S. Hrg. 110–579 

CREATING JOBS WITH CLIMATE SOLUTIONS: 

HOW AGRICULTURE AND FORESTRY CAN 

HELP LOWER COSTS IN A LOW-CARBON 

ECONOMY 

HEARING 

øBEFORE THE¿ 

SUBCOMMITTEE ON RURAL REVITALIZATION, 

CONSERVATION, FORESTRY AND CREDIT 

OF THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

MAY 21, 2008 

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry 

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44–764 PDF 2009

S. HRG. 110–579 

CREATING JOBS WITH CLIMATE SOLUTIONS: 

HOW AGRICULTURE AND FORESTRY CAN 

HELP LOWER COSTS IN A LOW-CARBON 

ECONOMY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON RURAL REVITALIZATION, 

CONSERVATION, FORESTRY AND CREDIT 

OF THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

MAY 21, 2008 

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry 

( 

Available via the World Wide Web: http://www.agriculture.senate.gov 

SUBCOMMITTEE ON RURAL REVITALIZATION, CONSERVATION, 

FORESTRY AND CREDIT 

DEBBIE A. STABENOW, Michigan, Chairman 

PATRICK J. LEAHY, Vermont 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

MICHEAL D. CRAPO, Idaho 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

LINDSEY GRAHAM, South Carolina 

MARK HALVERSON, Majority Staff Director 

JESSICA L. WILLIAMS, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority Chief Counsel 

(II) 

(III) 

C O N T E N T S 

Page 

HEARING(S): 

Creating Jobs With Climate Solutions: How Agriculture and Forestry can 

Help Lower Costs in a Low-Carbon Economy ................................................... 1 

Wednesday, May 21, 2008 

STATEMENTS PRESENTED BY SENATORS 

Stabenow, Hon. Debbie, a U.S. Senator from the State of Michigan .................. 1 

Crapo, Hon. Mike, a U.S. Senator from the State of Idaho ................................. 2 

Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota ................... 5 

Salazar, Hon. Ken, a U.S. Senator from the State of Colorado ........................... 5 

WITNESSES 

Panel I 

Broekhoff, Derik, Senior Associate, World Resources Institute ........................... 16 

Corneli, Steven, Vice President, Market and Climate Policy, NRG Energy, 

Inc. ......................................................................................................................... 14 

Lubowski, Ruben N., Ph.D., Forest Carbon Economics Fellow, Environmental 

Defense Fund ........................................................................................................ 12 

Wayburn, Laurie A., President, and Co-Founder, Pacific Forest Trust .............. 9 

Wittman, Dick, Member, Steering Committee, Agricultural Carbon Market 

Working Group, and Former President, Pacific Northwest Direct Seed Association .................................................................................................................... 7 

APPENDIX 

PREPARED STATEMENTS: 

Broekhoff, Derik ............................................................................................... 36 

Corneli, Steven ................................................................................................. 50 

Lubowski, Ruben N. ......................................................................................... 53 

Wayburn, Laurie A. .......................................................................................... 87 

Wittman, Dick ................................................................................................... 100 

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

‘‘21st Century Agriculture Project’’, report issued by Senator Bob Dole and 

Senator Tom Daschle ........................................................................................... 104 

American Farm Bureau Federation, prepared statement .................................... 133 

American Farmland Trust, prepared statement ................................................... 139 

American Soybean Association, prepared statement ............................................ 146 

The Business Council for Sustainable Energy ...................................................... 149 

Coalition for Emission Reduction Projects, ‘‘Effects of Offset Policies on Compliance Costs:’’ ...................................................................................................... 155 

The Contribution of Pecan Orchard Agricultural Systems to Carbon Storage 

and Sequestration ................................................................................................ 159 

National Milk Producers Federation, prepared statement .................................. 163 

The Nicholas Institute for Envoronmental Policy Solutions, ‘‘Harnessing 

Farms and Forests in the Low-Carbon Economy’’ ............................................. 168 

(1) 

CREATING JOBS WITH CLIMATE SOLUTIONS: 

HOW AGRICULTURE AND FORESTRY CAN 

HELP LOWER COSTS IN A LOW-CARBON 

ECONOMY 

Wednesday, May 21, 2008 

U.S. SENATE, 

SUBCOMMITTEE ON RURAL REVITALIZATION, 

CONSERVATION, FORESTRY, AND CREDIT, 

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY, 

Washington, DC 

The subcommittee met, pursuant to notice, at 2:33 p.m., in room 

SR–332, Russell Senate Office Building, Hon. Debbie Stabenow, 

Chairman of the Subcommittee, presiding. 

Present: Senators Stabenow, Salazar, Klobuchar, and Crapo. 

STATEMENT OF HON. DEBBIE STABENOW, A U.S. SENATOR 

FROM THE STATE OF MICHIGAN 

Senator STABENOW. Well, good afternoon. I am so pleased that 

all of you are here. This is a very important topic, and obviously 

very timely given the discussion that we will be having in June on 

the critical issues around global climate change and global warming. And I am very pleased that Senator Crapo, the Ranking Member of our Subcommittee, has joined me and agreeing to convene 

this meeting, and we are looking forward to some very important 

information being shared today that will help us as we formulate 

some options going forward to, I think, make sure that agriculture 

and forestry are a part of the solution when we look at what we 

need to be doing together. 

I believe we have a responsibility to our children and our grandchildren to address the growing climate crisis that we all know exists, and agriculture does need a voice in that process, as I indicated, as part of the solution. 

We are here today to learn about the role of agriculture in reducing greenhouse gases and how we can best incentivize these reductions in a cap-and-trade system. One way that the agriculture and 

forestry community can play a role is through greenhouse offsets. 

As my colleagues know, offsets are greenhouse gas reductions or 

sequestrations made outside a regulatory cap that mitigate other 

emission sources. 

There are numerous types of activities that could qualify for offsets. I know we will talk about many of them today. And as the 

jurisdiction of this Committee suggests, we will focus primarily on 

2 

those within agriculture and forestry. Whether it is soil sequestration on croplands, methane capture from dairy farms, or sustainable managed forests to prevent deforestation, as well as grow 

more and older trees, there are many opportunities to reduce emissions of quality offsets that ensure that a ton of carbon reduced is 

a ton of carbon. 

First and foremost, we need to discuss an offset policy to find additional solutions that reduce greenhouse gases. There are, however, other benefits to a strong offset policy: creation of jobs and 

economic opportunity, increasing and incentivizing new technologies, providing additional environmental benefits, and, last but 

not least, offsets provide cost containment. 

Michigan and the Nation stand to benefit from a strong offset 

policy. We are blessed in Michigan not only with a strong manufacturing base, but also agriculture and forestry are key to our economic success. And I think that we can benefit both of those sectors as we look at the issue of quality offsets. Bottom line, we need 

to meet our greenhouse gas emission mandates, and we can if we 

allow this to be a policy that is reasonably priced, which, again, 

goes to the question of offsets. 

Offsets allow for significant cost control. Recently, a well-respected EPA model analyzed the Lieberman-Warner bill and found 

that viable offsets can drastically diminish the cost of carbon both 

to businesses and to consumers. For example, if we do not restrict 

the amount of verifiable quality offsets in a cap-and-trade market, 

the cost savings to the economy may be as much as 71 percent 

from a program that does not limit quality offsets. 

There are also other significant opportunities that come from offsets. With proper management, both forestry and agriculture could 

help reduce as much as 25 percent of annual U.S. emissions. Currently, agriculture sequesters only 1 percent of U.S. emissions, but 

through items we will talk about today, we could sequester as 

much as 10 to 15 percent, which is why this hearing is so important. 

So I am hopeful that we can construct a set of policies from your 

recommendations today that encourages as many quality and 

verifiable offsets as possible. That way we can make sure that we 

are transitioning into a new low-carbon economy in a way that is 

economically stable and is one that benefits consumers in all parts 

of our economy. 

I am looking forward to the panelists, and I will introduce them 

in a moment. But let me first turn this over to our Ranking Member, and I also want to thank Senator Ken Salazar from Colorado 

for joining us for this very important hearing. 

Senator Crapo. 

STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM 

THE STATE OF IDAHO 

Senator CRAPO. Thank you very much, Senator Stabenow. I appreciate your working with me and your interest in this hearing. 

I think it shows very strong leadership, and I appreciate that. 

I also want to thank our witnesses for being here with us today 

to discuss the role of agriculture and forestry in a low-carbon economy. I especially want to give thanks to Mr. Dick Wittman for travVerDate Aug 31 2005 14:14 Jan 30, 2009 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\44764.TXT SAG2 PsN: SAG2
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eling here from Idaho to participate in the hearing. Dick is a member of the Steering Committee on the Agricultural Carbon Market 

Working Group and Past President of the Pacific Northwest Direct 

Seed Association. He is a farmer, a rancher, and a forester from 

Idaho and a leader in the agriculture industry on carbon markets. 

He is also very valuable in terms of his depth of experience, being 

a producer who is voluntarily participating in carbon contracts, and 

I value his input and consider him to be an important resource on 

these issues. 

It has been estimated that agriculture and forest land can contribute immensely to reductions in greenhouse gas emissions. For 

many in agriculture and forestry, carbon offsets represent opportunities to obtain more value out of the land and new land management technologies in addition to the possibilities of reducing the 

costs of cap-and-trade programs. 

Agriculture and forestry offsets are already contributing financially to some farms and private forestry operations, and because 

of their important functions, farmers and foresters must have a 

voice in the discussion about climate change policy. That is why I 

want to thank you again, Chairman Stabenow, for holding this 

hearing today for this important discussion. 

Climate legislation is expected to be considered by the full Senate soon, and it is important that we are having this dialog today 

to increase the awareness of agriculture and forestry’s contributions and to take a careful look at what is known so far as to how 

offsets are working in voluntary markets and how projects can be 

properly verified and monitored. 

Additionally, appropriate attention needs to be paid to examine 

both the positive and the negative effects of mandatory cap-andtrade systems on farmers, ranchers, and foresters. I commend the 

work that is being done throughout the agriculture and forestry 

communities to collectively look at the most constructive role for 

agriculture and forestry in this context. 

Many of the witnesses here today have been on the cutting edge 

of that effort and in the cooperative work that is taking place on 

this issue. It is very productive. Congress is on the verge of finalizing a new farm bill, and included in that farm bill conference report is a provision to require the United States Department of Agriculture to create technical guidelines, including verification and 

accounting measures to determine environmental services benefits 

from conservation and land management actions. This provision 

would also direct the Department to concentrate first on carbon 

markets. It is important because it would better prepare agriculture to take part in the carbon credit markets through a structure led by the USDA. 

This provision also adds to the significant mechanisms in the 

farm bill for improving our environment through conservation programs. We need to keep these programs in mind as models when 

considering climate initiatives and legislation. No Federal policy 

has contributed more to enhancing our environment than the farm 

bill and the conservation programs specifically included in it. 

I continue to believe that incentives rather than mandates offer 

the best way to achieve environmental results on private land. For 

that reason, the role of family farms and private forests as offset 

4 

contributors rather than capped industries seem to me to be the 

most productive approach. It is important to make certain, though, 

that throughout the advancement of any legislation pertaining to 

this issue, it does not turn into a mechanism to force certain planting or operating decisions that may not be in the best interest or 

make the best sense for a particular agriculture or forestry operation. 

Additionally, it is important that U.S. agriculture sectors do not 

get penalized for environmental management in agriculture sectors 

outside our borders. For instance, the United Nations Food and Agriculture Organization cited cattle rearing as generating more 

greenhouse gas emissions than the transportation sector. However, 

in the United States, cattle management practices surpassed practices in other countries. 

The livestock industry is a vital part of Idaho’s economy. In 2007, 

Idaho’s beef and dairy industries provided 57 percent of Idaho’s 

overall agricultural receipts with more than $3 billion. It is important for our national economy to ensure that these sectors continue 

to be successful to maintain these industries and the jobs that they 

produce in the United States. 

I encourage everyone to continue to take a hard and realistic look 

at all the factors, good and bad, that may result from a mandatory 

cap-and-trade system. The effects are far too reaching to do otherwise. 

Some have raised the concern that emissions leakage could substantially lessen the effects of emissions reductions, and it is also 

important to look at how early actors who are already taking steps 

to reduce emissions will be taken into account in the new system. 

It is also important to examine proper measurement, double counting, permanence, and the very serious concerns about the impact 

of cap-and-trade systems on agricultural inputs that are already 

sizable and growing. We also need to make certain that as tradable 

units are developed, they are done in metrics that make sense for 

agriculture. 

For farmers and foresters to be able to assist with reducing emissions, they must be able to remain on the land. There are legitimate concerns that implementation of the cap-and-trade system 

could result in prohibitive increases in input costs, such as diesel 

and fertilizer. Policies should best be structured to enable agriculture and forestry to contribute to this effort without compromising their ability to thrive. 

I look forward to diving into some of these issues as we evaluate 

the discussion today. And, again, I want to thank all of you for 

coming here, the witnesses, Senator Stabenow for the farsightedness in holding this hearing, and good timing as well. And I appreciate what I expect we will have in terms of our lively discussion 

today. 

Thank you. 

Senator STABENOW. Well, thank you so much, Senator Crapo, 

and we want to recognize Senator Amy Klobuchar as well, and, 

Senator Salazar, if you would like to take a moment, welcome. 

5 

STATEMENT OF HON. KEN SALAZAR, A U.S. SENATOR FROM 

THE STATE OF COLORADO 

Senator SALAZAR. Thank you very much, Senator Stabenow, 

Chairman of the Subcommittee, and Senator Crapo for holding this 

hearing. 

I have a statement that I will just submit for the record, but I 

want to make two comments. 

First, it seems to me that what we did with the farm bill in Title 

IX, Moving Forward with New Energy Opportunities for Rural 

America, was a major step in the right direction. We gave the farm 

bill some real meaning with respect to the energy future of America that deals with everything from cellulosic ethanol to geothermal 

to small hydroelectric to small wind and a whole host of other 

things that were in there. And I think that is very important. And 

as we move forward in the climate change debate, one of the things 

that we will be addressing again is how we continue to move forward with that clean energy frontier. 

One of the aspects of climate change and carbon control that we 

worked on in the Energy Committee for a long time has been the 

concept of carbon capture and sequestration, and, unfortunately, 

we have not been able to move with the demonstration projects 

that we have wanted to move forward with on that agenda. In my 

own State, we had a plan in place that would have put together 

a major IGCC plant that would allow us to burn coal and would 

allow us to sequester the carbon in geologic formations. 

As we look at that concept, I think it is also very important to 

understand that those who have sequestered carbon for a very long 

time are, in fact, the farmers and ranchers of America, and I think 

that this hearing gives us an opportunity to put the spotlight on 

how our agriculture and rural communities can help us deal with 

the challenge that we face with carbon emissions and climate 

change. 

So I very much appreciate the hearing. Thank you very much. 

Senator STABENOW. Thank you. 

Senator Klobuchar. 

STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR 

FROM THE STATE OF MINNESOTA 

Senator KLOBUCHAR. Well, thank you so much, Madam Chair, for 

holding this hearing. We are both from Midwestern States where 

we have people who not only farm but also people who love the outdoors. And I do not just hear about global warming anymore from 

academics. I hear it from hunters in Hibbing, Minnesota, who have 

seen the effects on their wetlands; from people who go ice fishing 

on Leach Lake and are having trouble putting their fish houses on; 

from business leaders up in Duluth who have seen the effects on 

the water levels in Lake Superior. And certainly if the projections 

are correct, no one will feel the impact worse than farmers, who 

may face more severe weather, droughts, and storms, and will 

make their lives even more unpredictable. 

But I also believe farming can be part of the solution, and that 

is why I am so glad you held this hearing today. Some of the cutting-edge research on the cellulosic ethanol, which Senator Salazar 

referred to, in the farm bill is at the University of Minnesota, 

6 

where they found that we can actually produce carbon-negative 

motor fuel from native prairie grass. That is why that section of 

the farm bill that provides incentives for dedicated energy crops is 

so important. 

There are other ways for farmers to fight global warming, too. 

There is a farmer in northern Minnesota whose name is Dennis 

Haubenschild—that is a good Minnesota name. He tells me that 

his cows pay him three different ways: first, his cows pay him with 

the milk that they produce; second, with the electricity that they 

generate with his methane digester; and, third, he sells the offsets 

to the Chicago Climate Exchange for capturing those greenhouse 

gases. He has a saying, Dennis does: ‘‘It is only waste if you waste 

it.’’ And it has proven to be true. 

I am very excited about the work we are doing in our State with 

wind turbines and biomass gassifiers and all kinds of things. The 

times are changing quickly, both in terms of our understanding of 

global warming and also what we can do to fight it. And I am looking forward to hearing from our witnesses about what Congress 

can do to help farmers to participate to the maximum extent in 

clean energy and solutions to global warming. 

Thank you, Madam Chairman. 

Senator STABENOW. Thank you, Senator. 

We want to turn to our terrific witnesses, and, Mr. Wittman, you 

have been introduced already by Senator Crapo, but I would just 

welcome you again as a farmer and rancher and forester from 

Idaho, very much a part of creating the solutions. We welcome you. 

Laurie Wayburn, who is President and co-founder of the Pacific 

Forest Trust. Laurie is the co-founder of the only nonprofit organization solely dedicated to preserving, enhancing, and restoring 

America’s private working forests for all of our public benefits. 

With more than 25 years of national and international experience 

in sustainability issues, Ms. Wayburn’s current focus is advancing 

the climate benefits of forests. She is helping to lead regional and 

national efforts to enact climate change policies that unit conservation and management with market-based incentives to reduce carbon dioxide emissions. We welcome you. 

Mr. Ruben Lubowski, economist and Forest Carbon Economics 

Fellow at the Environmental Defense Fund, we welcome you as 

well and appreciate your expertise. You are working on the Climate 

and Air Program and the Climate Campaign with a focus on developing domestic and international strategies to integrate carbon 

emissions and sinks from forestry, agriculture, and land-use change 

into a U.S. cap-and-trade system and a successor treaty to the 

Kyoto Protocol. From 2002 through 2007, Mr. Lubowski was an agricultural economist in the Resource and Rural Economics Division 

at the U.S. Department of Agriculture’s Economic Research Service. That is a mouthful. You must have had a big business card on 

that one. 

[Laughter.] 

Senator STABENOW. So we welcome you. 

Steve Corneli, Vice President of Market and Climate Policy, NRG 

Energy, and you coordinate NRG’s positions and strategic initiatives related to climate change issues. We welcome you as well. Mr. 

Corneli has previously served as NRG’s Vice President of ReguVerDate Aug 31 2005 14:14 Jan 30, 2009 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCS\44764.TXT SAG2 PsN: SAG2
7 

latory and Governmental Affairs and Director of Regulatory Policy 

and has been a frequent witness in FERC market design proceedings and technical conferences. Prior to joining NRG, Mr. 

Corneli served in the Minnesota Attorney General’s Office—there 

you go, Senator Klobuchar—first as a utility policy analyst, and 

subsequently as the manager of the office’s Utility Consumer Advocate Division, with primary responsibility for energy-related legislative affairs. Welcome to you as well. 

And Derik Broekhoff, Senior Associate with World Resources Institute. Derik helps direct the greenhouse gas protocol team at the 

World Resources Institute and leads WRI’s work on the design of 

greenhouse gas emissions trading programs, registry systems, and 

standards for carbon offsets. He is the primary author of the WRI 

WBCSD GHG Protocol for project accountability—OK—and has 

testified before Congress on the development of voluntary market 

carbon offset standards. Prior to joining WRI, he worked for 10 

years in the fields of energy and climate change consulting, where 

he developed financial and economic analytical tools for carbon 

market forecasting, risk management, project evaluation, and business strategy development for a wide range of private and public 

sector clients. 

As we can see, we have five wonderful experts here with us 

today. I welcome all of you, and, Mr. Wittman, we will start with 

you. 

STATEMENT OF DICK WITTMAN, MEMBER, STEERING COMMITTEE, AGRICULTURAL CARBON MARKET WORKING 

GROUP, AND FORMER PRESIDENT, PACIFIC NORTHWEST DIRECT SEED ASSOCIATION 

Mr. WITTMAN. Well, Madam Chairman, Ranking Member Crapo, 

and members of the Committee, I appreciate the opportunity to 

come today and speak about ways that agriculture can help our 

Nation mitigate greenhouse gas emissions in a timely and cost-effective manner. 

As Senator Crapo already gave my resume, I will not reiterate 

that. But I would summarize by saying; being a manager of a crop 

and livestock and timber-managing operation really means, we 

are‘‘carbon managers’’. The more we start thinking about the most 

important resource that we manage carbon and it is only through 

that resource that we do all the things we do in the natural resource provider industry, it brings to bear what this issue today is 

all about. 

For the last 3 years, I have been part of a national steering 

group of ag leaders studying carbon markets and climate change. 

On behalf of that group, the Ag Carbon Market Working Group, I 

commend you for looking at cost-effective strategies to achieve 

greenhouse gas emissions. 

Science has proven that ag lands have great potential for sequestering carbon. Sequestration is a proven sink that offsets the impact of emissions. Analysis by the Pew Center indicates that agriculture can provide up to 40 percent of the reductions that we are 

hoping to achieve by 2010 compared to 1990 levels. Consumers and 

resource providers have concerns, and we cannot discount those 

concerns as they relate to potential negative impacts from a carVerDate Aug 31 2005 14:14 Jan 30, 2009 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\DOCS\44764.TXT SAG2 PsN: SAG2
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bon-constrained economy. No one wants to face increased costs and 

uncertainties that could derail economic progress. But, in my view, 

the question is: Do we pay now, or do we pay more later? There 

is a continuing increasing cost of ignoring this issue. 

Our working group has studied emissions mitigation strategies 

all across the U.S. and globally. We have learned that, with the 

right incentives and education, there is no limit to the technologies 

and practices that businesses and consumers can tap to reduce negative impacts on our climate. The organizations that I represent 

urge you to recognize the diverse mitigation options that agriculture can offer. These include things like conservation tillage, forestry and agroforestry, reducing methane from manure and 

ricelands, precision ag efficiencies, displacing fossil fuel with renewable energy and reducing nitrous oxide emissions from croplands. Allowing market-based carbon offsets as part of a national 

cap-and-trade program provides both a cost-containment measure 

for emitters and a shock absorber to our economy. A cap-and-trade 

system helps make it profitable for farmers and foresters to invest 

in environmental stewardship. 

As an energy-intensive industry, agriculture is sensitive to energy prices. It is in all of our best interests to create incentives for 

transitioning to alternative energy that is both affordable and less 

damaging to our environment. Greenhouse gas offsets can play a 

huge role in creating those incentives. 

The EPA and others have modeled cap-and-trade bills, such as 

Lieberman-Warner, and they have concluded that domestic and 

international offset provisions in Senate bill 2191, capped at the 

15–percent level, could reduce allowance prices by 93 percent over 

what they would be without these offsets. If we had unlimited ag 

offsets, those prices could fall even further. EPA has also confirmed 

that if we have unlimited offsets, this will not hamper technological 

innovation, but will reduce costs of the entire cap-and-trade system. 

Many organizations are pursuing or already engaging in carbon 

aggregation services. Soil carbon credits can be generated and traded in the greenhouse gas markets with absolute confidence. My 

personal experience bears this out. In 2002, the Pacific Northwest 

Direct Seed Association penned one of the first contracts in the 

United States—and, frankly, throughout the world—to engage in a 

voluntary carbon offset trade. We contracted with Entergy Corporation in Louisiana to direct-seed cropland for 10 years that would 

sequester 30,000 tons of CO2. 

Carbon trading has proven that education and incentives related 

to these offsets can result in significant changes in farming practices. That is what this hearing is all about. We want to change 

behavior, and those changes in behavior can result in both economic viability as well as environmental improvement. 

Emissions offsets that the ag sector can provide are high quality, 

they are measurable, and they are verifiable. Scientists have studied this for years. Soil carbon sequestration also has many benefits 

that go beyond greenhouse gas emissions reductions: It improves 

air and water quality, reduces soil erosion, enhances moisture retention, and improves soil productivity. 

9 

A sad fact for our industry is that agriculture has lost over half 

the native organic matter in our farming soils across the U.S. over 

the past 300 years. This has resulted from tillage, wind, and water 

erosion. Practices such as direct seeding—or no-till—are reversing 

this trend. By sequestering carbon, we are strengthening soil quality, not further degrading it. We are also reducing fossil fuel consumption on the farm. No other sector can offer such high-value 

offsets to society at such a low cost. 

As we move to a mandatory greenhouse gas system, buyers will 

demand projects that pass rigorous measurement and verification 

tests. The dairy industry is doing this, as you have indicated. Those 

who say agriculture cannot offer a real mitigation solution are simply wrong. U.S. agriculture and forestry are some of the only sectors with currently available, high-quality, low-cost, verifiable 

emissions reductions technologies. 

Mitigating and solving our climate crisis will not be easy. Other 

world players were initially hesitant to include ag and forestry as 

part of the solution. That was a mistake. They are now incorporating ag and forestry as vital components of their climate mitigation strategies. Here is an area where the U.S. has a unique opportunity to provide an international leadership role by crafting 

reasonable and innovative ways to include ag and forestry offsets 

as part of the total solution. Agriculture is ready and we are willing to meet this challenge. 

Because of our conviction that we can mitigate emissions, the Ag 

Carbon Market Working Group has endorsed unlimited offset markets. So has a report just released by former Majority Leaders 

Daschle and Dole. On behalf of the Bipartisan Policy Center, I 

would respectfully ask that this report be submitted for the record. 

Senator STABENOW. Without objection, it will be. 

[The report can be found on page 104 in the appendix.] 

Thank you again for the chance to speak to you today, and I will 

gladly answer any questions and assist you in crafting responsible 

policies as we move forward. 

[The prepared statement of Mr. Wittman can be found on page 

100 in the appendix.] 

Senator STABENOW. Thank you very much. 

I should mention to the witnesses and members, I think the clock 

was not working for a while, but I think it is on now. So if everybody has—there we go. OK. We will ask members to keep their 

comments to 5 minutes, our witnesses, and we have lots of questions for you. 

Ms. Wayburn. 

STATEMENT OF LAURIE A. WAYBURN, PRESIDENT, AND COFOUNDER, PACIFIC FOREST TRUST 

Ms. WAYBURN. Good afternoon, Chairman Stabenow, Senator 

Crapo, members of the Subcommittee. I would like to thank you, 

as well as everyone else has, for holding this most important hearing, for the role that forests and farms can play in climate policy 

is not to be underestimated. I am honored to testify on the potential of private working forests in addressing the challenge of climate change. We look forward to working with you as you inteVerDate Aug 31 2005 14:14 Jan 30, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\44764.TXT SAG2 PsN: SAG2
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grate the forest and farm sector into an economy-wide climate 

strategy. 

The forests can and should, indeed probably must, play a significant role in mitigating climate change. They are an essential tool 

to help address this enormous challenge. Their inclusion will enable the most cost-effective, rapid, and durable climate gains, 

which will also catalyze multiple additional economic and public 

benefits from our forests, from sustainable clean energy alternatives to ecosystem restoration to hundreds of thousands of new 

sustainable jobs. Harnessing the power of our forests and climate 

policy will harness a key competitive advantage of the United 

States in the burgeoning global climate marketplace. 

Taking advantage of our Nation’s natural assets, deploying their 

proven capacity—if you will, they are the original carbon capture 

and storage—will help heal our climate. They can absorb excess 

CO2 from the atmosphere and store it safely for hundreds to thousands of years, in the forest, in products, and in substituting for 

fossil fuels. 

As you mentioned in your kind introduction, I am President of 

the Pacific Forest Trust, the Nation’s leading nonprofit organization dedicated to protecting America’s private working forests for 

their many public benefits, including climate stabilization, and I 

would suggest, as our prior speaker has, that this indeed may be 

their most important contribution now. 

We own, manage, and conserve working forestlands. We directly conserve working forests valued at over $160 million and work on 

millions of acres across the West. But we have also been instrumental in advancing the role of forests in California’s climate 

change policies, which are the first economy-wide in the country; 

in the Northeast’s Regional Greenhouse Gas Initiative; in the 

Western Climate Initiative in Washington State; and a number of 

others. We have worked on this issue since 1993. 

So in my remarks today, I will address the potential of forests 

in offsetting and reducing net carbon dioxide emissions as well as 

the lessons learned from our experience in California developing 

climate policy and climate markets, where we have, in fact, developed the first State-compliant project to meet emissions reductions 

targets, and we have now sold over 80,000 tons of emissions reductions into this country’s first pre-compliance market. 

Our experience shows that forest emissions reduction projects are 

realistic, cost-effective and practical tools. They conserve and restore private working forests, they economically sustain forest owners, and they ensure the long-term delivery of public benefits from 

water to wildlife, as well as wood. And in addressing the challenge 

of climate change, we welcome your inclusion of these sectors in 

order to create an effective economy-wide system. 

Very simply, forests absorb and hold CO2 when they grow, and 

they release it when they are converted, lost to development, or 

when they are disturbed. In fact, the United States shares this 

global problem of forest loss and degradation that we are now seeing recognized so strongly in international negotiations. 

We lose 6,000 acres a day of forest and open space in this country. Over 4,000 of those acres are forests. That is 1.5 million acres 

of forests a year. Every year, we lose forests the size of the State 

11 

of Delaware. When we lose those, we lose all the carbon stocks that 

they hold and all their future sequestration and climate benefits 

they bring. So we share this with the global situation. 

But this problem is also an enormous opportunity for the United 

States, for in the United States we actually have the legal structures, the governance, and the science to do something about that 

forest loss today, and to do so in a credible, verifiable, and enforceable manner. We can put our forests to work today in fighting climate change. 

By doing that, we can reduce net CO2 emissions by tens of billions of tons in the next 50 years. Three simple actions—reducing 

forest loss, restoring forest carbon banks, and reforesting former 

forests—will bring us those benefits. We can measure those in 

ways that can be very precise, using methods that are well accepted and in wide use. And this will be based on existing legal institutions and governmental systems. This distinguishes us globally. 

My time is running down here, so I am going to switch over to 

showing where we have done this in the State of California. 

In adopting a compliance system with a Cap, California integrated forests into that as part of early action measures. My organization recently completed the first project that met those compliance targets. That is on 2,200 acres in Northern California where 

we are using forest management to both conserve and restore the 

forest carbon banks there. 

We recently sold 60,000 tons of certified emissions reductions to 

Natsource, a leading global emissions and renewable energy asset 

manager, which purchased these—this is their first investment in 

the United States of any sort. They purchased these believing that 

forest offsets are a key policy tool in the portfolio of activities to 

address climate change. A number of other purchases have been 

made as well, such as by our Governor and by the Speaker, who 

wanted to have high-quality, State-backed emissions reductions. 

But the project is also providing other public benefits: sustainable flows of harvest of timber, and the restoration of habitat for 

endangered species, indeed, spotted owls have recently been sighted on the property. So we are managing for climate, for timber, and 

for spotted owls. We are adding a net asset value, net present 

value of over $2,000 per acre for this landowner, and that is not 

negligible, and that is complementary to sustainable timber. 

So these forest offset projects are an important step in developing 

a robust carbon market. We have received countless inquiries for 

purchasing these emissions reductions and from landowners to create these emissions reductions. 

What this shows is that when you have the right policy, the market will follow. In looking at Federal cap-and-trade legislation, incorporating a system such as in California will create the kinds of 

incentives that private landowners need to manage their lands to 

produce the climate benefits we need to address climate change. In 

doing so, we can provide also hundreds of thousands of clean, very 

green jobs through managing our forests for these products. 

In conclusion, I would like to suggest that forests are not only 

a bridge to a low-carbon future, they are a key component of a 

long-term integrated strategy in U.S. climate policy. 

Thank you. 

12 

[The prepared statement of Ms. Wayburn can be found on page 

87 in the appendix.] 

Senator STABENOW. Thank you very much. 

Yes, Dr. Lubowski. 

STATEMENT OF RUBEN N. LUBOWSKI, PH.D., FOREST CARBON 

ECONOMICS FELLOW, ENVIRONMENTAL DEFENSE FUND 

Mr. LUBOWSKI. Good afternoon, Madam Chairwoman and distinguished members of the Subcommittee. I greatly appreciate the 

chance to talk with you today about the critical role that agriculture and forestry can play in moving our Nation and the world 

to a low-carbon future. 

Last August, I attended a workshop in Des Moines organized by 

the American Farmland Trust, the Farm Foundation, and the Natural Resources Defense Council. This event brought together 27 

farmers to share their views on the market opportunities of a lowcarbon economy. I was struck by a widespread recognition of the 

potential this holds. One participant summed up the mood of this 

meeting by saying, ‘‘Agriculture will be in the carbon-constrained 

world. This is one way we can share costs and spread societal benefits. Agriculture is a system, and it is involved.’’ 

Overall, the strong message from this meeting was that crop and 

livestock producers want to be engaged in a climate change solution, designing its policies and harvesting its benefits. These benefits are hard to ignore. Carbon promises to be a bumper crop for 

U.S. agriculture and forestry if we put the right policies in place 

to reward the farming, forestry, and ranching practices that reduce 

greenhouse gas emissions. The rewards, according to an analysis of 

legislation similar to the Lieberman-Warner Climate Security Act, 

could total more than $8 billion a year for American farmers alone. 

This is more than the value of the entire U.S. wheat crop. So it is 

not—this is a very significant amount. 

My testimony today will cover three key points: 

First, our farms and forests have enormous potential to deliver 

major environmental benefits and provide a crucial form of cost 

control as we move to a low-carbon economy. 

Second, a framework of different quality assurances can safeguard the value of investments in carbon-friendly forestry and 

farming practices. 

Last, a system that credits reductions in tropical deforestation is 

a major opportunity to control costs in a cap-and-trade system, but 

the chances to do this are literally vanishing as we speak. This is 

an opportunity we cannot afford to miss to engage key developing 

nations in the global effort to control greenhouse gases. 

To begin, agriculture and forestry activities have great potential 

to provide cost-effective climate solutions that deliver other environmental benefits as well, as we have already heard. Our vast 

rural land base is one of our great national assets. Climate-friendly 

agricultural and forestry practices can reduce emissions of gases 

that cause climate change and that can also actually remove these 

gases from the atmosphere. Whether in agriculture, forestry, or 

rangeland management, our rural economies possess tremendous 

potential for growth in a new industry of climate solutions. 

13 

By driving changes in land-use and land management practices, 

markets for offsets can also create substantial public benefits in addition to climate change mitigation. For example, practices that 

conserve soils and reduce fertilizer inputs would reduce the amount 

of pollution entering our waterways. A well-designed offset program will also provide major new opportunities for American entrepreneurship because there will be money to be made by finding 

new and better ways to sequester carbon and otherwise reduce 

emissions from uncapped sectors. A well-designed offset program 

will stimulate technical research and business innovation in America’s rural economies. 

The potential impact of carbon-friendly changes in land-use practices also extends far beyond our borders. The destruction of forests 

in the tropics emits massive amounts of carbon dioxide, approximately 20 percent of global greenhouse gas emissions. This is 

roughly as much each year as all the CO2 emitted by all the fossil 

energy consumed in the United States. 

When forest carbon emissions are included, the third and fourth 

largest emitters of greenhouse gases in the world are Indonesia 

and Brazil, respectively. We have an opportunity to reap the benefits of these low-cost, high-value emissions reductions through recognition of tropical forest protection activities in our own carbon 

market. It is critical that we seize these opportunities not only because of the climate benefits, but also because of the tremendous 

impact agriculture and forestry offsets can have on controlling the 

costs of a transition to a low-carbon economy. Offsets broaden the 

set of available options for complying with the requirements of climate policy by allowing companies greater flexibility to make emissions reductions wherever they are cheapest across both the economic and physical landscape. 

Where there is potential to bank allowances for use in future periods, in addition, offsets allow companies to buildup reserves of 

low-cost abatement solutions that can serve as a buffer against unexpected swings in future allowance prices. 

Agricultural offsets are among the lowest-cost of all the land-use 

options, and several analyses have shown that these offsets to be 

the low-hanging fruit.‘‘ Economic analyses have confirmed the costmitigating value of both agriculture and forestry offsets. 

My second point is our system of quality assurances built in to 

a cap-and-trade program can substantially mitigate concerns over 

offset quality. An offset program can provide real reductions in 

greenhouse gas emissions only if the offsets represent real reductions that are measurable, verifiable, and enforceable. 

In my written testimony, I describe a two-part framework of options to meet the need for quality assurances, both at the scale of 

individual projects and at the level of the overall program. 

Firstly, the prime example is right here of all the experience that 

already exists on ensuring quality at the project level. This is a 

manual published last year by Duke’s Nicholas Institute for Environmental Policy Solutions, along with EDF and a panel of highly 

regarded scientists. 

A range of approaches should also be considered to ensure quality while providing market incentives for offsets. For example, an 

enhanced national and regional accounting system could be used 

14 

periodically to compare expected performance from a sector’s offsets 

to estimated changes in greenhouse gases measured in a national 

inventory for that sector. In my written testimony, I also describe 

a potential true-up process for the forestry sector that could permit 

the use of improved information on changes in land-use practices 

to assess and, if necessary, adjust the parameters of the offset program. 

My final point is that policymakers have a time-limited opportunity to simultaneously engage developing nations and reap enormous greenhouse gas benefits through market incentives to reduce 

tropical deforestation. My written testimony describes the results 

from a modeling exercise we conducted at EDF that shows that inclusion of tropical forest credits can substantially reduce the overall 

cost of a U.S. cap-and-trade program similar to the version of S. 

2191 that came out of Committee. Opening America’s carbon market to these international forest tons would also create a model for 

engaging developing countries broadly in solving the climate problem. 

On the other hand, if the world waits a decade or two to create 

powerful incentives for compensating those who protect tropical forests, the forests and the approximately 300 billion tons of carbon 

they contain will already be gone. 

In short, the benefits of domestic agricultural and forest offsets, 

as well as international forest carbon credits, should not be overlooked. They offer an immediate opportunity to reduce emissions at 

home and abroad, and with the right rules and standards, they can 

substantially shrink compliance costs without compromising the integrity of a strict emissions cap. 

Thank you for your attention. I look forward to your questions. 

[The prepared statement of Mr. Lubowski can be found on page 

53 in the appendix.] 

Senator STABENOW. Thank you very much. 

Mr. Corneli. 

STATEMENT OF STEVEN CORNELI, VICE PRESIDENT, MARKET 

AND CLIMATE POLICY, NRG ENERGY, INC. 

Mr. CORNELI. Thank you. Good afternoon, Chair Stabenow, 

Ranking Member Crapo, Senators. It is wonderful to be here and 

to have this opportunity to talk about offsets, which are probably 

one of the three most critical issues facing decisionmakers in designing an effective climate change program, the other two, in our 

view, being the rate of emission reductions and the whole question 

of allocations. These three things together will be critical in determining the economic impacts and environmental effectiveness of 

any climate change legislation, and agriculture and forestry are 

very significant in the equation because they both contribute large 

amounts of greenhouse gases that are hard to regulate under a 

cap-and-trade system and, thus, are ideal candidates for providing 

offsets. And at a personal level, one of the things you did not mention in introducing me was that before I moved to Minnesota, I 

spent 12 years managing our family’s potato and vegetable farm of 

700 acres in Wisconsin, and I know firsthand from that experience 

how eager rural America is for the kinds of business and environVerDate Aug 31 2005 14:14 Jan 30, 2009 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 C:\DOCS\44764.TXT SAG2 PsN: SAG2
15 

mental opportunities that high-quality offsets can create in agriculture and in forestry. 

Now, offsets are also critical for our company as well. We are a 

major power producer. We own and operate 23,000 or so megawatts 

of power plants throughout the Northeast, the South, and California. Seven thousand megawatts of those power plants are coalburning power plants, and we are one of the largest emitters of 

CO2 in the United States, probably the seventh largest in the 

power sector. Last year, we emitted 61 million metric tons of CO2. 

We are not particularly proud of that fact, but we are proud of providing low-cost, reliable power, and coal is part of the equation that 

makes that possible. 

On our own, we are aggressively working to reduce our own carbon emissions by developing new low- and no-carbon power plants, 

including nuclear, wind, and post-combustion and pre-combustion 

IGCC carbon capture and sequestration. But these kinds of voluntary efforts like we are doing we think are simply not enough. 

Like the other members of USCAP at the table here, EDF and 

WRI, we believe that there has to be a mandatory U.S. cap-andtrade system to regulate carbon emissions, and we need this as 

soon as possible to send a market signal for the rapid investment 

in low-carbon technologies across our entire economy. 

There are two reasons we are so interested in offsets. First, 

under any cap-and-trade system, we are going to be a major buyer 

of allowances. We favor a bill that would have a mix of auction and 

allocations, like the Lieberman-Warner bill does. Under that bill, 

we would get enough pre-allowances for about 46 percent of our 

emissions and would have to buy the rest, about 33 million allowances in the first year. If we can buy offsets for less than those allowances, we will buy as many as the law allows. That is simply 

in our own interest to do so. 

But more than our own interest, the basic laws of supply and demand mean that the use of ample amounts of offsets, because they 

are anticipated to be less costly than many of the emission reductions in the regulated sector, should not only lower prices for us 

but should lower prices for consumers throughout the U.S. economy. And this will help protect our economy during the transition 

to low-carbon technologies while helping limit climate change. This 

great potential from offsets to make climate change legislation 

more effective and less burdensome to consumers and our economy 

is the main reason we are so excited about offsets. But that can 

only happen if the right things in the policy arena happen. So here 

are the five things that we think are most important. 

The No. 1 issue, probably the most important issue of all, is we 

need climate change legislation now. Just as an example, we are 

trying to buy offsets ahead of time. We can buy them through the 

Regi markets because the rules are established. We cannot buy offsets that will qualify under the United States cap-and-trade program because those rules do not yet exist. Nobody knows what will 

qualify. Nobody knows how to produce or buy those offsets. So we 

need to get the market rules out there in a way that is friendly to 

business, friendly to the environment, and that will unleash innovation in new technologies. We feel that the entire carbon-related 

investment scene, whether it is power plants, automobiles, offsets, 

16 

were all frozen in the headlights without clear rules. So that is the 

No. 1 thing. 

Second, there have to be reasonable opportunities for using offsets for compliance. As you have heard, various modeling exercises 

suggest that more offsets result in lower prices. We think this is 

critically important, but it is important not to ask for too much because, as any farmer knows, too much of a good thing can cause 

the price to crash, and too low of a price that could happen perhaps 

from unlimited offset use would not necessarily be in anybody’s interest. So it is important to get the quantity right and the price 

right. 

Third, high-quality offsets are critical. We look for contractual 

guarantees that we will not be at risk for offsets that fail to meet 

quality compliance requirements, and that means it is in 

everybody’s interest, sellers and buyers, to have high-quality offsets. 

We think that there has to be a mix of domestic and international offsets. Again, the same modeling from the EPA, EIA, and 

others suggests that domestic offsets alone may not be enough to 

achieve the balance that is needed in terms of price and quantity. 

And high-quality international offsets, especially the ones from the 

reduced deforestation that Dr. Lubowski talked about, we think are 

critically important. 

And, finally, on that note, a mixture of project-based offsets and 

sector-based offsets. Project based offsets—which are things that 

entrepreneurs go out—they put in the methane capture in the feedlot in the livestock operations, and they sell those offsets to people 

like us. Those are important. But sector-based ones, such as the 

Government of Brazil reducing deforestation in Brazil, or other sectors that cannot easily be regulated, also are important. 

So that about sums it up. We need action. We need climate 

change legislation from Congress and signed by the President 

quickly. We need fair rules about offsets. We need ample amounts 

of offsets, and we need clarity in the ability to get on with investing. 

Thank you very much. 

[The prepared statement of Mr. Corneli can be found on page 50 

in the appendix.] 

Senator STABENOW. Thank you very much. 

And last, but certainly not least, Mr. Broekhoff. 

STATEMENT OF DERIK BROEKHOFF, SENIOR ASSOCIATE, 

WORLD RESOURCES INSTITUTE 

Mr. BROEKHOFF. Thank you, Madam Chair and distinguished 

members of the Subcommittee. Thank you for this opportunity to 

testify about the potential role of agriculture and forestry in 

achieving a low-carbon economy. My comments today are focused 

on the basic requirements for carbon offsets under an emissions 

trading program and how agriculture and forestry projects that reduce or sequester greenhouse gas emissions may fare against those 

requirements. 

My own study of the issues suggests that agriculture and forestry have an important role to play in lowering the costs of mitigating climate change. At the same time, many types of agriculture 

17 

and forestry projects may have a harder time meeting the basic criteria for carbon offsets than projects in other sectors. It may be 

more effective to support these kinds of projects through methods 

other than a carbon offset program. 

To understand the issues involved, it is important to clearly define the function of a carbon offset in an emissions trading system. 

Fundamentally, a carbon offset is a reduction in greenhouse gas 

emissions that is achieved to compensate for, or offset, an increase 

in emissions at another source. To serve this function, carbon offsets need to meet five basic criteria. 

First, carbon offsets must be real. They must reflect a complete 

accounting of a project’s effects on emissions. Any unintended increases in emissions resulting from a project, or leakage, must be 

fully accounted for. 

Second, carbon offsets must be additional. This means they must 

involve reductions that would not have happened in the absence of 

a carbon offset program. 

Third, carbon offsets must be permanent. Offsets that are prone 

to reversal through fire, harvesting, or other disturbances must 

have measures in place to compensate for when this occurs. 

Finally, carbon offsets must be verifiable and they must be enforceable. 

The biggest challenge for any carbon offset program is finding 

practical methods to ensure that offsets are real, additional, 

verifiable, permanent, and enforceable. Fortunately, a lot of work 

has been done to develop methods for doing so under a variety of 

programs, both international and domestic, some of them already 

mentioned here today. 

The standards developed under these programs would have to be 

carefully evaluated to determine their compatibility with a Federal 

regulatory offset program, but there is a large body of work to build 

off of. The larger challenge is deciding which types of projects to 

include in a carbon offset program. Generally speaking, emission 

reductions with the lowest uncertainty about their quantification 

and additionality make the best offsets. Projects that capture and 

destroy landfill methane, for example, are highly credible because 

their effects can be directly measured, and there is little uncertainty about their additionality. Projects that sequester carbon, on 

the other hand, including reforestation, forest management, agricultural land management, and avoided deforestation projects, can 

be more challenging. This is because, compared to other types of 

projects, their effects can be more difficult to measure; their reference cases can be more difficult to establish; they are more prone 

to leakage; and their emission reductions are subject to reversal. 

In most cases, it is possible to compensate for these risks and uncertainties. But reducing uncertainty means increasing costs. It 

may be that these added costs can be borne by a carbon offset market, but it is also worth considering whether the climate benefits 

of these projects could be achieved in ways that avoid all the costs 

necessary to certify them as carbon offsets. If such costs could be 

avoided, then more reductions could be achieved for the same expenditure of resources. 

One way to do this would be to encourage projects with high 

quantification uncertainties through a separate program of direct 

18 

payments or other kinds of incentives. Unlike offsets, reductions 

achieved through direct payments, for example, would not have to 

compensate for increased emissions at other sources and, therefore, 

would not have to be subject to the same levels of scrutiny in terms 

of measurement, additionality, leakage, and reversibility. 

Further study is needed to determine which types of projects 

might best be encouraged through an offset program and which 

might be better achieved through other methods. In the meantime, 

it makes sense to design policies that keep both options open for 

a variety of emission reduction projects. 

Thank you very much, and I am happy to answer any questions. 

[The prepared statement of Mr. Broekhoff can be found on page 

36 in the appendix.] 

Senator STABENOW. Thank you very much. We appreciate all of 

your testimony. 

Let me first start by really asking a question related to, Mr. 

Broekhoff, what you were saying at the end in terms of being able 

to measure offsets. Obviously, we want to make sure that whatever 

is being done meets the kinds of things you are talking about. It 

is real, it is new, it is additional, it is enforceable, permanent, 

verifiable, and so on. But we have heard slightly different things 

as it relates to forestry and reforestation and so on. And so I am 

wondering if anyone else on the panel, if Dr. Lubowski or Ms. 

Wayburn, you were kind of looking over—from the look on your 

face, I thought maybe there was a little different perspective that 

you had in terms of measuring as we talk about reforestation and 

so on. But I wondered if either of you would want to comment 

about that as verifiable offsets, credible offsets. 

Ms. WAYBURN. I would agree with Mr. Broekhoff that these are 

key issues that have to be addressed, and I think that these have 

affected how people think about forests and forest emission offsets. 

However, I think we should draw a distinction between where 

those uncertainties really exist and where they don’t. 

I was suggesting that there is a distinction between what we 

have available in the United States in the way of science and systems and good governance that enable the precise measurement, 

that enable the tracking and verification, that enable the transparency to be able to quantify forest emissions reductions with very 

high certainty. And, indeed, I would say they have to be. The only 

way we can create offsets that are fully tradable is to meet those 

same standards, and I believe we have done that in California, because we are now in a pre-compliance market. 

I do agree that uncertainties in measurement exist in forests 

that we do not yet understand and that we may wish to take a different approach for forests where we cannot measure them as accurately as we can in the United States and use those systems to 

help buildup, if you will, to the science and institutional credibility 

and governance that will enable the kind of accuracy that we want 

to see in a full trading market. But I believe that we have every 

capacity in this country to meet all of those requirements, and, indeed, in California’s State legislation, AB 32, which sets a cap, all 

of those requirements—real, additional, permanent, verifiable, and 

enforceable—are required and forests are accepted in that regime 

as offsets through early action. 

19 

Senator STABENOW. Do you believe that it is more difficult from 

an international offset perspective than it is domestically as we are 

looking at forests and offsets? 

Ms. WAYBURN. I think we need to do both. This is such a critical 

issue. When we look at the net excess of CO2 in the atmosphere 

today, between 40 and 50 percent of that comes from forest loss 

and degradation. That is both in the tropics and here. So we need 

to do both. I am suggesting that we may want to take slightly— 

we may want to take similar but parallel approaches domestically 

and globally so that domestically we have the systems to be fully 

tradable to meet those offset criteria and to do it with all the measurement and verification down to the very precise 0.01 statistical 

accuracy. And, globally, we may not be able to meet that, so we 

might want to have a different system that we look at which has 

a different kind of discounting approach globally, where what we 

are really concerned about is not so much that precise measurement on an annual basis and verifying it and visiting it, but we 

are using, for example, remote sensing to see if those forests are 

still there or not and we make direct payments annually to ensure 

that; and that as we buildup the science there, we can have exactly 

the same kinds of systems and perhaps that in the U.S. can help 

inform that globally. But I think we need to do both. 

Senator STABENOW. Dr. Lubowski, you talked also about international—the importance of addressing what is happening internationally as well as domestically. 

Mr. LUBOWSKI. Yes, and, generally, we think that incorporating 

international forest credits is a tremendous opportunity that should 

not be missed, and it is an opportunity that, you know, we are losing as we speak. So for that reason, it is very important to get 

those greenhouse gas benefits, which also, you know, have this potential to offer cost control for U.S. companies and in this way also 

reduce costs for U.S. consumers. 

Going back to the monitoring question, I just first of all want to 

concur that absolutely monitoring and verification have to be done 

and are a key part to ensuring the quality of these offsets. And, 

you know, that is essential for having a robust market where, you 

know, producers can get fair value for their product and also where 

the purchasers can have certainty of what they are buying. 

You were asking about monitoring in the forestry case versus 

maybe in terms of some other offsets from agriculture, and one 

issue here is that for soil carbon, you really have to get into the 

ground to measure it; whereas, forests can more easily be monitored from space. 

I am not a remote-sensing expert, but I have been told that there 

are some ways you can actually get some idea about soil carbon 

from space. But in the forestry case, this is a lot easier and a lot 

more precise. 

So that is one of the reasons why in my testimony we discussed 

this national accounting system and improved national inventory 

with a potential provision for over time, if we are not getting all 

the reduction from the forest sector that we expected, there might 

be some room for a true-up. 

Conversely, you know, we might get more than we expected, and 

then we—you know, we would not have to worry about that. But 

20 

the key is that, you know, we can do the monitoring from space 

and also that it is very important to build a program that over time 

will gather more and more data and more and more information 

and have the flexibility that as we get this data, we can then improve the program, refine the protocols, and make things better as 

we go along. 

Senator STABENOW. Thank you. 

To any of the panelists that want to answer, we will be having 

in front of us a very important work product regarding global 

warming coming before the Senate in June, a very important piece 

of legislation, a lot of work, bipartisan and so on. What would 

you—would anyone want to speak to how you would improve on 

this as it relates to offsets? What do you think would be the— 

whether it is the number, whether the percentage that is in the bill 

right now, or the language in terms of types of offsets, do you feel 

that the language—and I know we will have a substitute or a manager’s amendment. We will have to take a look at the final language. But do you feel that the language, in terms of offsets and 

the kinds of things, whether it be agriculture or forestlands and so 

on, are broad enough to cover all of the things we are talking 

about? Or do we need to do some work as it relates to the description of the offsets as well? But it would be helpful to know any suggestions that you would have. Yes, Mr. Corneli. 

Mr. CORNELI. Senator, the comments I will make are about the 

bill as it was reported out of EPW. There is certainly a lot of uncertainty about what it is going to look like soon. But the two areas 

that we think would be improvements in the bill compared to how 

it was when it came out of EPW would be, first, to make it clear 

that when it comes to offsets, the 15 percent that was allowed for 

compliance for international credits would instead be clearly specified that those could be international offsets—a credit being something like what is traded as an emission allowance in the EU, not 

an offset per se. We think that is very important. And that would, 

in effect, convert the bill from 15 percent to 30 percent offsets. 

We also think it is very important that the idea of these avoided 

tropical or avoided international deforestation tons be a component 

of the bill simply because the volume of deforestation that is going 

on tropically—I did some math. I think it is 100 square miles a 

day, roughly, of tropical forest that is disappearing and will not 

come back. It is so huge that that is an opportunity that we just 

cannot lose. It has all these other biodiversity and ecological and 

international security benefits. 

And, finally, as a buyer, again, we hate to see some really good, 

cheap stuff go just because people have not figured out how to 

weight it yet. You know, let’s keep it in the bin until we figure out 

what the scale is, and then let’s start buying it pretty quick. 

So we think those are two things that would be fairly straightforward and improvements over the bill as it was in Committee. 

Senator STABENOW. Thank you. 

Mr. Wittman. 

Mr. WITTMAN. Well, I would like to add one point on the percentage of the offsets that could be coming from the ag and forestry sector. We believe that the current number is too low. We would like 

to see unlimited offsets. If this is truly the least-cost alternative 

21 

out there, and we are not looking at this as a permanent solution 

but, rather, a bridge toward the future where we can get technology to come up with solutions for better energy and other 

changes in our systems that reduce emissions, we would like to see 

no limits rather than a 15 percent limit. 

Another area that is very important is the issue of the infrastructure you are going to use to implement this. We already have a 

wonderful infrastructure in USDA that can provide a delivery system that has—it has been in the business of creating standards. It 

has been in the business of creating data. It has data out the front 

line. One of the issues that I see of major concern—and this has 

happened in the past as we have added new programs like EQIP 

or CSP—is that we give an existing organization a new mandate, 

and we do not give them any additional resources. We do not provide the educational support so that they can implement that. 

USDA scientists have been studying models for years, and our 

organizations have been working very closely with them in testing 

and refining these models. And there is a huge body of work out 

there. And in reference to the issue of measuring and monitoring 

and verification, we share the concerns of others that we must be 

able to meet the rigor of these rules so that they are good quality. 

But a crude measure of the right thing is better than a precise 

measure of the wrong thing. And you are dealing with measuring 

something that can only be measured over long expanses of time, 

because we have variables in rotation systems, we have variations 

in climate, whether ag offsets, whether it is forestry or soil related, 

can never be measured by what happens in 1 year. You have to 

look at long-term trends. 

Another issue is we have a tendency to think that all the answers to our solutions exist in the United States. There are other 

parts of the world that have been leaders long before us in implementing no-till. They have data and research that we can 

buildupon and add to our existing scientific data to get to answers 

as to how to do this measurement process. It is available in Europe 

and South America. You have countries that have wholesale adoption of no-till that are leaps and bounds ahead of the United States 

in terms of their percentage of adoption. 

Our no-till organizations are interacting through international 

networks to tap that information. So I would challenge you in these 

bills to make sure that we clearly define USDA’s role in the definition of these standards, and particularly in the measurement process, that they be given some specific directives. For example, one 

is no further funding for a USDA model until they put that model 

in laymen’s language where the user can put their data in without 

converting it to metric information. 

I recognize their need to publish and their scientific disciplines, 

but that industry does not understand today who their customer is. 

No farmer, no politician, no policymaker will stand for trying to 

convert what we produce into metric units and taking 3 hours to 

fill out a data form to test what is happening in sequestration. 

So these are the things that I think the bill could really improve 

upon. 

Senator STABENOW. Thank you. 

Anyone else? 

22 

Mr. LUBOWSKI. Thank you. Environmental Defense Fund supports the version of the S. 2191 bill that came out of Committee, 

but we think an improvement, as I said before, would be to expand 

the international credit provisions to allow for the reduced deforestation tons, and this is very important for the reasons that have 

been already been mentioned, and especially because this opportunity is, you know, disappearing as we speak. And if we don’t take 

advantage of it, we will end up paying for it in two different ways: 

first, we will pay higher costs of complying with our climate legislation today, and, second, by not getting Brazil and other countries 

on a path of reducing their deforestation emissions, this potentially 

can make the climate problem worse and have us have to pay more 

in the future to make up for the damage. 

So for these reasons, it is very important to include these credits, 

and I will also add on the monitoring side that Brazil right now, 

through its National Space Agency, has on the Internet a website 

where you can see in real time how deforestation is happening 

across the country. So this can be monitored and verified. 

Thank you. 

Senator STABENOW. Thank you. 

Yes, Ms. Wayburn. 

Ms. WAYBURN. Well, I recognize that the version of the bill that 

we have seen has changed markedly, so I am not going to comment 

on the bill as it may exist or may not at the moment. But I would 

like to suggest a couple of things. 

We would support unlimited offsets with the proviso that we 

need to have with that integrated accounting between the offset 

sectors and the cap sectors. And I bring this up because one of the 

most effective ways that forests and agriculture can contribute here 

is to providing sustainable alternative energy. And if what we are 

doing in the forest sector is providing this woody biomass for energy and eventually for low-carbon transportation fuels, and we are 

valuing those fuels in the cap, but we are not valuing their production facilities, if you will, the forests and the farms in the cap, we 

could drive very perverse outcomes, because if all we do is value 

the product but not the resource that is producing it, we push for 

more product and we do not have to count for the impact here. And 

we have seen this, unfortunately, in this weakest discussion 

around corn ethanol. When you look at the whole cycle accounting, 

corn ethanol does not pencil out from a carbon emissions reduction 

strategy. And so I think that unlimited offsets I would favor, if as 

noted a moment ago, because I think that as we move the market 

forward domestically in this country, particularly because forestry 

is a global industry, we will pull those markets globally as well. 

I believe there is something called ’’positive leakage,‘‘ which is if 

I do well by doing the right thing, you may also wish to do that, 

too. And so I think that as we look at trying to incorporate unlimited offsets, we need to recognize that we need an integrative accounting between the capped and uncapped sectors so that we don’t 

have perverse outcomes. 

And the only other item that I would like to suggest is that recognizing the urgency of halting deforestation in the tropics, we also 

need to recognize the urgency of harnessing America’s opportunity 

to restore our own forest carbon banks. The opportunity here, tens 

23 

of billions of tons in 50 years, an average of, say, a billion tons a 

year, depending upon what price that you want to use. That is 

going to be adding tens of billions of dollars into this economy for 

revitalizing rural areas across this country that are forest dependent or creating new jobs in energy. That is very powerful, and that 

will generate the kind of support we need in this country to really 

enact effective legislation. 

Senator STABENOW. Thank you. 

Mr. Broekhoff. 

Mr. BROEKHOFF. Yes, Madam Chair, I would reiterate what Mr. 

Corneli suggested in terms of recognition of international carbon 

credits, and in particular, credits generated under the Clean Development Mechanism. This is the largest existing regulatory offset 

program in the world today. 

There have been some criticisms of the CDM, I think some reasonable ones, but I think the benefits of the United States engaging 

with the system probably outweigh the risks, and that is a change 

I would like to see. 

If I might take a moment to say a few words about the international forest credit notion and, in particular, addressing avoided 

deforestation through offset credits, I think, you know, clearly if we 

look at the issue of climate change and how we are going to address it, it is critically important to address deforestation globally, 

not just for climate change mitigation but for a whole host of environmental concerns. However, if you are looking at an offset crediting approach for deforestation, all the kinds of concerns and criteria I raised in my testimony come up, I think, writ large, in many 

cases. 

So you have to deal with issues of leakage. If you prevent deforestation in Brazil, you don’t want it to simply move to Peru. And 

it is a global issue. If you look at timber markets today, they are 

international and global in scope. They rapidly respond to shifts in 

supply and demand. 

So I think a system like that would have to have a very high participation rate. You would want participation from countries that 

make up probably 90 percent or more of global forest coverage. 

You also need to look at this issue of permanence. If you slow 

rates of deforestation, it does not help if that simply delays the 

point at which all the forests are gone. 

So if you are looking at an offset crediting mechanism, you want 

to make sure that you are crediting against a baseline that actually 

slows, stops, and reverses deforestation. And I think that is important when we are looking at what you credit against in that kind 

of system. 

You also have to have effective monitoring and verification, and 

I understand that there are others here who are probably more expert on this than I. Talking with my colleagues, I know we have 

good systems for monitoring forest coverage. I think there are 

greater uncertainties in terms of measuring the carbon that is actually in the forests, and we may have to improve some of that before you can have quantification levels up to the level of confidence 

we want for an offset crediting program. 

Finally, you need to have institutions and governments capable 

of actually delivering on avoided deforestation and achieving these 

24 

gains, and doing so in a way that respects community rights. And 

I think to do that you will need some capacity-building efforts prior 

to the implementation of this kind of program to get it going. 

So, again, it is critically important to address, but there are a 

number of ducks that I think you need to get in a row before this 

kind of program might be viable as an offset program. 

Senator STABENOW. Thank you. 

Mr. CORNELI. If I might just—— 

Senator STABENOW. Yes, quickly, and then I am going to turn to 

Senator Crapo. 

Mr. CORNELI. In the spirit of dialog here between the limits, the 

unlimited, and a lot of ducks to get in a row comments here, one 

idea that may be worth considering in any legislation that might 

help solve all of those issues is to create a bank, if you will, or a 

pool of offsets, an offset reserve much like the old soil bank or the 

original farm commodity programs of some time ago, where the 

idea is to really put large amounts of offsets, whether domestic or 

international in a reserve, so they would be delivered, they would 

be realized, the trees would stop being cut down in as many of the 

rainforest countries as possible, while the quality and verification 

issues are being worked out. And that pool, instead of being sold 

to compliance customers like us, people who want to buy offsets to 

turn in instead of allowances, would be held in reserve and dumped 

into the market or injected into the market through, say, an auction in response to allowance prices getting too high. And as all of 

you know, one of the big concerns about S. 2191 is some of the 

model runs that show $77 or $200 allowance prices, well, having 

a reserve like this not of allowances but of actual real offsets whose 

reductions have already taken place could be a way to, A, guarantee environmental quality without borrowing from the future; B, 

assure that prices are stable; and, C, solve some of these very real 

problems while providing ample places for domestic and international offsets to go and to get paid for. 

So that is a concept that could be worth considering as well. 

Senator STABENOW. Right. Thank you very much. 

Senator Crapo. 

Senator CRAPO. Thank you very much, Madam Chairman. Actually, I think you and I were working off the same list. You asked 

a lot of my questions. But, I still have a lot more. 

First, Mr. Wittman, I would like to ask you, if you know—I don’t 

know how thoroughly you have studied the specific text of Senate 

bill 2191. I want to get to the baseline question, though. The baseline in S. 2191 is defined as the ’’greenhouse gas flux or carbon 

stock that would have occurred in the absence of an offset allowance.‘‘ Now, the question I have is for a farmer like yourself, who 

is already engaging in a practice that is reducing emissions, such 

as direct seeding, would you be eligible for an allowance or an offset under that language. 

Mr. WITTMAN. The issue is what is the baseline from which we 

are trying to reduce overall emissions. If we are using 1990 as the 

starting point and say, okay, by some future point in the future, 

we are going to reduce from 1990, then everything that people have 

done since 1990 should be given recognition. 

25 

The reality is that the concerns about additionality and measurement are going to make it very difficult for me to go back and market the carbon that I have sequestered since 1990. If I have notilled my farm every year, I am probably sequestering between 0.5 

and 0.75 tons of carbon per year. The problem with not recognizing 

that is that you create perverse incentives for someone, to be eligible to cash in on carbon market opportunity. You create the wrong 

incentives to literally plow up soils, and restart the clock so that 

you can become a good person. That is the last thing we want to 

create in our policy structure. 

So our view on this is that we need to look at the continuation 

of a practice like no-till. Even though you have done it for years, 

every year you still have incremental sequestration. There is additional good every year that is being added to the pot. It is not done. 

We have all kinds of scientific projections that have said there will 

be some point in the future where we will reach saturation and we 

will no longer sequester more carbon, and if that is the case, then 

I should not be eligible to collect an offset because I am not sequestering incremental carbon. 

So it is both the issue of incremental sequestration as well as 

avoided emissions. The minute I turn around and till soil, I start 

emitting. I send CO2 up into the atmosphere. So we need to create 

a policy that encourages not only adoption by new people of a practice that works, but avoidance of practices that are going backwards. 

Senator CRAPO. Thank you. And I know, Ms. Wayburn, you had 

mentioned additionality as an issue, as well as Mr. Broekhoff, and 

probably all of you. But anybody else want to get in on this issue 

right now, Ms. Wayburn. 

Ms. WAYBURN. Well, Senator Crapo, one of the approaches—the 

approach that we suggested and that has been adopted in California is something called ’’regulatory additionality.‘‘ And what this 

does is establish a level playing field for everybody. You work from 

what are existing laws in your State or, in the absence of law, best 

management practices in your State that are recognized. And 

whatever you do above what you are required to do by law and that 

you commit to keeping there qualifies as additional. And that does 

several things. 

No. 1, it recognizes early actors, people who have been doing an 

excellent job, and says thank you for doing that we will reward 

you, and other people will then follow. We recognize that the law 

sets a baseline of common behavior. And so that concept of 

additionality can happen in this country because we do have a regulatory baseline or a best management practices baseline which is 

widely identified. 

Senator CRAPO. Thank you. 

Mr. Broekhoff. 

Mr. BROEKHOFF. Yes, this issue of additionality is probably the 

most vexing aspect of a carbon offset program and how you approach it. To speak about it conceptually, the idea is essentially 

you want total emissions under an emissions cap-and-trade system 

to be the same whether you have an offset program or whether you 

don’t. When you issue an offset credit, that allows emissions from 

capped sources to go up. So in order to keep net emissions the 

26 

same, you have to give credits to reductions that would not have 

happened if you didn’t have a carbon offset program. And if you are 

giving credits for reductions that occur from activities that someone 

was going to do anyway, they had been doing for years, it made 

sense anyway, in effect you are undermining the integrity of your 

emissions cap. 

Now, I realize that creates all kinds of difficulties and problems, 

so I think there are some practical ways to approach additionality. 

Regulatory additionality may be one component of that. Probably 

in some cases for some types of projects, you need to go beyond just 

the regulatory piece of it. But it does become difficult to give credit, 

even though that may seem unfair, for activities that have been 

going on for years and would likely continue into the future without an offset program. 

Senator CRAPO. Thank you. 

Anybody else. 

Mr. LUBOWSKI. Thanks. The point about rewarding people that 

are already doing the right thing is important in the sense that we 

definitely don’t want to create perverse incentives for people that 

have been doing the right thing now to not do it in order to then 

be able to get credits. So it is very important to address this, and 

there are different ways it could be done, including potentially 

through, you know, using the allowances that have been reserved 

for the agriculture and forest sector, and there are other options as 

well. So this is an important issue to deal with. 

In terms of additionality, there are very detailed guidelines already developed to deal with incalculate baselines for individual 

projects, you know, depending on the type of project and type of activity. In addition to this project level work, we think it is very important to do very good monitoring and accounting of the overall 

sector, to get an idea overall nationally what we are getting, and 

then be able to use this data to then go back and improve the 

project level standards and protocols. 

In terms of the tropical deforestation, there what we have been 

advocating is for the largest emitting tropical countries, there is no 

indication that deforestation is decreasing. If anything, the recent 

experience shows that it is going up. 

So we have been advocating using historic data on deforestation 

rates over, you know, a historic period and then crediting national 

level reductions below these historic rates as our definition of ’’additional,‘‘ and especially if you look at it at the national scale, you 

know, you don’t have this within-country leakage issue. There still 

is, of course, what Mr. Broekhoff alluded to in terms of potential 

leakage internationally. So, you know, the solution to this is getting at least the biggest emitting countries on board, you know, 

and creating a process to try to encourage as many other countries 

to join into the program. 

Thank you. 

Senator CRAPO. Thank you. 

Mr. Wittman, again, do you and the organizations that you have 

been working with support the allowance of international forest 

carbon credits to be utilized in the United States? 

Mr. WITTMAN. Do we? 

Senator CRAPO. Yes. 

27 

Mr. WITTMAN. I think our organizations generally would support 

a combination of domestic and international. As a massive user of 

energy and fully aware of the implications to fertilizer costs and 

energy costs, it is important to us and the consumers that buy our 

products to not have economic shocks that we can’t stand. So as 

long as international projects are verifiable—and I will recognize 

the Clean Development Mechanisms that exist—there are those 

that say if you are going to rely on international projects and they 

meet those standards, those are tougher than many of the things 

that we have existing in the U.S. today. 

So I don’t think we should be so concerned about the quality of 

international offsets if they are only allowing those to qualify that 

meet those clean development mechanism standards today. 

Senator CRAPO. I know an argument has been made that international offsets would be less expensive than domestic offsets. Is 

that generally agreed? I see yeses and noes, so maybe I ought to 

ask the question. The question that I am getting at is that—I guess 

there are several issues here to weave together. One is if we allow 

international offsets, should they be capped? If they are allowed 

and if they are capped, again, should the domestic offsets be 

capped similarly, or should domestic offsets be treated differently? 

In the context of this question, what kind of an impact on the market price allowance would international offsets would cause. 

I know that is a very complex question, but would any of the witnesses care to comment on the issue in general and how we should 

approach it? 

Mr. WITTMAN. I would like to just add to what I said on that. 

There is a real concern that if we just allow people in the U.S. to 

go the cheapest place in the world elsewhere and buy low-cost 

projects, that we will not really affect the emissions reductions that 

we are trying to achieve. It won’t be painful enough. 

If we have an unlimited cap on domestic offsets, I think we are 

protecting the opportunities for economic investment in the U.S. 

first. And maybe to be conservative, we should have some cap on 

international. But I don’t think we should stop with the international as long as we make sure that the standards those projects 

have to meet are as rigorous as anything we would do in the U.S. 

Senator CRAPO. Anybody else want to comment on that, Mr. 

Corneli. 

Mr. CORNELI. I think that these are very tricky issues, and the 

insights that are out there, many of them come from modeling exercises that make their own assumptions about the costs of domestic and international offsets. 

So with the proviso that my view is somewhat informed by these 

models and that they may be wrong, I will go ahead and say it 

looks like the domestic offsets get more expensive more quickly 

than the international ones, and that that means that if you were 

to rely on domestic offsets to moderate prices—and I think this is 

consistent with what Mr. Wittman just said—you would see higher 

prices for allowances, and they could be so high that they could— 

the allowance prices themselves could have these effects of causing 

people to use a lot of natural gas instead of coal in power production, driving up the price of natural gas for consumers and fertilizer manufacturers. 

28 

So to avoid that problem, it would probably be useful to allow a 

fair number of international offsets, especially the ones that are 

likely to be lower cost, such as the avoided deforestation ones, and 

understanding that those may be more expensive in terms of all 

the risks and transaction costs that we really don’t know about yet. 

So what that suggests is that if there was a limit on domestic 

offsets, it might not be hit. If there was a limit on international offsets, it might be hit. The domestic one might not be hit because 

the market price would not be high enough to turn on all of the 

domestic ones that are available. 

Senator CRAPO. I understand. 

Yes, Ms. Wayburn. 

Ms. WAYBURN. I think that we just do not know at this juncture 

which is going to be more or less expensive, and I think one key 

reason for that is that, in our experience doing these projects, we 

have what we would call an all-in approach. Starting from the beginning, we have paid for the long-term security, we have paid for 

the monitoring, we have all of those costs built in from the beginning; whereas, in many of the CDM projects and the international 

projects, the initial costs are there, but not the long-term costs. 

And the question of how much transaction cost that will add over 

time is at this point unknown. 

What I would say is that in our experience in selling these offsets 

in a pre-compliance market—so this is where people are counting 

on these to meet their requirements under law—our prices are between those of the Chicago Exchange and those in Europe. And 

they are equal or less than those we are seeing on CDM. 

Senator CRAPO. Thank you. 

Mr. Lubowski, quickly, if you—— 

Mr. LUBOWSKI. Yes, quickly. I will just say that it is important 

to note that the version of S. 2191 that came out of Committee also 

has a provision for a Carbon Market Efficiency Board that would 

have various powers, including the power to adjust limits on offsets, if appropriate. And some people argue that there should be no 

offsets; some people argue there should be unlimited offsets. I think 

the key thing to keep in mind is that we should have a system of 

checks and balances where you have very good data and are able 

to assess, you know, the quality of the offsets over time and have 

flexibility to, based on this real information and good data, determine which offsets should be let in, how many should be let in, and 

be able to have flexibility to do this as the data comes online. 

And—I will leave it at that. Thank you. 

Senator CRAPO. Thank you. 

Madam Chairman, I do have one more question, if I could ask 

it. 

Senator STABENOW. Yes, you may. 

Senator CRAPO. I cannot resist asking this question since this is 

the Forestry Committee. It deals with forest fires, and the question 

is, how do you contemplate that we weave in the issue of healthy 

forests in terms of the context of forest fires into this whole debate? 

And let me just say a few things, and I would love to hear statistics 

or information that any of you have, or ideas here. But as I understand it, the record forest fires and rangeland fires that we saw 

last year caused immense emissions, in fact, my understanding is 

29 

the emissions caused by these fires far exceed that of any other 

sources of emissions, or at least the transportation sources of emissions that we have in this country. So it is a huge emissions source, 

yet there is also a great debate going on as to whether or not we 

should let fires burn or not in terms of the proper management 

practices in our forests. So once again, the way we deal with it in 

the context of global warming raises, to me, a phenomenal set of 

difficult issues. 

I know that is a huge question, but it has got to be one that people have struggled with as we deal with this in the context of forests. 

Ms. Wayburn, do you want to start out there, or Mr. Wittman. 

Mr. WITTMAN. Go ahead. 

Ms. WAYBURN. Well, I think that is an excellent question, and it 

is one that gets more pointed as we look at what climate change 

is predicted to do to forests. And I would like to suggest there are 

several ways to approach it. 

No. 1, the primary incidence of fire is on our public lands, not 

our private lands. And what I was suggesting in my remarks is 

that we focus the market and offsets on private lands, not public 

lands. I think we want to establish a goal for public lands that 

looks at managing these forests for their greatest adaptation and 

resilience in climate change because of the increased stress that climate change brings. 

Now, that may, in fact, mean much more management on these 

lands than what we have been experiencing in order to reduce 

those fuel loads, in fact. And so for that long-term environmental 

gain in re-injecting, if you will, resilience into these forests, we 

would have increased management to do that. 

On private lands, where the incidence of fire is so much smaller, 

I think what you are looking at is what is your insurance system. 

How do you have—it is really a contractual issue, but if I have sold 

you 100 tons of carbon emissions reductions, I have got to guarantee those against all sorts of natural risks. And so in our buysell agreement, we need to have a provision for that, and I can tell 

you that buyers have very, very strong provisions around that. 

So there is a buffer system there that is required. Whether it is 

individually or whether it is pooled, whether it is Governmentbacked, there is a buffer system. 

So I think the question of fire can, in fact, be dealt with, and it 

needs to be dealt with over the long term, and it particularly needs 

to be addressed to our public lands to restore resilience and adaptation to these lands. 

Senator CRAPO. Thank you. My time has far expired, but, Mr. 

Wittman, if you could be very quick. 

Mr. WITTMAN. You hit a hot button with me because we manage 

forests, private forests, and we are right next to publicly managed 

forests. We plant almost 9,000 trees every year. We selectively log 

our forests. And when we get done, we have a fully stocked forest. 

The role that many of us have here is not only managing carbon, 

but we are trying to educate others on this whole issue. One of the 

challenges we have had is getting people to see: ‘‘what products we 

have to sell in a carbon portfolio market?’’ Just last week, we were 

engaged in this debate with some foresters. They are interested in 

30 

getting into carbon trading. Their questions are: ‘‘What do we have 

to sell?’’ And I said, ‘‘You have three different kinds of products: 

you have reduced-emission products, you have avoided-emission 

products, and you have offsets through sequestration.’’ They said, 

‘‘Well, what does that mean?’’ Here is what this means. 

A reduced-emissions project would be going to a chipping operation and chipping slash piles and sending it to a power plant instead of lighting a match and sending that carbon into the atmosphere. Now we are producing renewable energy from limbs instead 

of sending this smoke up in the air and doing no good at all. That 

is reduced emissions. 

Avoided emissions is being able to go out and selectively log a 

forest so that when you do have a fire, it burns limited residue on 

the ground, but it does not totally destroy the forest, and it does 

not burn up 8 inches of organic matter and turn your ground sterile. 

So once they put language to carbon concepts they can understand at the layman level, they start thinking of all the things we 

can do, and I think that is a message that we probably have not 

talked about enough today. We underestimate the potential of our 

American entrepreneur to create solutions. 

If I am allowed to be a prophet for about 30 seconds, I will say 

that the cost of this whole climate change legislation will never be 

as bad as what we think it will be. American ingenuity will create 

solutions that we never imagined. Once we educate people on the 

opportunities and how they can participate and we scare them with 

the threats of how bad the costs can be, I think we will see solutions coming out of the woodwork that we never would have imagined. 

Senator CRAPO. Thank you. 

Senator STABENOW. Thank you very much. 

Senator Klobuchar. 

Senator KLOBUCHAR. Well, thank you much, Madam Chair, and 

thank you to all the witnesses. A lot of the questions have been 

asked, but I will forge ahead. 

You know, I am on the EPW Committee and an original cosponsor of the Lieberman-Warner bill, and I feel strongly that we 

should not wait a year to act. I was in Greenland last summer and 

saw the water melting off these humongous icebergs. They call it 

the ’’canary in the coal mine of climate change.‘‘ And you have laid 

out some of the arguments that we have heard, Mr. Wittman, 

against the bill, and we know there are always changes that we 

can make to make it better. 

But what I was most interested in was, Mr. Corneli, not just because you have a Minnesota connection, but your testimony and 

where you freely said that your company produces 7,000 megawatts 

of electricity from coal-fired power plants in addition to the natural 

gas and oil and nuclear plants that you operate and that you are 

the seventh largest emitter of CO2. 

Are people surprised when you go out and speak, are they surprised to hear you advocating for climate change legislation? 

Mr. CORNELI. Not so much anymore. 

[Laughter.] 

31 

Mr. CORNELI. We look at this, as many in the utility or power 

industry do, as fundamentally a problem of technology. When it is 

free to put carbon in the air, people will do it. You know, why 

would you not do something that does not cost anything when you 

are making a business decision and your competitors are all making business decisions? So we have not really had any powerful incentive as an industry or as a company to find something else to 

do that either will not emit the carbon or that will capture it and 

keep it from going into the atmosphere. 

Like Mr. Wittman, we think that when there is a price signal, 

and also when there are also other complementary policies that 

will help support the kind of technology development we need, that 

people will very quickly—engineers at GE, another member of 

USCAP, General Electric, by the way; at Siemens, another member 

of USCAP, the companies that make this stuff, the companies that 

build this stuff, and the companies that buy it and use it—will all 

very, very quickly figure out how to take the carbon out of things 

like the power sector and how to keep using coal in a way that 

keeps the carbon out of the atmosphere. 

And so we think that that is sort of like we are part of the solution—I mean, we are part of the problem. We have to be part of 

the solution. Policies have to change the technology. And I think 

the same thing applies to the offset business. We have to get a 

clear signal to use the forest sinks, the soil sinks, the avoided 

greenhouse gas emissions that cannot easily be regulated, get people innovating about those, and the answers will come out of the 

woodwork, and we will be surprised at how quickly and effectively 

we can get there. 

Senator KLOBUCHAR. One of the things I have been noticing, you 

say our country developed the wind technology, but now we have 

been leapfrogged by two or three other countries in terms of them 

getting there first in terms of the number of turbines and what 

they are doing. Could you talk a little bit more—I know you talked 

earlier about the urgency of this and the lost investment and kind 

of the delay that, in fact, what I am starting to believe is because 

the people of this country and the entrepreneurs know we are 

going to do something, they are actually holding back until we do 

something. Is there some validity to that? 

Mr. CORNELI. I believe there is. It is very hard to sink a lot of 

money—a new power plant costs several billions of dollars. A new 

auto production line probably costs something like that. Engineering a new electric battery so that low-carbon or no-carbon power 

plants could provide electricity with zero carbon to cars, to consumers’ cars, so they would not have to buy $4 gasoline—those 

things cost a lot of money, and people will hesitate to spend that 

kind of money until they know they can get it back in terms of selling goods and services. And so there really is this sort of leashedup demand here. 

I think what we are—you know, there is a lot of fear—China is 

the usual sort of suspect—about we are exporting jobs to China if 

we regulate CO2. There is another—— 

Senator KLOBUCHAR. And how do you respond to that? 

Mr. CORNELI. Well, part of that is that we have to lead in figuring out how to do this so cheap that they want to buy it. But 

32 

there is another big risk, which is there are people, there are many 

companies in China figuring out how to make low-carbon technologies that they can sell here. And there is a global race in terms 

of decarbonizing, inventing, innovation, and America is the greatest 

economy in the world, the greatest source of innovation and creative thinking in the world. As soon as we get a market system 

that will turn that on for solving carbon stuff, we will win that 

race. But if we wait too long and other countries get ahead of us 

in the race to low-carbon technologies—— 

Senator KLOBUCHAR. Thank you. 

Does anyone else want to respond to the China argument that 

we often hear, Mr. Wittman. 

Mr. WITTMAN. I have a concern, and this is fed to me constantly 

by my children, who are much better educated than I am, that we 

spend too much time blaming China and India for being part of the 

problem when, in fact, we need to look at our consumptive patterns 

in the U.S. and consider the fact that India and China simply want 

to grow the right to build their eating habits and standard of living 

like we have. We are the model. And if everybody in this room 

went through the process of doing a carbon footprint and we start 

studying the impact that we have on global resources, I don’t think 

there is a single person in here who would not change some behavior tomorrow. But the first step in changing or correcting a problem 

is understanding or creating an awareness of how you are personally part of that problem, whether you are an individual or whether 

you are a business. We are not going to change China’s and India’s 

demand for resources. They don’t use a fraction of what we use yet, 

and while their growth is increasing, the level per person is nowhere close to the United States. 

So I agree with the concept that we go back to becoming world 

leaders in crafting solutions, making it so successful that they will 

want to copy us like they have copied everything else, and they will 

follow us in making environmental change. 

Senator KLOBUCHAR. Thank you. 

Mr. Broekhoff. 

Mr. BROEKHOFF. Just following up on that and turning that 

question a slightly different way, if you look at this question of 

international carbon offsets and the Clean Development Mechanism, this is an offset program that clearly we are not participating 

in, but it has already created opportunities for U.S. companies in 

developing countries. The United States is actually second only to 

Japan in terms of being the source of technologies that have been 

deployed in these energy-efficient, renewable energy projects in developing countries, including China, so that, you know, the benefits 

and risks can go both ways. 

Senator KLOBUCHAR. Thank you. I want to follow up with something else, Mr. Broekhoff. In your testimony you talked about the 

problem with measuring how much additional carbon is stored in 

the soil with tree plantings and grass plantings, and you said that 

it is difficult to measure whether it is verifiable. 

I know there were provisions in the 2002 farm bill and we have 

some similar provisions in the 2007 farm bill that require USDA 

to study the potential for soil carbon sequestration. Could you tell 

me a little bit about the research that you alluded to or the lack 

33 

of research and where the shortcomings are, and what do you see 

as the highest research priorities going forward? 

Mr. BROEKHOFF. Well, let me try to clarify my argument. I am 

not arguing that we do not have the technology or the scientific 

knowledge to verify with some accuracy the carbon that is sequestered in soils or trees. I think you can employ methods that do that 

with a high degree of accuracy. However, it is harder to do than 

it is for certain types of other projects that could be used as offsets. 

So if you are talking about landfill methane, for example, you capture methane coming out of the landfill and run it through a flare 

or use it to generate electricity, you can measure how much methane you are capturing with a flow meter with a high degree of accuracy, and at low cost. 

Turn to something like soil carbon sequestration, and the methods you use to try to get to that same level of accuracy entail a lot 

more costs, relatively speaking. So it is a relative argument. 

And the issue basically boils down to there being more kinds of 

overhead costs like that for many of these kinds of agriculture and 

forestry projects than for other types of projects. 

Senator KLOBUCHAR. Thank you. 

Any thoughts on hybrid trees? I visit all 87 counties in my State 

every year, and my most memorable visit to Crookston recently 

was that the highest tree in Crookston was only like 8 years old 

or something. It was a hybrid poplar in the back of Wendell Peterson’s yard. 

And so, Ms. Wayburn, do you have any thoughts on that and the 

development of that and if that is a possibility as we look into, you 

know, more trees and more forests and how we could handle these 

things in terms of the global warming issue? 

Ms. WAYBURN. I think agricultural approaches to forestry make 

a lot of sense. But I think at the same time, we want to recognize 

the role of managing our natural forests effectively as well, and 

that those gains perhaps are more sustainable, and they are certainly more realizable in the near term. 

I had my hand up just to offer an anecdote of how we can positively affect China through what we have done in California with 

forests. Now in Fujian Province in China, they are looking at natural forest management as a tool in their own carbon emissions reductions as opposed to what they have been looking at before, 

which was a very intensive industrial forest management policy, 

and looking at the net gains that they were making in climate 

through natural forest management and meeting their timber and 

product supply needs. So that was a positive leakage example of 

developing something here and using it and having it work in 

China. So I would support that. 

But the notion of can we use hybrids, can we use genetic modifications, can we use fertilizers, all very much more agricultural 

approaches in forestry, I think the answer is yes. We just need to 

look at the total carbon budget and what the side effects are. Because if we are going to look at things like crop switching, which 

is what I would suggest hybrid poplar might well be, that might 

make more sense than, for example, something like cotton. 

Senator KLOBUCHAR. OK. Any other thoughts? 

[No response.] 

34 

Senator KLOBUCHAR. All right. Well, thank you very much. I appreciate it. 

Senator STABENOW. Well, thank you very much to each of our 

panelists. I think we have exhausted our time today, but we have 

learned a lot, and I appreciate very much your comments as we explore ways to be able to use offsets in a way that is measurable, 

quality, permanent, all of the things that we have talked about 

today to really be able to allow us to expand upon the effectiveness 

of a cap-and-trade program. And I appreciate all of the ideas as 

well. 

I think it is an exciting time for us. There is a lot of work to do. 

Coming from a State that is not only a great agricultural and forestry State, but we are proud of making automobiles, you may have 

heard, and manufacturing. And so there are lots of pieces of this. 

And I have to say on a side note that in addition to working on 

this issue and on the farm bill, which is very important in terms 

of the energy and conservation provisions, we also have a budget 

resolution on the floor that we hope to be voting on this evening 

or tomorrow that has a green-collar jobs initiative with new dollars 

in it for advanced battery technology and conservation and energy 

efficiency and other areas that are very important, and tax provisions that we have been trying very hard to get passed, get passed 

a filibuster, to be able to incentivize a number of different technologies that need to be happening. 

Coming from that manufacturing State, I have to say, though, 

just a note on China and our Asian neighbors, and that is, they are 

rushing on technology. When the first Ford Escape hybrid was 

placed into the marketplace—and we are very proud of the first hybrid SUV—they could not find a battery in the United States. They 

had to buy it from Japan. 

So the budget resolution that we have that includes an aggressive amount of money, new investment in advanced battery technology, is critical because China is spending hundreds of millions 

of dollars, as is Japan, as is South Korea, and we certainly do not 

want to be in a position where we go from dependence on foreign 

oil to dependence on foreign technology. 

So I think the rush is on, and in addition to all of the issues that 

deal with what is happening with our forests and open spaces, the 

rush is on for us to act quickly and effectively. And we thank you 

very much for your input. 

[Whereupon, at 4:25 p.m., the Subcommittee was adjourned.] 

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