Federal Climate Policy 107: Land Use, Forestry, and Agriculture

The land sector in the United States contains a pool of carbon—carbon stored in soils, forests, and other vegetation—that is more than 50 times the nation’s total annual greenhouse gas emissions as of 2019, with forests alone storing about 28 times those total emissions [1]. This carbon pool has grown steadily over the past several decades, as the amount of atmospheric carbon absorbed by vegetation has exceeded the land sector’s own emissions (e.g., through forest fires, conversions to other uses, or harvesting forests). In 2019, the land sector removed nearly 800 million metric tons of carbon dioxide equivalent (MMT CO₂e) from the atmosphere—roughly equal to 12 percent of total US emissions. Accordingly, the land sector should be thought of as a “negative-emissions” sector.

In contrast, agricultural production activities generate net-positive greenhouse gas emissions. In 2019, agricultural activities and electricity use accounted for about 11 percent of total US greenhouse gas emissions (Figure 1)—primarily in the form of methane from the digestive processes of livestock and manure management, along with nitrous oxide (N₂O) from agricultural soil management [2].

This explainer reviews the federal policy options for increasing land-related carbon storage and reducing N₂O and methane emissions from agricultural land uses and production activities.

Land Use and Forestry

The size of the carbon pool in the land sector depends on land uses, land conditions within uses, climate conditions, and land management practices. Forests account for the vast majority (96 percent) of the land sector’s carbon sink, followed by green urban areas; agricultural areas account for the least, according to the Inventory of US Greenhouse Gas Emissions and Sinks. Shifts in land use to non-forest uses result in carbon emissions.

Land use patterns generally are stable on public lands, while land use patterns on private lands are more likely to change over time (Figure 2). Land use, conditions, and management also are likely to vary in response to changes in climate.

• Urban Growth: Growth in urban areas was a dominant land use trend between 1982 and 2012 (Figure 2B). New urbanization occurred in roughly equal portions on converted agricultural, forest, and range lands.
• Declining Cropland: Cropland has declined overall—not only due to urbanization, but also in response to increased crop productivity and the US Department of Agriculture’s Conservation Reserve Program (CRP), a federal land conservation program that has enrolled 24 million acres of cropland.
• Forest Expansion: Between 1982 and 2012, forest use increased slightly. The transition of 17 million acres of forests to urban uses was offset by the transition of land from agriculture to forests. The expansion of forestland has strongly influenced growth in the land carbon sink since 1990, but future growth of forested areas is uncertain; for example, some projections indicate that the United States recently may have reached “peak forest area,” and the most recent forest inventories show a slight decline in forests [3].

Figure 3 shows the dynamic nature of land use, even where net change within a category is small; the largest transition in land use since the 1980s has been from agriculture to forests, followed by transitions from agriculture to CRP and urban uses, and forests to urban uses [4]. Lands that were in persistent urban uses [5] made up nearly all the remaining negative emissions from the sector; urban areas are net carbon sinks primarily because of growth in tree biomass [6]. Rural lands that were converted to non-forest uses reflect positive emissions, whereas grasslands, croplands, and wetlands generated little net emissions over this time, indicating relatively stable land carbon pools. Figure 4 shows how land use changed from 1990 through 2018.

Agriculture

On agricultural lands, carbon storage is more than offset by emissions from production activities. Emissions from the agriculture sector amounted to 618.5 million metric tons (MMT) of CO₂e (9.3 percent) in 2018, up 11 percent from 1990 (Figure 5). The primary sources of these emissions are agricultural soil management, methane emissions from livestock (from digestive processes), and manure management.

• Soil Management: Emissions from soil management vary as a function of crop type, production system, fertilization, and weather patterns. Soil management emissions increased by about 7 percent between 1990 and 2018, despite a reduction in cropland area.
• Livestock: The digestive process in livestock accounts for the majority of methane emissions from agriculture. Emissions increased by 8 percent between 1990 and 2018. In 2018, beef cattle and dairy cattle produced 72 percent and 24 percent of livestock-related methane emissions, respectively.
• Manure Management: Manure management produces substantial methane and N₂O emissions. Liquid-based management (anaerobic) systems generate much higher methane emissions than dry management systems. A 66 percent increase in methane emissions from manure between 1990 and 2018 reflects a shift toward larger, confined production operations with liquid-based systems.

Expanding the Carbon Sink and Reducing Emissions

The land sector in the United States provides a consequential carbon sink that could be enhanced by policies and market forces that shift land to more carbon-dense uses (particularly forests); reduce future forest losses; enhance carbon sequestration capacity; and transfer more harvested biomass to long-term storage in buildings and other products.

Recent research on natural climate solutions identifies afforestation and increasing tree densities as the most effective means to grow the land carbon sink in terms of carbon sequestration per unit area. Atmospheric carbon reductions also can be achieved by changing agricultural practices, including retiring cropland, switching to low-emissions crop production systems (including conservation tillage), and adopting alternative technologies for manure management.

National carbon pricing (carbon tax and cap-and-trade) programs could have a significant effect on market forces and incentives in the land use sector. Such policies can be designed to strengthen the land sector’s role as a carbon sink, given that land itself and land-based resource products like crops and timber are key components of the national economy. Recent research indicates that even relatively low carbon prices could incentivize substantial emissions reductions by encouraging the retirement of cropland and the adoption of digester technology for large, confined animal operations. Higher prices are needed to incentivize changes in crop production systems.

This explainer highlights four tools beyond a carbon price that could expand the US carbon sink and reduce emissions from agriculture.

The Basics

Stored carbon is a commodity that, like crops and timber, can be purchased. However, because it is a public good, rather than a private good, markets alone generate little demand for carbon storage. Thus, without government intervention, landowners have little incentive to change management practices or shift to less carbon-intensive land uses. To correct this misalignment of incentives, the government can act as the purchaser. While carbon payments can be thought of loosely as subsidies, a more accurate description is that the government pays landowners for carbon storage services, such as planting trees, taking agricultural lands out of crop production, or shifting to no-till crop management.

Benefits and Challenges

Payment programs can align the public benefit of increased carbon storage with public payments to landowners who make investments in the service. They can provide new revenue streams to rural farmers, forestry-based communities, and agricultural and forestry companies. By relying on general tax revenues as a funding source, they widely distribute the costs of carbon storage. Revenues can also be supplemented by private-sector funds when private institutions wish to voluntarily purchase carbon storage offsets or credits.

A downside to payment programs is that they can cause “leakage,” which occurs when carbon payments lead to reduced emissions from one land use but also lead to increased emissions from other land uses. For example, when payments motivate landowners to shift row crops to forestry, other property owners may shift back to row crops, with a corresponding reduction in the net carbon stored. Economic analysis of land and commodity markets is needed to assess the magnitude of leakage and, therefore, the overall climate benefits of payment programs.

Key Considerations

A key implementation issue is how to define and verify the delivery of stored carbon. Different land use types (e.g., specific tree species, cropping patterns) and management approaches (e.g., tilling, planting, thinning practices) need to be observable or verifiable and then mapped onto the specific amounts of carbon they store. The second implementation issue is how to select the lowest-cost carbon storage options. Payment programs can use “reverse auctions,” in which landowners reveal the minimum payment they require in exchange for changing their management practices or land uses. The government then selects projects based on the lowest-cost options for purchase, also known as “payment bids.” In sum, a government-led commodity definition, auction, and payment infrastructure is required.

Current and Proposed Carbon Storage Payment Programs

Several existing programs serve a similar function that could be expanded and focused more directly on carbon sequestration. The CRP is one example, signed into law in 1985. For several decades, the federal and state governments also have administered subsidized tree-planting programs. This type of program could more strongly emphasize carbon storage and holds lessons for tree-planting legislation currently under consideration in Congress. Under the Biden administration, a closely related policy proposal is for the US Department of Agriculture to establish a “carbon bank” using existing Commodity Credit Corporation authorities as a financing vehicle. Part of that proposal is to use a CRP-style reverse auction to solicit the lowest-cost carbon storage and emission mitigation activities from landowners.

The Basics

Solid wood products used in construction represent 15 percent of the US land carbon sink. Using more wood products for building could significantly expand carbon storage by increasing demand for forest products (demand-side incentives). New mass timber technologies (such as cross-laminated timbers) greatly expand the potential use of wood in large buildings, especially in commercial applications. Moreover, because wood products are a substitute for concrete and steel, their use can lead to reductions in carbon emissions from the carbon-intensive concrete and steelmaking industries.

Three types of policies could stimulate demand for wood construction products: First, the tax code could provide tax credits to builders for using carbon-dense construction materials. Second, government procurement policies could be changed to benefit contractors who use carbon-dense wood products. Third, building codes could be modified to allow more wood-intensive construction.

Benefits and Challenges

One virtue of these policy approaches is that they only require amendments to existing policy platforms—the tax code, government procurement policies, and building codes. The costs of tax credits and procurement incentives are transferred widely to the general taxpayer. The cost of modifying building codes falls on builders and building owners. Forest producers generally will benefit from all three policy types due to increased demand for timber, as will technological innovators in the mass timber production sector.

A potential downside to greater construction-specialized wood products demand is that it could lead to forestry practices and forest harvest pressures that threaten the ability of forests to provide other important services, such as ecological habitats and water resources. However, these sustainability concerns—and the need for safeguards against them—accompany any carbon-focused land use policy.

Key Considerations

Tax credits and new procurement policies are not direct payments for carbon storage, but the public will pay for them via their effect on tax revenues and burdens. So, as with direct payments, ensuring the cost-effectiveness of these policies requires the measurement of the net carbon storage achieved relative to a baseline where wood products already are widely used in construction.

Current and Proposed Programs to Stimulate Demand

Existing tax code, procurement, and building code platforms at the federal, state, and local levels can be expanded to stimulate wood product demand. All of these wood construction incentives can be built into current federal infrastructure investment bills.

Building codes often restrict the height of wood buildings (historically for structural and fire suppression reasons). Modern wood production innovations have overcome many of those concerns, yet codes have not kept pace. The revised 2021 International Building Code includes revisions to allow for the use of mass timber in the construction of 18-story buildings with requisite fire protection and provides a model for new regulations. Updated building code standards could, on their own, stimulate demand at little cost.

The Basics

Another way to expand the carbon sink is to directly control land use via regulation. Urban land cover grew by 1.36 million acres annually between 1982 and 2012. This rate of urban growth is projected to continue, and US Department of Agriculture projections indicate that reducing the rate of urbanization could lead to large carbon storage benefits. For example, a 20 percent reduction in urban growth over the next 30 years is projected to augment carbon storage by about 40 MMT CO₂e per year through 2050.

Benefits and Challenges

By design, land use controls restrict what property owners can do with their land, which may be desirable if the policy goal is to maximize land uses consistent with aggressive carbon storage goals. However, restricting the right of owners to use their property as they wish is likely to generate significant political opposition. Additionally, the costs of land use controls fall mainly on property owners via reduced property values.

Key Considerations

One way to reduce the cost of land use regulations—and help ameliorate political opposition—is to establish a transferable development rights program. Rather than restricting land use uniformly, such a program would put a cap on development within a broad region, assign rights to development corresponding to that cap, and allow property owners to trade those rights among themselves. Like any cap-and-trade program, this strategy achieves an environmental goal at a lower total cost.

Another way to reduce the cost of land use regulations is through a no-net-loss policy. Rather than prohibiting conversion of forested land to urban development, these policies require landowners who deforest their land to pay for afforestation elsewhere. Payment could be made to private or government-developed forest banks—organizations that specialize in afforestation and forest restoration projects. This strategy allows high-value urban development to occur while funding relatively inexpensive forest gains elsewhere.

Local control of zoning makes land use controls challenging to deploy as a national strategy. Transferable development rights programs require a trading infrastructure to set the cap, allocate initial rights, and manage the transfer of rights among property owners. No-net-loss programs require measurement and verification that forest carbon losses are offset by corresponding gains purchased from an eligible forest bank—a doable, but challenging, technical and administrative task. Such market-based land regulation approaches would require new state or federal legislation.

Current and Proposed Land Use Control Programs

Transferable development rights programs have been established in several places throughout the United States. They tend to focus on preserving open and agricultural land uses—not necessarily forested land. Forest no-net-loss rules have been developed in Maryland and New Jersey and are a common component of city tree ordinances. Of particular relevance is the national experience with no-net-loss wetland regulations and mitigation banking programs established under the Clean Water Act.

The Basics

More than 35 percent of US land is publicly owned and managed; therefore, changes on public lands can significantly influence carbon storage and emissions. Historically, agencies have not been directed to manage public lands with carbon storage in mind. New statutory authorities with a sequestration focus could expand the public-lands carbon stock in some areas and reduce emissions in others. Private commercial activities that take place on public lands, such as timber harvesting and livestock grazing, already are managed and regulated through frameworks that could be adapted to focus more on carbon storage. For example, grazing rules on public lands could be altered to more strongly emphasize carbon storage in root systems and soils, and forest management rules could be harnessed to reduce carbon emissions from wildfires.

Benefits and Challenges

Public lands are already managed with public goals in mind, such as recreation and wilderness preservation. Amending public land management statutes and regulation is the most direct way to action, but that does not mean such changes are easy. The political crosscurrents can obstruct amendments to public land management statutes and regulations. The list of governing rules is long and composed of agency-specific regulations and planning rules, as well as cross-cutting laws (e.g., National Environmental Protection Act, Clean Water Act, Endangered Species Act), that can constrain land management and be used to challenge changes to public land management statutes and regulations.

Key Considerations

A key consideration is how expanding carbon storage will affect forest health, other uses such as watershed protection and recreation, and the ecological services derived from these lands. In some cases, clear trade-offs exist; for example, if grazing is restricted, then declines will follow in terms of livestock yields, rancher profits, and lease revenues. Fire suppression to store more carbon could create a buildup of forest fuel that may lead to more damaging future fire events. Other less obvious trade-offs may be just as important, such as the impact of carbon-oriented vegetation management on species habitat and water resources.

Additionally, the costs of enhanced carbon storage on public lands fall either on public agencies (i.e., taxpayers) or commercial interests using public lands. For example, afforestation investments (tree planting) could be funded by Congress, whereas the cost of changes to commercial harvest or grazing rules would fall more heavily on specific producers.

All of the values and uses of public lands are represented by stakeholders who are likely to lobby for their interests if policy is enacted to alter the current rules.

Past, Current, and Proposed Public Land Authorities

Federal lands are managed by specific agencies—including the Bureau of Land Management, Forest Service, Fish and Wildlife Service, and National Park Service—operating under their own statutory rules. These rules govern federal agency managers and commercial operators on public lands.

[1] Forests alone store about 28 times total emissions: The Second State of the Carbon Cycle Report from the US Global Change Program (Table 2-1) shows forest carbon stocks of 187,473 MMT CO₂e while the 2020 Inventory of US Greenhouse Gas Emissions and Sinks estimate emissions from the US as 6,676 MMT CO₂e. Total carbon in all terrestrial pools is estimated to be 339,130 MMT CO₂e.

[2] This represents 93 percent of total emissions from agriculture. Other emissions arise from rice cultivation, urea fertilization, liming, and field burning.

[3] Some projections indicate that the United States may have recently reached “peak forest area,” and the most recent forest inventories indicate a slight decline in forests.

[4] While informed by the National Resources Inventory land use data, the greenhouse gas inventory report uses somewhat different land use categories defined by the Intergovernmental Panel on Climate Change protocol.

[5] In the Greenhouse Gas Inventory, urban areas are labeled “settlements” and are generally consistent with the sum of urban and rural transportation land uses from the National Resources Inventory (NRI).

[6] Urban areas are net carbon sinks in the United States primarily because of growth in tree biomass.

This explainer was featured in the 207th issue of Resources magazine.