Opportunities in Carbon Policy for

Home-Grown Energy
What is low-carbon energy?
Low-carbon energy is a term used to describe energy that produces less “carbon” or greenhouse gas
(GHG) emissions than traditional power generation from fossil fuels. Many types of energy produced by
farmers and ranchers release less carbon than fossil fuels. Likewise, many energy products or processes
generated by farmers are renewable and can be readily replenished once consumed. Low-carbon,
renewable sources of energy include:

• Biofuels
• Biomass
• Digesters
• Wind
• Solar

The GHG emissions of these energy types are measured in percent change in emissions as relative to the
fossil fuel that is displaced. For example, on average corn ethanol emits 21.8% less than petroleum and
gas-to-liquid diesel emits 8.6% more than petroleum.i

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How can farmers produce low-carbon renewable energy?
Farmers can generate renewable, clean energy while continuing to produce traditional commodities.
This is because often the practices used to generate renewable power can work simultaneously or in
harmony with traditional crop and livestock production. Revenue from renewable energy can be
generated in many ways, whether growing a crop for biofuel, leasing land for a wind turbine, capturing
the biogas power from animal manure or installing a solar panel system. More description of types and
potential for renewable energy produced by agriculture is discussed in a later section.

Carbon policy promotes low-carbon energy

The potential exists to produce low-carbon biofuels and renewable energy in the United States. It is
important for American agriculture that biofuel and carbon policies complement one another in a way
that ensures opportunities to increase farm revenue. Tremendous potential exists for American farmers
to produce low-carbon energy, whether from biofuels, wind turbines, or new technologies still in
development. In order to maximize this economic potential, power generators and consumers must be
encouraged to utilize renewable, American energy.

Experts agree that a climate policy would incentivize the production and use of low-carbon and
renewable energy. Policy mechanisms such as emission caps, offset markets and carbon prices are
effective ways to promote a transition to lower-carbon renewable fuels and energy. Such policies send
a new signal into the marketplace that says low pollution energy is of greater value. A carbon price may
represent the most efficient mechanism by which to incorporate biofuels into comprehensive climate
policy, although the role of complementary policy such as a renewable energy standard should not be
overlooked.ii Effectively combining carbon policy with a strong renewable energy standard will ensure
American farmers are encouraged to produce and consumers consume clean, domestic energy. Along
with deploying more clean energy, policies such as these will help America diversify its energy portfolio
– allowing for less dependence on foreign produced energy.

A study by 25x25 and the University of Tennessee shows a properly designed climate policy could
increase energy crop revenues by over $4 billion in 15 years.iii The map below, from the same study,
shows the economic impact to American agriculture of a climate policy that limits GHG emissions and
puts a price on carbon. Modeling done to create this map allowed for the creation and sale of
agricultural offsets and considered the increased sale of renewable energy crops. The map clearly
shows the vast majority of counties in the United States increasing agricultural net returns.

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Legislation and policies currently under development that would create opportunities such as those
described include Senator Stabenow’s Clean Energy Partnership Act (CEPA), which would encourage the
production of agricultural offsets and the production of renewable energy. The Kerry-Lieberman
American Power Act (APA) would put a price on carbon and includes offset language similar to CEPA.
Energy standards such as those included in Bingaman’s American Clean Energy Leadership Act and the
Lugar-Graham Practical Energy and Climate Plan would also incentivize the production of renewable
energy and encourage energy efficiency.

Carbon offsets and bioenergy generate additional revenue

The above map shows the economic potential for American agriculture that a well-designed carbon
policy could create. This potential includes establishing new markets for carbon offsets and creating
incentives for the use of renewable energy. Climate policy could create several, complimentary sources
of income for farmers. For example:

• A corn farmer could generate offsets for no-till practices that store carbon and offsets for
reduced application of fertilizer while producing corn for corn ethanol and corn stover for
cellulosic ethanol. In this scenario, the farmer gets a direct revenue source from the carbon
market as well as a market boost to the energy crop in the form of increased national demand.
• A dairy farmer could install a digester and produce offsets for methane capture and revenue for
the biogas generated.

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And, these practices could be “stacked” with other payments for ecosystem services – such as clean
water benefits – if the right policies are put in place. For example, all of the practices described above
would be credited by climate policy such as the Clean Energy Partnerships Act introduced by Senators
Stabenow and the draft climate-energy policy proposed by Senators Kerry and Lieberman as well as
potentially for policies designed to reduce runoff pollution into the Chesapeake Bay or comply with
various other environmental benefits encouraged by the farm bill.

Discussion of farm-based renewable energy sources

The following diagram based on a chart created by the University of Tennessee shows renewable energy
sources that farmers can produce. Following the graphic are brief descriptions of some of the energy
types as well as some of the economic potential for farmers who adopt the practice.

Renewable Energy

Biofuel/ Biomass/Biogas
Wind Power Solar Energy
Biodiesel Electricity

Corn/Oilseed Cattle/Swine/
Crops/Sugar Poultry Digesters

Corn/Wheat/ Wood Corn/Wheat/ Wood

Residues Residues

Dedicated Energy Dedicated Energy

Crops Crops

Food/Mill Wastes Food/Mill Wastes

Grease/Tallow

Biofuel / Biodiesel
Biofuels are fuels, such as ethanol, produced from biomass. For example, ethanol can be made from
high-energy biomass (such as corn, wheat, or sugar beets) or even a lower-energy byproduct (such as
corn stover, pellets or wheat straw). Biodiesel is created from oil seeds (like soybeans) and waste
materials like grease or tallow. Biofuels and biodiesel have huge potential to generate revenue for
farmers, and are already thriving industries.

Example – Corn Stover

As one example, corn stover is already being used to create ethanol, and large agri-businesses are
looking into expanding its use and improving its production efficiency. A recent estimate suggests that
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farmers would need to be paid $30 to $60 a ton in order to cover operation costs and make a profit
from managing corn stover.iv Monsanto predicts that corn farmers will be creating up to an additional
ton of corn stover per-acre as bushel yields grow from ~200 bushels/acre to ~300 bushels/acre.v Based
on these estimates, corn farmers could increase annual gross revenue by $450,000 to $900,000 on a
1,500 acre farm for corn stover alone.

Biomass / Biogas Electricity

Biomass is any organic matter that comes from plants, animals or their wastes. Biomass can be used to
create electricity from a variety of sources ranging from byproducts (such as corn stover or wood
residue) to dedicated energy crops (like switchgrass) or even manure digesters (using cattle, swine or
poultry digesters). Electricity from biomass can be used onsite, such as at a manufacturing plant, or sold
back to the grid.

Example – Biogas
Anaerobic digestion is a natural process by which biomass is decomposed by bacteria in the absence of
oxygen, or “anaerobically”, producing methane and other byproducts or “biogas”. Biogas is typically
60% to 70% methane; 30% to 40% carbon dioxide, and trace amounts of other gases. Dairy, beef,
poultry, and swine manure have all been used for anaerobic digestion along with agricultural byproducts
such as stillage from distillation. Energy is produced from methane, the primary constituent of natural
gas; the process of methane capture reduces emissions into the atmosphere (methane is a potent GHG).

The conversion of the manure to useable electricity can save farmers on farm electricity costs, earnings
from selling electricity to utilities and potentially from carbon offset payments. The following chart
shows the economic potential, annual net returns of $68,195, for a digester at a 1,000 cattle Minnesota
dairy farm.vi

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Wind
Wind turbines produce low-carbon energy with a relatively small footprint on the ground. The average
farm in many states could host 3-4 wind turbines and earn $18,000 to $24,000 in land lease payments.vii

Source: US Department of Energy. http://www.windpoweringamerica.gov/wind_maps.asp

Solar
Solar photovoltaic (PV) panels can be mounted on a house, shed, or barn, or they can be freestanding on
the ground. Farmers could offset their power consumption or even earn revenue by producing solar
power.

In areas with no utility lines, solar systems are often cheaper and require less maintenance than diesel
generators, wind turbines, or batteries alone. And where utilities charge for new lines, a PV generating
system is often much cheaper for the landowner than paying for a new line.viii

Additionally, solar PV systems may the most cost-effective water pumping option in locations where
there is no existing power line. They are exceptionally well-suited for grazing operations to supply water
to remote pastures. Simple PV power systems run pumps directly when the sun is shining, so they work
hardest in the hot summer months when they are needed most.ix

i
EPA. (April 2007) Greenhouse Gas Impacts of Expanded Renewable and Alternative Fuels Use. Retrieved at:
http://www.epa.gov/oms/renewablefuels/420f07035.pdf
ii
Nicholas Institute. (November 2009) Integrating Biofuels into Comprehensive Climate Policy: An Overview of Biofuels Policy
Options.

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iii
University of Tennessee and 25x’25. (December 2009) Analysis of the Implications of Climate Change and Energy Legislation to
the Agricultural Sector.
iv
Des Moines Register. (May 16, 2010) “Firms eye profits in leftover corn plant products.” Philip Brasher.
http://www.desmoinesregister.com/article/20100516/BUSINESS01/5160322/-1/ENT06/Firms-eye-profits-in-leftover-corn-
plant-products
v
Ibid.
vi
Ag Carbon Market Working Group. (Publishing Pending) The Transaction Costs of Agricultural GHG Reductions & Offsets: A
Scoping Report.
vii
National Resources Defense Council. (Retrieved, June 2010) Renewable Energy for America: Harvesting the Benefits of
Homegrown, Renewable Energy. Retrieved at: http://www.nrdc.org/energy/renewables/missouri.asp#note5
viii
NYSERDA. (2010) Introduction to Solar Energy Applications for Agriculture. Retrieved at:
http://www.powernaturally.org/publications/agguide.pdf.
ix
Ibid.