There are currently two operational cap-and-trade programs in the US - the Regional Greenhouse Gas Initiative involving nine Northeast states, and the California market. These programs allow regulated entities to meet emissions reductions obligations by purchasing carbon offsets achieved by other businesses such as agriculture. Farmers can generate offsets by capturing carbon through anaerobic digestion of manure and selling the reductions. The EPA also has a greenhouse gas reporting rule requiring facilities emitting over 25,000 tons of CO2e annually to report emissions, though this does not currently apply to livestock due to congressional restrictions. An opportunity exists for animal agriculture to benefit financially from these programs by generating carbon offsets.

1. 1
2
3
4
Table of Contents
The Current State
of Cap-and-Trade
Mandatory Greenhouse
Gas Reporting Tool
Conclusion
References
This project was supported by
Agricultural and Food Research
Initiative Competitive Grant
No. 2011-67003-30206 from
the USDA National Institute of
Food and Agriculture.
Livestock and Poultry
Environmental
Learning Center
4
IntroductionAnimal agriculture emits methane gas
[CH4
], primarily from the digestion
of ruminant animals and manure
decomposition, and nitrous oxide gas
[N2
O] from cropland used to produce
feed for the animals. Both of these are
greenhouse gases (GHGs) and have
the potential to influence the climate.
Farmers may be aware of the concern
over greenhouse gases, but are not as
aware of the regulations or programs
that may impact them.
The current state of greenhouse
gas regulations is discussed in the
second section of this publication.
One area of interest for farmers is the
possibility of getting paid for reducing
the emissions of GHGs. There are
two types of programs that can
result in revenue gained for reducing
emissions. The first is typically
referred to as Green Power Purchase
and is applicable to farmers who
have an anaerobic digester and are
generating electricity or natural gas.
With this type of program, electric
or gas utilities purchase renewable
electricity generated at a premium
rate from farms and these rates
are paid by customers who desire
non-fossil fuel energy. Green power
Introduction
programs are very popular in some
states and unavailable in others.
The second way that farmers can
potentially benefit from reducing
greenhouse gas emissions is through
programs referred to as Cap and
Trade. Cap-and-trade programs can
be voluntary or regulatory. In either
case, participants are able to reduce
their carbon emissions by purchasing
carbon reductions achieved from
another business. This is sometimes
referred to as carbon offsets and it
works because the price to reduce
carbon emissions varies from business
to business. Farmers participate by
capturing carbon in their operation,
most often through anaerobic
digestion of their manure, monitoring
how much they captured, and selling
these carbon offsets to those needing
or wanting to purchase these carbon
reductions. This carbon is traded on a
market similar to commodity trading.
The section below summarizes
some of the existing cap-and-trade
programs in North America needing
or wanting to purchase these carbon
reductions.
1 Department of Bioproducts and Biosystems
Engineering, University of Minnesota
2 Department of Biological and Environmental
Engineering, Cornell University
THE CURRENT STATE OF CAP-
AND-TRADE IN THE U.S. THE
MANDATORY GREENHOUSE
GAS REPORTING RULE
Neslihan Akdeniz1
, David R. Schmidt1
, Jennifer Pronto2
JANUARY 2014

2. 2 THE CURRENT STATE OF CAP AND TRADE IN THE U.S. THE MANDATORY GREENHOUSE GAS REPORTING RULE
Visit www.extension.org/60702 for more information and a full list of available resources.
There are currently two cap-and-trade programs in operation: Regional Greenhouse
Gas Initiative (RGGI), which involves nine Northeast and Mid-Atlantic states
(Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New
Jersey, New York, Rhode Island and Vermont) and the California market, established
by Assembly Bill 32 and administered by the California Air Resources Board (CARB).
RGGI applies only to the largest coal-fired power plants over a certain size. Currently,
power plants may use offsets to meet 3.3 percent of their compliance obligation,
except under specific conditions when limits on use can increase to 5–10%. Five
types of projects are eligible for the award of CO2
offset allowances, one of which is
avoided methane emissions from agricultural manure management operations. All
offset projects must be located within one of the RGGI participating states.
The CARB covers major sources of GHG emissions in California, such as refineries,
power plants, industrial facilities, and transportation fuels.
CARB’s Compliance Offset Program allows regulated industry to meet up to 8% of
its triennial compliance obligation through offsets. There are currently four offset
categories, one of which includes livestock projects that focus on capturing and
destroying methane emissions from manure management systems on dairy and
swine farms. Projects developed under CARB’s protocols, anywhere in the United
States, are eligible to sell carbon credits to regulated emitters in California. The
RGGI’s carbon prices remain low, in the $3 per short ton CO2
e range ($3.21,
Auction 20, June 2013), while in its fourth auction (August 2013), California sold
13.8 million carbon permits ranging from $10.71 to $50.01 per allowance, with
the settlement price at $12.22 per metric ton CO2
e.
The CARB’s Livestock Project Protocol (v. 4.0 released on January 23, 2013)
outlines all of the eligibility requirements for livestock projects. According to
the protocol, a livestock project is defined as the installation and operation of a
biogas control system that captures and destroys CH4
that would otherwise have
been emitted to the atmosphere in the absence of the project from uncontrolled
treatments and/or storage of manure.
Depending on the price at which producers can sell their carbon credits, the
California market can become a major incentive for livestock biogas generation. The
USDA estimates that at a carbon price of $13/metric ton of CO2
e, half of the dairy
operations with more than 500 cows can profitably operate digesters. The capital
requirements to install a biogas control system vary widely depending on a number
of site-specific variables. The estimated capital cost ranges from $1,000 to $2,000
per cow depending on herd size. Plus,
the costs for monitoring equipment are
estimated to be around $15,000 for
start-up with similar sums each year
for verification and registration. Jim
Jensen, Sr. Bioenergy and Alternative
Fuel Specialist at Washington State
University, reported that larger farm
owners (1,500 animal units) should
explore the potential costs and benefits
of participating in the California carbon
market while smaller farm owners
(1,500 animal units) may find their
best value through participating in
voluntary carbon markets.
In the past few years, the CARB has
been trying to broaden California’s
GHG program. On April 19, 2013,
Governor Jerry Brown and CARB both
gave their approval to link California’s
cap-and-trade program with that
of Quebec. As of January 1, 2014,
California and Quebec will accept
each other’s carbon allowances and
approved offsets and auctions of
allowances will be done jointly by
California and Quebec. The integrated
system will become the largest
cross-border carbon trading market
established since the European Union
Emissions Trading Scheme became
operational in 2005. The link to Quebec
may raise California carbon allowance
prices between 2013 and 2020.
The Current State of Cap-and-Trade
Neslihan Akdeniz

3. 3THE CURRENT STATE OF CAP AND TRADE IN THE U.S. THE MANDATORY GREENHOUSE GAS REPORTING RULE
Visit www.extension.org/60702 for more information and a full list of available resources.
Mandatory Greenhouse Gas Reporting Tool
In response to the 2008 Consolidated Appropriations Act, on October 30, 2009,
the U.S. Environmental Protection Agency (EPA) issued the Greenhouse Gas
Reporting Rule (40 CFR Part 98). This rule requires reporting of greenhouse gas
(GHG) data and other relevant information from sources that emit more than
25,000 metric tons of carbon dioxide equivalent (CO2
e) per year.
The gases with relation to agriculture that are covered by this rule are carbon
dioxide (CO2
), methane (CH4
), and nitrous oxide (N2
O). Reports are submitted to
the EPA electronically using an electronic greenhouse gas reporting tool (e-GGRT).
The EPA verifies the data submitted through the use of statistics, algorithms,
ranges and other verification checks and when needed contacts the facilities
directly concerning potential data quality issues. The EPA publishes the data using
the FLIGHT tool (Facility Level Information on Greenhouse Gas Tool), which allows
users to review information by facility, industry, location, and type of gas. All other
data is published through ENVIROFACTS.
The rule does not regulate GHG emissions but it collects data on large emission
sources for the purpose of deciding if future regulation is necessary. On December
15, 2009, the EPA announced its Endangerment Finding that GHGs threaten
human health and welfare. This finding is still under review, but if approved, such
a finding will allow the EPA to regulate GHG emissions under the Clean Air Act.
The rule covers different source categories including livestock and poultry
operations. Subpart JJ of the rule requires owners and managers of facilities
containing manure management systems that emit at least 25,000 metric tons
of methane and nitrous oxide (measured as CO2
e) per year to report emissions
from all source categories at the facility. The EPA is currently not implementing
subpart JJ due to a Congressional restriction prohibiting the expenditure of funds
for this purpose. Since the day the rule was published, Congress has stopped the
EPA’s ability to use the following fiscal year’s appropriations for implementing
subpart JJ. However, the restriction needs to be renewed every year to remain in
effect. Producers should remain aware of the requirements in the event that the
restriction is not renewed.
If the prohibition is allowed to expire,
beef, dairy, swine, and poultry facilities
emitting over 25,000 tons of CO2
e
would be required to report annual
aggregate CH4
and N2
O emissions for
the following manure management
system components at the facility:
• Feedlots
• Liquid/slurry systems
• High-rise houses for
poultry production
(poultry without litter)
• Storage pits
• Poultry production with
litter deep bedding systems
for cattle and swine
• Digesters
• Manure composting
• Dry lots
• Solid manure storage
Facility Components
to Report
Neslihan Akdeniz
Continued on page 4

4. 4 THE CURRENT STATE OF CAP AND TRADE IN THE U.S. THE MANDATORY GREENHOUSE GAS REPORTING RULE
Visit www.extension.org/60702 for more information and a full list of available resources.
An opportunity exists for animal agriculture to benefit
from GHG cap-and-trade programs, since regulated
entities will be looking for carbon offset credits to
purchase, and this will drive up the value of the
offsets. Credits could be more valuable in the future
with legislation to regulate certain sectors—they will
look to agriculture as one of the voluntary sources
from which to be able to offset those emissions.
Table 1. Reporting Thresholds Conclusion
Beef 29,300
Dairy 3,200
Swine 34,100
Poultry-layers 723,000
Poultry-broilers 38,160,000
Poultry-turkeys 7,710,000
Emissions unrelated to the stabilization or storage of
manure (such as emissions from enteric fermentation
from cattle, field application of manure, or pasture/range
manure management practices) would not have to be
reported. Facilities below threshold populations (Table 1)
would not be required to report, but facilities that exceed
thresholds would need to calculate their emissions to
determine if they emit more than 25,000 tons of CO2
e. The
EPA estimates that 100-110 of the largest livestock facilities
would be required to report at the 25,000 metric tons CO2
e
per year threshold level. Neslihan Akdeniz
California Environmental Protection Agency. 2013. Air
Resources Board sets date for linking cap-and-trade program
with Québec. Online available at http://www.arb.ca.gov/
newsrel/newsrelease.php?id=430 (access date 8/29/2013).
California Environmental Protection Agency. 2013. Auction
information. Online available at http://www.arb.ca.gov/cc/
capandtrade/auction/auction.htm (access date 8/29/2013).
EPA (Environmental Protection Agency). Greenhouse Gas
Reporting Program-Basic Information. Online available at http://
www.epa.gov/ghgreporting/basic-info/index.html
(access date 8/1/2013).
EPA (Environmental Protection Agency). Greenhouse Gas
Reporting Program Implementation. Online available at http://
www.epa.gov/ghgreporting/documents/pdf/2009/FactSheet.pdf
(access date 8/1/2013).
EPA (Environmental Protection Agency). Manure Management
Systems-Proposed Rule: Mandatory Reporting of Greenhouse
Gases. Online available at http://nmplanner.missouri.edu/
regulations/EPA_GG_ManureManagementSystems[1].pdf
(access date 8/1/2013).
Jensen, J. 2013. Money from Something: Carbon Market
Developments for Agriculture. Online available at http://www.
extension.org/pages/67612/money-from-something:-carbon-
market-developments-for-agriculture (access date 8/29/2013).
Lazarus, W.F. 2013. Economics of Anaerobic Digesters for
Processing Animal Manure. Online available at http://www.
extension.org/pages/19461/economics-of-anaerobic-digesters-
for-processing-animal-manure#.Uh9s_mwo6po
(access date 8/29/2013).
Regional Greenhouse Gas Initiative (RGGI). Auction 20
Results. Online available at http://www.rggi.org/docs/
Auctions/20/PR060713_Auction20.pdf (access date
8/29/2013).
U.S. Livestock Project Protocol Version 4.0. Online available
at http://www.climateactionreserve.org/how/protocols/us-
livestock/ (access date 8/29/2013).
References
Animal species Threshold # of head

5. 5THE CURRENT STATE OF CAP AND TRADE IN THE U.S. THE MANDATORY GREENHOUSE GAS REPORTING RULE
Visit www.extension.org/60702 for more information and a full list of available resources.
Extension programs and employment are available to all
without discrimination. Evidence of noncompliance may be
reported through your local Extension office.
ThisprojectwassupportedbyAgriculturalandFoodResearch
Initiative Competitive Grant No. 2011-67003-30206 from the
USDA National Institute of Food and Agriculture.
Participating Universities
Cornell University
Texas AM University
University of Georgia
University of Minnesota
University of Nebraska–Lincoln
Washington State University
ANIMAL AGRICULTURE
CHANGING CLIMATEIN A