release of carbon dioxide. 
Conservationists have also encouraged forestland owners to use more 
sustainable forestry practices such as longer rotations and selective 
harvesting that will maintain the integrity of the relevant ecological 
system while allowing the forest owner to receive some economic 
benefit. In almost every case, these practices yield carbon benefits as 
well. In agriculture, conservationists have worked with farmers to 
adopt low-till or no-till techniques in order to control soil erosion. 
It turns out that these practices, too, also yield an important climate 
benefit.
    There is the possibility that the happy coincidence between what is 
good for biodiversity and other environmental objectives and what is 
good for the atmosphere will end in the future. One can foresee the day 
of genetically engineered fast growing tree plantations designed simply 
to sequester carbon. That is why The Nature Conservancy and other 
groups believe it is extremely important that support for carbon 
sequestration be targeted at the protection and restoration of natural 
forests and improved agricultural practices and that no incentives be 
provided to projects that would involve the replacement of natural 
systems, no matter what the carbon impact.
    In addition to this principle, we also believe that any incentive 
program for carbon sequestration must be focused on projects that truly 
have a benefit to the atmosphere. This means the projects promoted must 
meet the following tests:

        1) LAre they additional to what would have happened anyway? 
        There is no benefit to the atmosphere from subsidizing projects 
        that are already likely to happen for other reasons.
        2) LDo they displace the carbon-reducing activity to another 
        area? If stopping the cutting of one forest merely leads to 
        another forest being cut, there is no gain to the atmosphere.
        3) LIs the climate impact of the project measurable?
        4) LDoes the project make a long-term impact? A project that 
        merely delays the release of carbon for a short time period has 
        little value to the atmosphere.

    Our hope is that the benefits from the incentives created in your 
legislation can also be focused on projects that effectively address 
these issues.
    For years, conservationists have correctly argued that the 
environment provides services to the economy that are not valued by our 
market system. A forest often protects a watershed for a major city, 
prevents soil erosion from steep hillsides in a storm-prone area, 
provides an attractive area for ecotourism that benefits the economy of 
local communities, and, particularly in tropical rainforests, harbors 
unusual plant and animal life that may help in the development of 
medicinal drugs. These forests are also critical to the functioning of 
the climate on our planet. Through legislation such as that sponsored 
by Senator Brownback and that sponsored by Senator Wyden, we see the 
potential for the first time to recognize the economic contribution 
that comes from these forests. Our hope is that, once this value begins 
to be recognized, society will come to see these forests differently. 
It will not be necessary to clear the trees or convert to residential 
development in order for landowners to obtain some value from these 
lands. It is for this reason that The Nature Conservancy applauds your 
efforts to shape a carbon sequestration program. We look forward to 
working with you as these efforts move forward.
    Thank you for the opportunity to address this important issue.

    Senator Brownback. Thank you, Mr. Coda.
    Mr. Bonnie, thank you for joining us.

  STATEMENT OF ROBERT BONNIE, ECONOMIST, ENVIRONMENTAL DEFENSE

    Mr. Bonnie. Like others on the panel, I want to thank you 
for the opportunity to be here today as well and thank you for 
your continued leadership on this important issue.
    Over the last several years and particularly over the last 
several months, the debate surrounding global warming has 
changed. There is growing recognition on all sides that a near-
consensus has emerged within the scientific community that 
climate change is already occurring as a result of human 
activities and that unless action to reduce emissions begins in 
the very near future it will be very difficult and perhaps very 
expensive to avoid dangerous interference with the world's 
climate system.
    Many businesses recognize the threat of climate change, 
with leading companies like BP-Amoco, Dupont, Entergy, and 
others voluntarily capping and reducing their greenhouse gas 
emissions in anticipation of future regulation.
    My testimony today focuses on what to do about climate 
change and in particular the role that carbon sequestration 
activities can have in confronting climate change. To be 
effective, any comprehensive strategy addressing climate change 
will ultimately require a cap on greenhouse gas emissions. 
However, often lost from the debate as Mike noted earlier, is 
the fact that land use activities, particularly tropical 
deforestation, account for about one-fifth of global, 
anthropogenic greenhouse gas emissions.
    What we do on the land is part of the problem, but it can 
also be part of the solution. Environmental Defense has long 
advocated cap and trade programs, also called emissions 
trading, that harness the power of market forces to meet air 
pollution targets in a cost-effective manner. Under a 
prospective greenhouse gas cap and trade program, industrial 
sources of greenhouse gas emissions would be subject to a cap 
on their emissions, but would be allowed to trade emissions 
reductions credits in a market system.
    By pursuing a market-based approach to climate change, one 
that incorporates carbon sequestration activities, the United 
States can take meaningful steps to curb emissions of 
greenhouse gases in a cost-effective manner while producing 
substantial ancillary environmental benefits from improved 
forestry and agricultural practices.
    Projects are already under way, as we have heard, to reduce 
greenhouse gas emissions caused by the destruction of tropical 
rainforests. Approximately 35 million acres of tropical forests 
are lost annually, an area larger than the size of New York 
State. The attendant emissions of greenhouse gases and the loss 
of biodiversity are enormous. A greenhouse gas emissions 
trading market, however, has the potential to place significant 
value on the atmospheric benefits of preserving tropical 
forests, making it potentially profitable for developing 
countries to conserve biodiversity.
    Environmental Defense has been pleased to work with you, 
Senator Brownback, on legislation designed to deal with this 
problem and to jump-start projects aimed at reducing 
deforestation. Your International Carbon Sequestration 
Incentive Act would provide U.S. companies with an economic 
incentive to invest in projects that slow rates of 
deforestation in developing countries and that thereby reduce 
emissions of greenhouse gases.
    There is also significant potential for greenhouse gas 
emissions trading markets to promote better land management and 
to provide an alternative source of revenue to farmers and 
forest landowners here at home. Through reforestation of 
agricultural lands, conservation tillage, and other actions, 
landowners could earn and sell greenhouse gas emissions 
reduction credits while producing a variety of other 
environmental benefits.
    A key to making this market work is to ensure accurate 
measurement of carbon stocks on participating lands and to 
develop a carbon accounting system that is transparent, 
verifiable, and that ensures the atmospheric benefits of 
sequestration activities. Since carbon sequestered by trees, 
plants, and soils can later be released, crediting systems must 
account for the potential reversibility of carbon stocks. A 
carbon accounting system must also ensure that carbon 
sequestration activities do not simply shift greenhouse gas-
emitting activities to other land parcels. We should also 
ensure that crediting of land use activities does not encourage 
the conversion of natural ecosystems.
    Many companies are already making investments in 
sequestration projects, as we heard from Dale and AEP, but they 
are doing so in an uncertain regulatory environment, where the 
future rules by which these projects will be judged are 
unclear. Thus, government can play a role, a valuable role, in 
creating incentives to craft measurement and carbon accounting 
protocols for carbon sequestration activities.
    The International Carbon Sequestration Incentive Act does 
exactly that, by creating a collaborative and transparent 
process to develop guidelines to ensure that carbon measurement 
and accounting issues are properly addressed.
    Similar efforts should be developed for domestic 
sequestration activities on American farm land and forest land. 
I note that Senator Wyden has a bill, for example, which 
proposes to do this for forests.
    In conclusion, carbon sequestration projects in conjunction 
with a greenhouse gas cap and trade market have the potential 
to provide a cost-effective strategy for addressing climate 
change while at the same time producing significant 
environmental benefits.
    Thank you very much.
    [The prepared statement of Mr. Bonnie follows:]

                 Prepared Statement of Robert Bonnie, 
                    Economist, Environmental Defense
    Over the last several years and particularly over the last several 
months, the debate surrounding global warming has changed. There is 
growing recognition on all sides that a near consensus has emerged 
within the scientific community that climate change is already 
occurring, that anthropogenic activities are a significant contributor 
to this climate change, and that unless action to reduce emissions 
begins in the very near future, it will be extremely difficult--and 
very expensive--to avoid dangerous interference with the world's 
climate system. Many businesses recognize the threat of climate change, 
with leading companies like BP Amoco, Dupont, and Entergy voluntarily 
capping and reducing their greenhouse gas emissions in anticipation of 
future regulation. The question is no longer whether anthropogenic 
emissions of greenhouse gases are causing global warming, but what we 
should do about it.
    My testimony today focuses on what to do about climate change and 
in particular the role that carbon sequestration activities can have in 
confronting climate change. To be effective, any comprehensive strategy 
addressing climate change will require a cap on greenhouse gas 
emissions. However, often lost from the debate is the fact that land 
use activities, particularly tropical deforestation, account for about 
one fifth of global anthropogenic greenhouse gas emissions. What we do 
on the land is part of the problem, and it should also be part of the 
solution.
    Environmental Defense has long advocated ``cap and trade'' 
programs, also called emissions trading, that harness the power of 
market forces to meet air pollution targets in a cost-effective manner. 
The United States already has ample experience using cap and trade 
programs. In 1990, then-President George Bush proposed and later signed 
legislation to amend the Clean Air Act by capping sulfur dioxide 
emissions, the precursors to acid rain, from electric utility plants. 
This legislation gave utilities flexibility in how to meet this new 
mandate, allowing them to buy and sell sulfur dioxide emissions 
allowances and to save allowances for use in the future. Utilities 
could choose to meet their obligations by reducing pollution at their 
own plants or they could purchase emissions allowances from other 
plants who were able to more easily make steeper reductions. The 
program has been an overwhelming success. Utilities have reduced acid 
rain emissions at a fraction of the cost of even the most optimistic 
forecasts. Moreover, emissions have been reduced over 20 percent below 
the levels mandated by the law.
    Similarly, under a prospective greenhouse gas cap and trade 
program, industrial sources of greenhouse gas emissions would be 
subject to a cap on their emissions but would be allowed to trade 
emissions reductions credits in a market. This market would provide 
companies with a variety of options for meeting their climate change 
obligations; they could reduce emissions from their own plants, 
purchase emissions credits from other plants, or, alternatively, 
purchase emissions credits from farmers and/or forest landowners who 
sequester carbon on their lands through improved land management 
practices.
    By pursuing a market-based approach to climate change, one that 
incorporates carbon sequestration activities, the United States can 
take meaningful steps to curb emissions of greenhouse gases cost-
effectively while producing substantial ancillary environmental 
benefits from improved forestry and agricultural practices. Such an 
approach can also enable farmers and forestland owners to earn a return 
on their investment for growing a new crop: carbon.
    For example, projects are already underway to reduce greenhouse gas 
emissions caused by the destruction of tropical rainforests. 
Approximately 35 million acres of tropical forests are lost annually--
an area larger than New York State. The attendant emissions of 
greenhouse gas and loss of biodiversity are enormous. Destruction of 
tropical rainforests has many causes, but at the root of all of them is 
the fact that those who liquidate those forests place higher value on 
them as agricultural land or sources of wood products than as forest 
ecosystems. A greenhouse gas emissions trading market, however, has the 
potential to place significant value on the atmospheric benefits of 
preserving tropical forests, making it potentially profitable for 
developing countries to conserve biodiversity.
    Environmental Defense has been pleased to work with Senator 
Brownback on legislation designed to jumpstart projects aimed at 
reducing deforestation. The International Carbon Sequestration 
Incentive Act would provide US companies with an economic incentive to 
invest in projects that slow rates of deforestation in developing 
countries and thereby reduce emissions of greenhouse gases.
    There is also significant potential for greenhouse gas emissions 
trading markets to promote better land management and provide an 
alternative source of revenue to farmers and forest landowners here at 
home. Through reforestation of agricultural lands, conservation 
tillage, more effective fertilizer application, and other actions, 
landowners could earn and sell greenhouse gas emissions reduction 
credits while improving crop productivity and water quality, protecting 
habitat for wildlife and reducing soil erosion.
    A key to making this market work is to ensure accurate measurement 
of carbon stocks on participating lands and to develop a carbon 
accounting system that is transparent, verifiable, and ensures the 
atmospheric benefits of sequestration activities. In some respects 
measurement is the easy part. We clearly have the technical expertise 
to accurately measure changes in carbon stocks. We do, however, have to 
develop verification techniques through direct measurements, computer 
models, and remote sensing that allow us to monitor carbon stocks 
across multiple ownerships at a reasonable cost.
    More challenging, though clearly doable, is to develop a carbon 
accounting system for carbon sequestration activities. After all, for 
the market to work, a carbon accounting system must ensure that a ton 
of carbon sequestered in the soil or in forests is equivalent to a ton 
of carbon emitted from a power plant or some other source.
    A carbon accounting system must ensure that sequestration 
activities provide real, verifiable and long-lasting atmospheric 
benefits. For example, carbon sequestration is reversible, meaning that 
carbon stored in soils and plants can later be released as a result of 
altered land management practices or natural disturbances. While this 
issue is often cited as the most difficult obstacle confronting carbon 
sequestration markets, it should be relatively easy to develop 
crediting systems that account for the potential reversibility of 
carbon stocks. One proposal to deal with this issue is to issue credits 
that expire after a fixed term. Upon expiration of the credits, the 
purchaser of the credits can either renew the contract with the 
landowner or replace the expired credits from some other source.
    A carbon accounting system must also prevent leakage; that is, it 
must ensure that carbon sequestration activities that result in reduced 
yields of wood-products or agricultural goods don't simply shift 
greenhouse gas emitting activities to other properties. Crediting for 
carbon sequestration activities should also not simply reward 
``business-as-usual'' activities. That is, a sequestration market 
should encourage landowners to alter their land management practices so 
as to produce real, additional greenhouse gas reductions for the 
atmosphere.
    We should also ensure that crediting of land use activities doesn't 
lead to perverse environmental outcomes such as encouraging the 
conversion of natural ecosystems. Perverse incentives for ecosystem 
conversions can be avoided by setting carbon stock baselines that 
account for any land clearing activities prior to initiation of the 
sequestration activities.
    We still have a great deal to learn as to how sequestration 
projects and the greenhouse gas market will function in practice. Many 
companies are already making investments in sequestration projects, but 
they are doing so in an uncertain regulatory environment where the 
future rules by which these projects will be judged are unclear. Thus, 
government can play a valuable role in creating incentives for 
companies, landowners, developing countries, conservation groups, 
agencies, and academics to work together to craft measurement and 
carbon accounting protocols for carbon sequestration activities.
    The International Carbon Sequestration Incentive Act does exactly 
that by creating a collaborative and transparent process to develop 
guidelines to ensure that carbon measurement and accounting issues are 
properly addressed. Similar efforts should be developed for domestic 
sequestration activities on American farmland and forestland.
    I would also encourage this committee to think more broadly about 
legislative efforts to spur a greenhouse gas emissions trading market. 
President Bush's reversal with respect to capping carbon dioxide 
emissions from power plants and his abandonment of the Kyoto Process 
has put the establishment of such an emissions trading market on hold. 
Ultimately, there can be no market without a cap on greenhouse gas 
emissions. Environmental Defense will continue to advocate for such a 
cap domestically and internationally.
    In the meantime, however, in anticipation of regulation of 
greenhouse gas emissions, the Congress can take steps to encourage 
voluntary greenhouse gas emissions reductions right away. For example, 
Congress should consider establishing an inter-agency process to 
establish criteria for accrediting private, third party greenhouse gas 
registries. These registries could, in turn, certify greenhouse gas 
reductions undertaken voluntarily by companies. With respect to carbon 
sequestration activities, such an approach would promote the 
development of robust carbon accounting systems.
    In conclusion, carbon sequestration projects in conjunction with a 
greenhouse gas cap and trade market have the potential to provide a 
cost-effective strategy for addressing climate change while at the same 
time producing significant ancillary environmental benefits.

    Senator Brownback. Thank you, Mr. Bonnie.
    I have a series of questions. First I would like to know--
Mr. Coda, you have got several of these projects under way 
right now. Are there others that are in the planning or drawing 
board stages?
    Mr. Coda. Yes, we have about seven projects that we have 
done feasibility studies on and that we have got ready to go 
and that we are hoping to find investors for.
    Senator Brownback. Are all of these in tropical forest 
regions?
    Mr. Coda. Those seven I referred to are. I should also 
mention that we are putting the same kinds of feasibility 
studies together for projects in the United States as well.
    Senator Brownback. Are they of the same scale as your 
Bolivia project, the two million additional acres?
    Mr. Coda. I am afraid we are never going to find that scale 
again. But they are going to be large-scale projects, on the 
order of 30, 40,000 acres in the tropics, less so in the U.S. 
where land is more expensive.
    Senator Brownback. The one I visited in Brazil, I believe 
you were at--I thought it was like 75,000 hectares that you 
were at, which would be, this was up near 200,000 acres.
    Mr. Coda. I think that is a little high. I think it was 
about 35.
    Mr. Heydlauff. 20,000 hectares.
    Senator Brownback. 20,000 hectares. Well, that would be 
several hundred thousand acres.
    Mr. Coda. We have been able to expand the project. There 
are other investors who have come in with additional funding in 
the same general area, so we are now going to be able to expand 
the project, I hope, to around 75,000 acres when that is done.
    Senator Brownback. How much can you do these on a per-acre 
basis? This is an incredible project in Bolivia, that you were 
able to save that much land for that kind of price. But taking 
it from what your statement is here, that was an unusual 
project.
    Mr. Coda. Yes. I do not know. I am going to have to get 
back. I normally think in terms of dollars per ton of carbon. I 
do not know that I think in terms of dollars per acre.
    Senator Brownback. How much can you do it on a dollars per 
ton of carbon?
    Mr. Coda. We can do all these projects in the less than ten 
dollars range and some significantly less than that, which is--
when people modeled the Kyoto Protocol, for example, and said 
what would carbon trade at under that, they typically came up 
with estimates between 25 and $200 a ton. If you ever had a cap 
and trading system and included carbon sequestration, it would 
substantially reduce the cost of the program in my opinion.
    Senator Brownback. Because you are currently doing it for, 
you are saying, about ten dollars a ton?
    Mr. Coda. Yes.
    Senator Brownback. Dr. Kimble, what would your projections 
be of adjusting cropping practices in the U.S. and the cost per 
ton of being able to do that, or the value per ton if you did 
changes in cropping practices in the U.S. for a carbon type of 
cap and trade market? Get the microphone if you could there.
    Dr. Kimble. I do not think there would be a lot of cost 
involved, because most of what they are doing in agriculture is 
actually better farming practices for them: going to no-till, 
is at present, a cost but as they are reducing their inputs 
this will offset the cost. So it is just building on what is 
ongoing. The cost per ton, if you talk to farmers, they talk in 
the range of $10 to $20 an acre before they will start looking 
at it. We pay not that much more than that for CRP land that 
has gone out of production. I do not know what the average is, 
$40, $50 a ton--I mean, an acre.
    So in the range of $10 to $20 a ton, I think farmers would 
come on board, because they see it as a co-benefit to what they 
are going to do anyway because it is beneficial to them to 
switch to no-till because they save fuel and energy.
    Senator Brownback. So you think a market would be activated 
in the U.S. for farmers to fix and to do cropping practices 
that fix carbon at the $10 to $20 per ton?
    Dr. Kimble. That is, when you talk to farmers, what they 
say. As you said, people estimate much higher values, but that 
is the number you hear when you are out with farm groups 
talking with them and they would start looking at it. They have 
been doing some--GEMCO, the Canadian consortium, has been 
working in Iowa and trying to get there, and they are talking 
three or four dollars a ton and not many farmers look at that 
range.
    Senator Brownback. There is measurement cost with doing 
this. How much would be the measurement cost to be certain that 
if somebody is buying a ton of carbon that they are getting a 
ton of carbon?
    Dr. Kimble. I think John covered the measurement cost. It 
is going out and sampling in soils. To me again, a lot of 
that--we do two million samples a year for fertility 
measurements, where they spend several billion dollars putting 
fertilizer on the land. We build into that--on the larger 
scales, we can build into that carbon measurements and use them 
without doing extra sampling.
    So you are paying a couple dollars a sample. If you have 
got a lot of fields, you are paying quite a bit. Again, it is 
tied into ongoing programs that they are doing because they 
want to know how much fertilizer to put on, so you just measure 
carbon with it.
    Senator Brownback. So you do not anticipate a high 
measurement cost, then, on soils in the U.S. if they went into 
carbon farming type systems, farmers here?
    Dr. Kimble. No. It is a little more complicated than 
measuring a tree, where you can go out and measure, because you 
have to go out and actually do field samples and send it back 
to a lab, or with some of the equipment that they are working 
on which allows you to go out and do direct measurements in the 
field, which would reduce the cost to pennies really for making 
a carbon measurement, when this new equipment DOE and others 
are working on comes on line.
    Senator Brownback. Mr. Heydlauff, American Electric Power 
is the largest user of coal domestically, the third largest, I 
think you said, of natural gas. We are looking here in the 
Congress at a major energy strategy and the need to build 
additional electric power generating units. Nuclear is a 
possibility, expensive in construction and there are a lot of 
questions.
    Coal is the most likely source for additional power 
generating, a major carbon emitter. There may be different 
technologies coming along. Maybe biomass can be burned. I am 
hearing about some carbon storing systems right out the pipe at 
the plant. But absent those--or maybe you should talk a little 
bit about those--will AEP look at additional coal-fired plants 
in the United States if we go on a major building program of 
electric power generating units, and what would be the company 
and-or the industry's philosophy about a cap and trade type of 
system if we build, encourage additional building of electric 
power generating plants, particularly coal-fired ones, in the 
United States?
    Mr. Heydlauff. First of all, I think you can rest assured 
that if we do build new generation some of it will likely be 
coal in the future, and it may not be too long before you hear 
an announcement of that type from us. We have 250 years' coal 
supply in the ground. It is the most valuable energy source 
that we have in this country today, and it would be foolhardy 
for any of us to suggest that we should not continue to use it.
    We have to use it in an environmentally friendly and 
acceptable manner, however. A couple of things that we think 
are important. One is that we have got to develop this new 
generation of clean coal technologies that the President is 
hoping to stimulate with his $2 billion development program, so 
that we will have technologies to replace the current 
generation of coal-fired power plants that are a lot more 
efficient and less carbon-intensive as a result in converting 
coal to kilowatt hours.
    One of the other things that we are looking at, we have 
been one of the leaders in the industry at doing research on 
what we call carbon capture and storage or use, where you 
literally are going to try to capture the carbon dioxide 
emissions from the flue gas stream post-combustion and then 
either use it for enhanced oil and gas recovery if there is a 
market for it--and there is a fair amount of that being done 
today, but it is relatively limited--or permanently dispose of 
it in an ecologically sound manner, probably deep underground, 
either in abandoned oil and gas wells and old coal mines or 
probably in saline aquifers deep under the ground, where it can 
be permanently stored without any ecological impacts.
    In terms of cap and trade, the acceptability of cap and 
trade programs to us will rest entirely on how you design the 
system. If you give us complete flexibility to offset emissions 
from new generation, literally the ability to go anywhere in 
the world, wherever it is legitimate and verifiable, to reduce 
emissions wherever we can do so at the lowest possible cost, 
then it is not as objectionable. If you try to require us to 
live within a cap within the sector, within the company, you 
are going to force energy policy changes that you are not going 
to like.
    There is really only one way we can significantly reduce 
carbon dioxide emissions on system and that is the conversion 
of coal-fired generation to natural gas, either directly at the 
existing plants or the forced retirement of those plants and 
replace it with natural gas generation or renewables, and that 
would substantially drive up the cost of complying with a cap 
and trade regime.
    We would hope--what we are talking about today in terms of 
carbon sequestration is just a policy we ought to have in our 
tool kit. But please understand, while I think there is a lot 
of potential there, it is not going to solve the problem of 
ultimately stabilizing atmospheric concentrations of greenhouse 
gas emissions. There is no silver bullet.
    It is truly the greatest challenge I think the world has 
ever faced and it will only be solved ultimately through new 
technology, a literal change in the energy infrastructure of 
the world. That is going to take time and a lot of it. It is 
time we get about it. I do not think we can wait a long time to 
begin making the necessary investments in the new generation of 
energy technologies.
    But the sensible path is to await the economic retirement 
of existing generation and replacement of that generation with 
revolutionary new technologies that are far more efficient and 
less carbon-intensive than what we currently have available 
today.
    Senator Brownback. So Dale, if we do expand electric 
generating near-term, you would anticipate that coal would be a 
major part of that? You from your company would look at that. 
But you do not have a particular objection to a cap and trade 
if you are given flexibility on where you can derive or locate 
those carbon credits. Am I understanding you correctly?
    Mr. Heydlauff. Yes, you are.
    Senator Brownback. Good.
    Mr. Bonnie, does your organization have any thoughts on, if 
there's expanded electric generating using coal, requirements 
on cap and trade, that type of system?
    Mr. Bonnie. I think ultimately our biggest concern is 
Environmental Defense believes we need a cap on greenhouse gas 
emissions and we need it very soon. In order to stabilize the 
greenhouse gas concentrations at appropriate levels and at safe 
levels, we need to get started sooner rather than later.
    Ultimately, if we have a cap and we have flexibility, we 
can allow the market to choose coal versus gas versus other 
appropriate technologies, and we can begin to create the market 
incentives for the development of the technology that Dale is 
talking about, and the price signal that is generated through 
the market for tons of greenhouse gas emissions credit will 
drive that technology.
    Now, like most environmental groups, to us clean coal is a 
bit of an oxymoron. But we recognize that if we can set the 
standards appropriately for greenhouse gas emissions credits 
and we can begin the transformation through the market of these 
new types of technology and new ways of providing electricity 
and do it cost-effectively--and cost-effectively is not--cost 
matters not just for utilities. It also matters to the 
environment, because if you believe, like we do, that the 
amount of greenhouse gas emissions reductions that we have to 
make are significant, then the more expensive it is the harder 
it is going to be for us to be able to make those reductions.
    So cost matters and it matters for society at large, but it 
also very much matters to the environment. So ultimately, when 
we look at the problem and we think about development of new 
power plants and those types of things, our greatest interest 
is in capping greenhouse gas emissions and getting a handle on 
that problem and allowing the market--a properly structured 
market, I should say--to really drive the type of innovation 
and technology that we need to stabilize the climate.
    Senator Brownback. To anybody on the panel: What 
legislative or regulatory change would you most desire that you 
think is most necessary at this point in time for us to move 
forward in encouraging these sorts of carbon sequestration, 
carbon trading type of programs, to try to reduce carbon on a 
least cost basis? What would you advocate from the Congress for 
us to do?
    [No response.]
    Senator Brownback. It is either a great question or a 
terrible question.
    Mr. Heydlauff. I will take the first crack with a very 
simple response, and that is: Pass your bill, pass the 
legislation of Senator Wyden.
    Senator Brownback. Great answer, great answer.
    Mr. Heydlauff. Truthfully, as you know, the world is mired 
in a great debate today about the extent to which we ought to 
credit carbon sequestration activities under the Kyoto Protocol 
or whatever. I am sure even if the Kyoto Protocol should be 
replaced with some other instrument they are still going to 
have this debate about how much of the expansion in the 
terrestrial ecosystem we ought to get credit for.
    My answer to that is every bit of it that is legitimate and 
verifiable. It does not matter where in the atmosphere the 
emission reduction occurs. The atmosphere will realize that 
benefit through whatever activity actually reduces emissions or 
absorbs it.
    But in terms of what you could do, one of the things--Mike 
does not like to hear this; I have told him this before. We 
spend a lot of money between the two projects. We have spent 
probably $6 million now with some of the additional money we 
have invested in the Bolivia project. We have $5.5 million in 
the Brazil project. We have got probably $2.5 to $3 million at 
least in domestic reforestation and enhanced carbon management 
in existing forest lands that we own. We are about to announce 
another project which was another $6 million.
    But there comes a point in time when the board of directors 
says: Enough is enough; there is only so much capital we are 
going to put at risk here on speculative ventures until we know 
that we are actually going to get credit for it.
    In the previous Congress, Senator Chafee and Senator 
Leiberman had introduced legislation that would have given 
credit for early action before you had any legal obligation to 
control emissions, but if you took things and it was verified 
you could bank it, in essence, and apply it toward any future 
compliance obligation you might have. We still think that 
concept has a lot of merit.
    Mr. Coda. If I could add, if I could add just to that one 
thing in particular. It is a small thing, but it is something 
that could be done very quickly, and it is referenced in 
Senator Wyden's bill as well as your own, is to really 
strengthen these voluntary programs that are currently on the 
books, the 1605[b] program and the international joint 
implementation program, both of which are very weak and have 
virtually no standards currently.
    It would at least provide some guidance to organizations 
like our own that are trying to move forward with projects in 
this area to have those programs be a little more substantial.
    Senator Brownback. Good. Anybody else? Mr. Bonnie?
    Mr. Bonnie. I guess in a perfect world we would like to see 
ratification of the Kyoto Protocol with good rules and flexible 
mechanisms, but recognize that that is certainly off the table, 
at least for the moment. The four pollutant bill, we would like 
to see that as well, with a cap on CO2 emissions from 
utilities. That appears to be off the table at the moment as 
well.
    But I think, following up with what both Dale and Mike have 
said, I think there are ways through the type of legislation 
that the two of you are examining, through promoting carbon 
sequestration both internationally and domestically, I think 
that this is an important step. I think it is vital that we 
begin developing the accounting mechanisms now. We need to 
learn by doing. So I think that is one part of what we need to 
do.
    In addition, I think we need to think more broadly beyond 
carbon sequestration and look to ways to begin to normalize 
carbon accounting or create some guidelines for carbon 
accounting, so that the AEP's of the world and others have some 
certainty with respect to when they make investments in 
greenhouse gas emissions reduction activities that they have 
some certainty that the rules they are playing by will be 
honored, they will be honored by subsequent regulatory 
frameworks.
    So I think that is another area, sort of backing up what 
Dale has said and what Mike has said is an area that we really 
should look at.
    Senator Brownback. Good.
    Senator Wyden.

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you, Mr. Chairman. Mr. Chairman, I 
want to commend you both for your very excellent bills and for 
holding this hearing. I think it is very timely, and I really 
look forward, as we have on a variety of occasions and 
subjects, to working closely with you.
    Senator Brownback. Thank you.
    Senator Wyden. I think we can get this done.
    Gentlemen, I am sorry I missed your testimony. I just have 
a couple of questions at this point. I think what has 
interested the Chairman and I is that sensible forestry might 
be a quarter of the solution to this problem. It is certainly 
not going to be the entire solution. You cannot walk around and 
say because you manage the forests well you are going to have 
no more problems with respect to global climate change. But to 
be able to handle a quarter of the problem, perhaps in a way 
that brings together industry and the environment, in a way 
that is cost-effective, costing between $2 and $20 per ton to 
store carbon in trees and soil, with alternative strategies 
involving emissions reductions costing up to $100 per ton, 
certainly is the kind of thing, in my view, that ought to be 
pursued.
    I think it is fair to say that there is no plausible 
scientific deniability about the human contribution to climate 
change and it seems to me that with carbon sequestration what 
the Chairman and I are trying to do of get beyond this blame 
game in this discussion and come up with a science-based, 
credible, economically-balanced and bipartisan approach.
    So, I just have a couple of questions, in hopes that we can 
continue to move in that vein. May I start with you, Mr. 
Bonnie. In your view, what effects do you believe that 
crediting of carbon sequestration activities would have with 
respect to ongoing forest activities in States like Oregon 
where forests are obviously an important resource?
    Mr. Bonnie. Well, I think certainly Mike referred to this 
in his testimony, but by creating a value for carbon you have 
given forest landowners another asset which they have, which 
when they examine what they want to do with their land they 
will essentially have something else they can sell. If they 
have marginal agricultural land, that means there is a value to 
reforesting that land.
    One of the problems with reforestation is that if you 
reforest your land often there is not a payback for many, many 
years. That is certainly true with douglas fir in Oregon and it 
is true with other species, even faster growing species in the 
Southeast. Carbon crediting potentially gives you the ability 
to pay for reforestation almost immediately and begin to get 
some return on your investment.
    So from a landowner's standpoint that is very appealing. It 
also is going to potentially create value for conservation, for 
improved forest management, for protection of wider streamside 
buffers--all types of things that from a sustainability 
standpoint we would like to do, and it is just by giving carbon 
sequestration a value in the market.
    This all, of course, depends on us developing a crediting 
system which assures not only the environmental co-benefits, 
but atmospheric benefits as well. That is something that I 
think we really need to push forward to do.
    Senator Wyden. Dr. Kimble, maybe a question for you and Mr. 
Bonnie. In your view, what is the role of government in 
normalizing carbon sequestration standards?
    Dr. Kimble. What was the last?
    Senator Wyden. What is the role of government in 
normalizing carbon sequestration standards?
    Dr. Kimble. I do not think we can--our agency, just 
speaking for my own opinion there, we cannot go out and do all 
the measuring. I think we can set the standards, the 
techniques, the methodology that can be used for people to go 
out and measure carbon changes, and then the private industry 
will pick it up.
    In other words, you set the standards, how to use soil 
maps, how to use these different techniques that we have, 
remote sensing, and put it together and develop the standards. 
I think our role is to provide guidance to people and companies 
who want to go into it and trade so it becomes a free market 
thing, but we give them the guidance on how to do it.
    Senator Wyden. Mr. Bonnie, do you want to add anything to 
that?
    Mr. Bonnie. I think there is a parallel with, on the forest 
side, with the Forest Stewardship Council. The Forest 
Stewardship Council is an organization which accredits 
certifiers of sustainable forestry. I use that because I think 
there is potentially a role for government doing the same 
thing. It is not clear to me that if we were to have--that 
government should have the sole role of actually verifying and 
making sure that all carbon credits are indeed legitimate. But 
perhaps government can create the standards whereby third party 
verification groups--and we are beginning to see a lot of 
private firms getting interested in acting as third party 
verifiers of greenhouse gas emissions credits.
    Government may have a role in creating some guidelines 
whereby those firms can begin to work with project proponents 
to verify greenhouse gas emissions reductions, and do it in a 
transparent way. I think government can help make that happen.
    Senator Wyden. One other question for you, Dr. Kimble. With 
respect to your published works, it is very clear that you have 
a lot of experience in this. You have written on it and been 
out in the field looking at measuring and monitoring systems 
for carbon in soils and crops. Do you have any questions about 
whether this is just theory or is this on the level?
    Our sense is that there is now a growing body of evidence 
that shows that sequestration can make a very real difference. 
I would be interested in having, for the record, your 
assessment of how much of this is really capable of getting 
done with respect to sequestration and how much of it is just 
theory, in your view?
    Dr. Kimble. I think we have gone by the theory. That is 
what we spent the last 8 or 10 years developing books to get 
the science base down. We know we can sequester carbon. We 
mined it like we mine coal. The difference between it and coal 
and gas is it is a renewable resource. We have lost large 
amounts of carbon through different farming practices over the 
years, clearing forests, whatever. So maybe 50 percent of our 
cropland carbon has been lost, so we can put it back. So it is 
a very large pool that can be replaced, which has many 
environmental benefits.
    Farmers are seeing this themselves. The no-tillers are 
seeing that they use less fertilizers, they use less energy in 
their fields, so it has got all these benefits there. So to me 
it is well beyond science and it is something we can do and 
probably need to do.
    Senator Wyden. I thank all of you. As you know, Senator 
Craig and I on the Forestry Subcommittee on the Energy 
Committee have spent a lot of time on this issue. I think the 
Chairman has some very good bills. If you will help us and keep 
pushing, I think the opportunity is now. I think the Congress 
wants to work in a bipartisan way and really get something done 
here.
    So I appreciate all the work that you have done. I think a 
lot of you have camped out with Senator Craig and I in trying 
to write our bill. I think Sam's bills are very helpful. We 
look forward to working with you and sending something to the 
President.
    Senator Brownback. Good. Thank you very much, Senator 
Wyden.
    I thank the panel members. Is there anything anybody 
additional wanted to add? John?
    Mr. Kadyszewski. I wanted to comment on an important role 
that the government has played in the measurement systems, and 
I think it is going to be an important role in the future. Part 
of the--and it is not so much on the definition of what method 
to use as it is in the background data collection that takes 
place as part of the Forest Service and the NRCS ongoing 
measurement and monitoring of soils and forests.
    For us, the ability to achieve low measurement costs is a 
function of how well-measured and how classified the existing 
land system is in the U.S. So I can produce accurate 
measurements at a lower cost in the United States than I can in 
other countries because of the existence of this very excellent 
set of background data. I think that there has been changes now 
announced both by the Forest Service and the NRCS in terms of 
how they are going--they are going to regularize, they are 
putting on a 5-year rotation basis the surveys that are going 
to be done in the United States and they are going to allow 
easier access to that data so that you can interpolate and make 
these measurements.
    This will push costs down on measurement. But I think an 
extension of this is most other countries do not have such 
measurement systems. So when we go in to do measurements in a 
country like Bolivia, we have to create more of that from 
scratch and it raises measurement costs. So I think there is a 
role by example of the way that the systems are run in the 
United States to create leadership in terms of that arena and 
method.
    I also think here in the United States we have a much 
stronger digital data set. The methods that I talked about 
today focused on ground-based measurements, but what has 
happened in the last 2 years in our work, there has been a 
revolution in the availability of digital data. So we see the, 
whereas there are concerns today within the environmental 
community about things like leakage and the spillover effects 
from these projects, I believe that within the next 10 to 20 
years we will have such well-done inventories on a global basis 
that we will be able to measure those effects without great 
cost and reduce the concerns.
    So I think in this area, because we are the technical 
leaders on many of these technologies, there is a role for the 
government to play in making sure this gets worked out. This 
goes to the point of the integrity to me of the measurement and 
accounting system is a very critical element in making this 
work tradable.
    The question you asked on costs: We have been under 25 
cents a ton. This is carbon that we are talking about being 
sold at $10 a ton for forestry systems. For agricultural soil 
systems, our estimates are that it will probably be closer to a 
dollar a ton. But we could push those soil costs down, one, 
with the new inventory data that is going to be available from 
the NRCS within 10 years. I say within 10 years; they are going 
to introduce it now, but it will take them a cycle or two of 
data collection to make it as valuable as it will be.
    But then second, the technique that Dr. Kimble mentioned 
for new precision farming now, where on your tractor you have 
got a sampler that does a nutrient analysis, and some of the 
work being done that he referred to at Los Alamos where you 
could mount a carbon sampler on that same tractor and take 
hundreds of measurements. This is going to narrow the bands and 
make carbon soil measurements come down into the same area as 
forest soil measurements.
    So I think that the sort of pioneering work there is 
important, and maybe from my perspective more important than 
trying to specify the methods and procedures. Markets, if you 
look at the stock market, say, they create ways to value 
commodities and sell futures and arbitrage and insure and re-
insure, and they will do better on the certification, 
verification, when it is tied to the money and sales. They do 
not do so well at creating the environment, which is why you 
have other people involved.
    Senator Brownback. Good thoughts. Excellent thoughts.
    This is an exciting panel, an exciting topic, from the 
standpoint that for years we have looked at it, with a kind of 
hand-wringing: What will we do? We are getting all this 
destruction of forests? We need to have more investment, in 
some cases from the Northern Hemisphere to the Southern 
Hemisphere. Here is a way, a project, a means of being able to 
do this in an exciting way and, Mr. Coda and your organization, 
being able to do things that you have dreamed of before, but 
have not had the wherewithal to do it. And other groups are 
saying, this is a good project.
    It values a forest for being a forest, not just for what 
you can extract out of the forest, which is another exciting 
part of the project, and to me as well, coming from an 
agricultural community and background, the idea that we could 
buildup the soils and that this is not only good for the 
atmosphere, it is good for the soils, has a sort of overall 
positive atmosphere to the whole thing that I think should make 
for a doable project. Hopefully we will be able to move this 
legislation on forward.
    One thing I might note at the end of this, too, is that if 
we look at more electric power generating in this country--and 
we need to--I think the business community is going to need to 
have certainty as to what is going to be the cost of dealing 
with CO2 emissions from this. My guess is if you are looking at 
more plants, the financial community is going to be asking: OK, 
how are you going to deal with the carbon issue here? You may 
not be regulated now, but we would anticipate you are going to 
have some sort of capped regime in the future, and therefore 
how are you going to deal with this? So that the business 
community needs some form of certainty as to how this is going 
to be dealt with, and we can help, I think in a great way, to 
accommodate that.
    I look forward to working with you more, hopefully, on 
moving this legislation and project on forward. Thank you all 
very much for coming.
    The hearing is adjourned.
    [Whereupon, at 3:55 p.m., the Subcommittee was adjourned.]

                                
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