Ten years ago, while I was director of environmental affairs at Murphy Farms, I got a phone call from a gentleman at Cantor Fitzgerald, atop the WorldTradeCenter in New York City. He told me about the notion of a carbon market, yet to be established, the theory of a carbon credit and why carbon may have value. He expressed interest in securing the rights to the potential carbon credits that could be created by capturing and destroying methane emissions from our hog lagoons. I wish I could say that I embraced his vision. I did not. I was skeptical and rather dismissive of what I considered to be “blue-sky” thinking.

Fast forward to today, and I am obviously betting my career path on the opportunity for animal agriculture to benefit from the emerging carbon-conscious consumer and economy.

Trends in global animal agriculture have achieved enormous gains in terms of producing animal food products efficiently. These trends include: greatly expanded pork, beef, milk, chicken and turkey production; increased per-capita meat consumption; fewer and larger production operations; new technologies and best-management practices; growth of contract farming; and increased environmental concern related to concentrated production.

Add to this the warning by some “experts” that eating meat contributes to global warming. Mainstream publications like Time magazine are running articles equating meat consumption with damaging the planet. The United Nations’ Food and Agriculture Organization published a 2007 report called “Livestock’s Long Shadow.” It estimates that the global livestock sector emits nearly the same amount of greenhouse gases as the global transportation sector. Much of the blame is pinned on enteric methane emissions from cattle, but there remains concern about all meat production.

While larger and specialized animal agriculture has produced more affordable food, it also has created numerous challenges in manure management, and no industry has been more critiqued or proactive than the pork industry. At the same time, there are emerging opportunities to realize value from converting manure into energy (electricity and renewable fuels) as well as environmental attributes such as carbon credits.

Conventional Manure Management

As most types of livestock farms (except for beef) moved to indoor production, manure-capture and -treatment systems have evolved from letting manure run into the creek following a storm to complete storage or storage and treatment systems.

Manure land application is still the norm, with the nitrogen and phosphorus found in manure used to fertilize row crops and hay. While most systems are properly designed, constructed and managed, mismanagement can lead to mishaps such as overflowing or burst lagoons and basins or runoff from over-application. Such isolated incidents have driven pubic outcry, media coverage and legislation in many animal-ag-intensive states. In 1997, North Carolina issued an ongoing moratorium on any new hog farms that use lagoons and sprayfields to treat manure. The threat of lawsuits and increased costs have made new hog facilities nearly impossible in much of the United States

Along with water-quality concerns, U.S. animal-production systems have the potential to affect local, regional and global air quality through nitrogen (ammonia), sulfur, volatile organic compounds, particulate matter and odor emissions. In the United States, manure management annually contributes almost 2 million metric tons of methane to the atmosphere, which has a global-warming potential equivalent to 40 million metric tons of carbon dioxide (U.S. Environmental Protection Agency, 2006). More than 80 percent of these greenhouse-gas emissions come from dairy and swine lagoons.

The pork, broiler, layer, turkey and dairy industries have entered into a Consent Agreement with the U.S. Enivornmental Protection Agency to monitor air emissions from sample farms for a two-year period, beginning in 2007. The purpose is to accurately determine emissions and formulate emission factors so that operations can determine whether they comply with U.S. Clean Air Act emission limits. Several “tack-on” studies are measuring greenhouse-gas emissions.

Environmentally Superior Technologies

Because of concerns with conventional manure-management systems, especially in the pork industry, there’s been significant research-and-development dollars devoted to developing what’s known as environmentally superior technologies — or EST — to replace traditional liquid-manure storage and treatment systems. 

Many technologies attempt to reduce or eliminate odor, ammonia (nitrogen), phosphorus and pathogens present in manure using biological, chemical and/or mechanical processes. Most systems are extremely expensive, not economical and complicated to operate, which has limited implementation.

Some EST systems have focused on converting manure into energy using energy-recovery systems such as ambient temperature or heated digesters. Lagoon covers, though, are a simple, well-understood and relatively low-cost technology that capitalizes on the existing manure treatment and storage infrastructure. It captures and collects lagoon emissions under an impermeable cover. It is conveyed through a gas-handling system, and destroyed through combustion in a flare, boiler or electrical generator known as a genset. Lagoon covers alone didn’t provide opportunity for economic return and, as a result, their cost made them impractical. 

Using EST on a commercial scale has been high-risk and high-cost, with more failures than successes. But that’s slowly changing due to more favorable economics associated with electricity values, high energy costs and the increasing value of carbon credits.

Carbon Credits

A carbon credit is a metric ton of carbon dioxide equivalent that, to be tradable, must be a quantified, verified and certified emission reduction of a greenhouse gas. The carbon credit trading market results from growing concern over global climate change — specifically, the warming of Earth’s surface and global warming’s consequences for mankind.

An explanation of this is when sunlight reaches the Earth’s surface some of it is absorbed and warms the Earth. Because the Earth’s surface is much cooler than the sun, it radiates energy at much longer wavelengths. Some energy in these longer wavelengths is absorbed by greenhouse gases in the atmosphere before it can be lost to space, which warms the atmosphere. Greenhouse gases also emit energy upward to space and downward to Earth’s surface — this is the “greenhouse effect.”

Greenhouse gases are components of the atmosphere that contribute to the greenhouse effect. Some greenhouse gases occur naturally, while others result from human activities. Naturally occurring greenhouse gases include water vapor, carbon dioxide, methane, nitrous oxide and ozone. Certain human activities such as industry, transportation and agriculture add to the naturally occurring gases. However, agriculture is responsible for sequestering significant carbon. World atmospheric scientists agree that “global warming is unequivocal” (IPCC report, 2007) and that the increased levels are responsible for climate change. What is hotly debated is how severe the consequences will be if atmospheric carbon concentrations continue to increase.

Carbon dioxide, methane, nitrous oxide and three groups of fluorinated gases are the subject of the Kyoto Protocol, which went into effect in 2005. It is an agreement made under the United Nations Framework Convention on Climate Change. Countries that ratify this protocol commit to reduce their carbon and five other greenhouse-gas emissions 6 percent by 2012 from a 1990 baseline. The Kyoto Protocol now covers more than 160 countries and more than 55 percent of global greenhouse-gas emissions. The United States has not signed on due to concerns about how the emissions’ reductions would impact economic activity. Meanwhile, there are state and regional regulatory programs like California’s Assembly Bill 32, the Western Climate Initiative and the Regional Greenhouse Gas Initiative, covering greenhouse-gas emissions from utilities in northeastern states. There also are voluntary programs like the Chicago Climate Exchange. There is increasing public pressure for a cap-and-trade system to cut greenhouse-gas emissions. The U.S. Senate received a bill in 2008, the Lieberman-Warner Act, which didn’t pass, but most Washington insiders predict federal regulations curbing greenhouse-gas emissions for the major emitting sectors will eventually pass.

Carbon-credit trading markets surfaced so that industrial emitters and governments can satisfy (at a lower cost than implementing control technology) a portion of their Kyoto Protocol requirements or meet voluntary reductions, as in the United States. Credits are generated in many ways but, as it pertains to animal agriculture, are produced by the capture and combustion of biogas (methane) from animal manure-management systems. Greenhouse gases such as methane are converted into carbon equivalents for trading purposes. Methane has 21 times the global warming potential of carbon dioxide.

Only recently, with legislative initiatives such as “renewable portfolio standards” and new environmental markets, have U.S. producers been able to: 1) receive a premium for electricity created from methane combustion, and 2) quantify and place a monetary value on emission reductions created by changes in their manure-management practices.

Both the United Nations Clean Development Mechanism abroad and the Chicago Climate Exchange in the United States have developed protocols to register and issue tradable carbon credits for anaerobic digesters, including simple lagoon covers.

This growing market represents a new and reliable revenue and environmental-benefits source for farmers and landowners. In 2007, about 832 million metric tons of carbon equivalents generated from offset projects (valued at more than $13.4 billion) were traded in international markets (PointCarbon, 2008). The average wholesale price for a carbon credit in the compliance market was $16.

In the voluntary market, 65 million metric tons of carbon equivalents were traded in 2007, worth about $265 million (Point Carbon, 2008). The average wholesale price of a carbon credit was about $6. It tripled in volume and value from 2006. The market is forecast to grow dramatically as the United States transitions to a compliance market. It’s estimated to be $1 trillion by 2020 in the United States alone, with carbon prices expected to increase as demand increases.

The rough estimate is that capturing and destroying methane from a hog lagoon generates about 0.4 metric tons of carbon equivalent per finishing hog space annually. Current carbon prices are not driving technology onto the hog farm but represent “icing-on-the-cake” revenue where the primary revenue driver is likely electricity sales.

Carbon Footprint

A carbon footprint is the quantification of the greenhouse-gas emissions that come from a business during a year or even from producing a product like a pork chop. The EPA is now accepting public comments on a mandatory greenhouse-gas reporting rule that may cover agriculture. Increasingly retailers are moving forward, requiring suppliers to quantify greenhouse-gas emissions associated with the product and then identify ways to reduce them.

An example comes from the U.S. dairy industry. Last year, Wal-Mart executives contacted Dairy Management Inc., the industry’s checkoff organization, about the carbon footprint associated with fluid milk sold in their stores. The executives also told DMI they expected emission reductions. The dairy industry held a Sustainability Summit in June, and industry stakeholders agreed to move forward aggressively to determine fluid-milk production’s carbon footprint, but also to cut greenhouse-gas emissions 50 percent by 2020 from a 2007 baseline.

The good news is that reducing greenhouse-gas emissions tends to increase energy efficiency and lower production costs. Of course, it also adds value to a product by making it more environmentally friendly. The pork industry, led by the National Pork Board, is in the early stages of determining a pound of U.S.-produced pork’s carbon footprint.

The low-carbon economy is coming like a freight train. The pork industry will be impacted through marketplace demands to produce pork with less greenhouse-gas emissions. While there is significant potential to capture value from manure by generating energy and carbon credits, emerging carbon markets and standards are new in the United States, are complex and not yet well understood by farmers, technology providers and the ag-finance community. Several barriers, including high transaction costs, small benefits for some farms, performance risks and liability, new and uncertain markets, and poor information, may cut incentives and slow technology adoption. But as long as lagoon covers and digesters are not required by law and animal agriculture remains exempt from greenhouse-gas regulations, technology adoption should benefit from selling carbon credits.

Bottom line, whether you see the carbon issue as it applies to pork production as hot air, a threat or an opportunity is up to you.

Editor’s note: If you would like to contact Garth Boyd, you can e-mail him at  garth.boyd@camcoglobal.com.