Nature Based Carbon Offset Solutions in Michigan

Abstract

Carbon offsets are one of the many tools for achieving carbon neutrality, particularly for sectors with high emissions, or sectors with hard-to-abate emissions. In Michigan, few resources exist on Michigan-based carbon offset acquisition or development. Thus, our project asks: what is the sequestration potential, cost, and co-benefits of carbon offset projects using cover crops on Michigan agricultural lands and reforestation of Michigan’s previously forested land? And how can organizations evaluate and compare these potential Michigan-based offsets to offsets in existing offset markets? To answer these questions we quantify the potential sequestration ability of different land types, analyze the costs given the programmatic and policy constraints of offset markets, and evaluate the social and environmental co-benefits of nature-based offsets in Michigan. This information is organized into deliverables: (1) geospatial models that identify the spatial distribution of financial costs and sequestration potential for cover cropping on agricultural land and reforestation on historically forested land, (2) a benchmarking analysis of major carbon registries, and (3) a final report which synthesizes our findings and presents an overview of carbon offsetting potential in the state of Michigan. To develop these tools we draw on a variety of methodologies, including a literature review, geospatial analysis, a sequestration analysis, a cost analysis, and a benchmarking analysis. Prior literature that analyzes the potential for reforestation carbon offsets primarily looks at county level data. Within our analysis we present a novel approach for mapping the marginal cost per tonne of carbon sequestered at a 30-m spatial resolution. This shows that there is not only wide variation in the marginal cost of sequestration across the state, but also within individual Michigan counties. If county data were aggregated into a singular mean or median value, pockets of land with cheaper marginal costs of sequestration may be missed. We also find that 98.1% of land deemed eligible for reforestation within the state of Michigan is at an estimated marginal cost equal to or below the social cost of carbon. This means that it would be cheaper to develop a reforestation carbon offset on the land and sequester the carbon than to continue incurring the damages of leaving the carbon in the atmosphere. In addition to carbon sequestration, reforestation projects create a number of co-benefits that often do not get adequately valued, including increased recreation opportunities, air pollution absorption, wildlife habitat, and improved water retention and erosion control. Our analysis of cover cropping as a source of carbon offsets evaluates potential carbon sequestration at the county level but employs several geographically or condition-specific inputs that set it apart from other studies. We incorporate sequestration rates derived through the USDA’s standardized sample-based meta-modeling approach to estimate 2 potential sequestration through the adoption of cover crops on agricultural lands devoted to the cultivation of corn and soybeans, the top two crops by area in the state. Our estimates account for variability in sequestration rates based on the irrigation status of agricultural lands. In addition we calculate costs based on timescales that align with contract lengths for farmers. Through our analysis, we find that the southern half of the state has the most potential for sequestration and the cheapest offsets. While the cost of using cover crops tends to be higher than the market rate in most Michigan counties, federal incentives help lower costs and make more areas competitive. In all counties, the price of sequestering carbon through cover crops falls well below the social cost of carbon. In addition to carbon sequestration, cover crops also have the capacity to improve agricultural resilience against weather extremes due to climate change through improved water filtration, and can significantly reduce surface runoff and soil erosion. Our analysis of six carbon markets included two compliance based markets, as well as four voluntary based. The markets were evaluated against nineteen metrics in five broader categories, then scored and assessed against DTE’s priorities to inform a final ranking. Through the analysis of the four eligible markets against the nineteen benchmarks, we find that the American Carbon Registry (ACR) currently aligns best with DTE when weighted for their priorities. The key drivers of their high score was their emphasis on co-benefits.