As global agricultural and industrial development

Using Carbon Sequestration Projects to Offset Greenhouse Gas Emissions Margaret A. Yowell and Jessica K. Ferrell As global agricultural and industrial development advance, the concentration of heat-trapping greenhouse gases (GHGs) including carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons continues to increase. Human activities increase GHG concentrations, which in turn increase global temperatures and influence the global climate. While GHG emissions perpetuate climate change, increasing, maintaining, and preserving the integrity of naturally occurring carbon sinks and reservoirs may help slow climate change. Oceans serve as carbon reservoirs by storing GHGs, while plants serve as carbon sinks by actively capturing carbon out of the atmosphere. Mature forests and oceans tend to be carbon reservoirs. They remain in equilibrium with the atmosphere unless disturbed, when they then release carbon and contribute to GHG concentrations in the atmosphere. This article addresses: (1) methods by which agriculture and forestry sectors in the United States can increase carbon reservoirs by sequestering carbon in forests, grazing, and croplands, and engaging in best management practices (BMPs) to limit carbon emissions; and (2) emerging business opportunities for investors and industry to partner with agriculture and forestry sectors engaged in carbon sequestration and emission-reducing practices. The Kyoto Protocol to the U.N. Framework Convention on Climate Change (Protocol) came into force on February 16, 2005. The Protocol addresses global warming and imposes binding commitments on parties to reduce carbon emissions to specified levels and thereafter maintain these capped levels. It employs the cap and trade system that is the foundation for air emission trading programs. Under this system, carbon sequestered by one party may be used to offset emissions in another party s territory, facilitating parties abilities to comply with the Protocol. Only Protocol parties may participate in the flexibility mechanisms. Because the United States is not participating in the Protocol, American companies operating only in the United States cannot participate in the Protocol-driven international Ms.Yowell is a partner and Ms. Farrel is an associate with the Marten Law Group PLLC in Seattle.They may be reached at myowell@martenlaw.com and jferrell@ martenlaw.com, respectively. carbon trading market. Despite this, there is still reason for domestic companies, even those that are not active internationally, to consider generating and investing in carbon emission credits. Although the Bush administration opposes the Protocol, various bills have been introduced in Congress to establish some form of carbon cap-and-trade program. These include the pending McCain-Lieberman bill (S. 139) that would establish a trading system aimed at reducing carbon emissions from utilities, refineries, power plants, and other commercial entities. This bill failed in the Senate in 2003, and given the current political opposition, federal regulation of carbon dioxide emissions is not likely to emerge in the near future. Pressure continues to increase politically, however, to do something to address global climate change, and common thinking is that carbon emissions will eventually be restricted in the United States. In 2004, for example, the attorneys general of twelve states and three cities filed suit against five utilities that emit a large percentage of the carbon dioxide emitted by utilities in the United States. This is, in part, an attempt to force federal regulation of GHGs as pollutants. See State of Conn. v. Am. Elec. Power Co., No. 1:04-05669- LAP, at *1 2 (S.D.N.Y. filed July 21, 2004) (seeking relief under federal or, in the alternative, state public nuisance common law). The targeted companies have filed various dispositive motions seeking to dismiss the suit at the outset and a decision from the court is pending. Although regulation of carbon dioxide emissions at the federal level does not exist yet, the U.S. Department of Energy (DOE) has developed guidelines for reporting emissions under its Climate Vision and Voluntary Greenhouse Gas Reporting programs. Moreover, state statutes have been adopted that establish mandatory mitigation requirements for U.S. businesses operating domestically. These statutes and voluntary participation in the DOE s programs, regional mitigation programs, and private initiatives are currently driving the domestic carbon emissions trading market. Massachusetts, New Hampshire, New Jersey, and Maine enacted the first statutes requiring stationary sources to report and reduce direct emissions of carbon dioxide and methane. Other states have now followed their lead. Currently, Wisconsin requires large emitters to report carbon dioxide emissions. Connecticut, 20 Natural Resources & Environment American Bar Association Summer 2005 Volume 20 Number 1

Georgia, Illinois, Maine, Oregon, Texas, and Washington require GHG emissions to be reported and inventoried. Massachusetts, New Hampshire, Oregon, and Washington impose binding GHG emissions reductions on utility companies. In addition to regulating carbon dioxide emissions from vehicles, California developed a comprehensive voluntary reporting program, the California Climate Action Registry. New Hampshire and Wisconsin also have established voluntary registries for emission reporting, and Massachusetts joined New Hampshire as the second state with a cap-and-trade system meant to facilitate compliance with carbon dioxide emissions reductions imposed on power plants. Bills that would address GHG emissions are pending in the following states: Arizona, Hawaii, Minnesota, New York, Rhode Island, and Vermont. On the other hand, Alabama, Illinois, Kentucky, Oklahoma, West Virginia, and Wyoming passed laws explicitly prohibiting mandatory reductions in GHG emissions. The specifics of this state legislation suggest the range of approaches that can be used to address GHG emissions. Starting in March 2004, the State of Washington requires new power plants to mitigate 20 percent of their carbon dioxide emissions. Washington s carbon reduction law codifies the framework for a carbon emissions trading platform by providing broad criteria for mitigation projects that utility companies may develop to meet their reduction obligations. Eligible mitigation projects include forest preservation, financing alternative energy and efficiency projects, and landfill gas recovery. In 1993, Oregon established the Forest Resource Trust (FRT) to reforest underproducing lands. With the participation of nonindustrial private landowners owning 10 to 5,000 acres of eligible land, FRT pays owners stand-establishment costs; in exchange, owners agree to share a fixed percentage of the net timber harvest revenues from forests created by FRT. The Oregon Department of Forestry hopes FRT can effectively use forestry-based carbon offsets to generate funding for a carbon market. Active for almost ten years, FRT has enrolled 889 acres and 28 total projects since 1995. Or. Dep t of Forestry, Forest Resource Trust Accomplishments, available at www.odf.state.or.us/divisions/management/forestry_ assistance/trust/frtaccomp.asp?id=50201040203 (last visited June 23, 2005). Oregon administrative rules provide for sequestering atmospheric carbon in wood to comply with air quality objectives and compensate for carbon dioxide emissions. Oregon law now requires power plants to reduce GHG Regional partnerships continue to develop the science, agronomical research, and legislative support necessary to a successful carbon trading program. emissions, and also establishes the Climate Trust a nongovernmental organization that receives payments from power plants, which it invests in GHG projects to avoid, displace, and sequester carbon dioxide emissions. GHGs lend themselves to emissions trading because they mix uniformly a ton emitted in Washington has the same effect in Washington as it does on the other side of the planet. When companies move their emissions-intensive activities from regulated states to nonregulated states, however, leakage occurs, resulting in low emissions reductions or increased emissions overall. Therefore, regional efforts work more effectively from a scientific standpoint than discrete, state-by-state programs (while international programs like the Kyoto Protocol work best from a scientific perspective). For this reason, regional efforts are beginning to get attention. Northeastern states launched a Regional Greenhouse Gas Initiative and are developing a cap-and-trade program to reduce power plants carbon dioxide emissions, as well as a Regional Greenhouse Gas Registry. Massachusetts Climate Protection Plan (CPP) affirms the Climate Action Plan adopted by the New England Governors and Eastern Canadian Premiers in 2001. The CPP seeks to meet Kyoto Protocolinspired regional targets of decreasing emission levels to 1990 levels by 2010, decreasing to 10 percent below those levels by 2020, and reducing GHG emissions far enough to eliminate dangerous threats to the climate. California, Oregon, and Washington are working together to reduce global warming pollution through the Governors West Coast Global Warming Initiative. In 2003 and 2004, DOE named seven states and multiple Indian nations, universities, private companies, organizations, and Canadian provinces to participate in seven public- /private-sector partnerships within its carbon sequestration program. These regional partnerships continue to develop the science, agronomical research, and legislative support necessary to a successful carbon trading program. The Emerging Carbon Market As a result of this state activity, DOE s voluntary GHG reduction programs, and the expectation of eventual federal regulation of GHG emissions, the features of a domestic carbon market are beginning to emerge. Complete definition of a domestic market depends on the resolution of several important implementation issues. The U.S. Environmental Protection Agency identifies Number 1 Volume 20 Summer 2005 American Bar Association Natural Resources & Environment 21

baselines, leakage, and duration as three key issues requiring resolution before implementation of a GHG offset program, which is critical to any carbon market. The U.S. experience with acid rain and other trading programs will guide the developing domestic carbon market. Several factors, such as an accurate emissions inventory and a fair baseline against which to measure reductions, remain in flux. Domestic trading markets for carbon credits created by agriculture and forestry sequestration projects already have emerged, however. The Chicago Climate Exchange (CCX) is a self-regulatory exchange that trades GHG emissions. While CCX membership is voluntary, more than forty-five corporations, municipalities, and other entities that emit GHGs from facilities in North America are participating in the exchange and have made binding reduction commitments. The CCX system consists of an online trading platform, a clearing and settlement platform, and the CCX registry. CCX began continuous electronic trading of GHG emission allowances on December 12, 2003. Its reduction commitments and trading rules apply from 2003 through 2006. The market platform covers emissions from facilities owned by CCX members of carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. CCX lists the following projects as eligible for offsets: landfill methane destruction in the United States; agricultural methane destruction in the United States; carbon sequestration in U.S. forestry projects; carbon sequestration in U.S. agricultural soils; and fuel switching, landfill methane destruction, renewable energy, and forestry projects in Brazil. In January 2004, CCX traded 82,800 metric tons (mt) of carbon dioxide, at prices between $0.90 and $0.98 per mt of carbon dioxide. Throughout 2004, prices ranged from $1.62 to $1.87 per mt. Prices hovered around $1.60 per mt between February 28 and March 4, 2005. Several organizations also now offer brokerage services to assist buyers and sellers with carbon offset and credit transactions. For example, the National Carbon Offset Coalition headquartered in Butte, Montana, facilitated a trade between the Salish and Kootenai Tribes of Montana and the London Office of Sustainable Forestry Management in 2000. Forest Securities, Inc. (FSI) offers management, scientific, economic, and brokerage services for a range of climate change initiatives, domestically and internationally. FSI has more than 15 million acres of forestlands under consultation around the world. (In the context of carbon sequestration, consultation GHG trading and offset programs could provide farmers, ranchers, and members of the timber industry with supplemental income through carbon sequestration practices. involves analysis of and recommendations for increasing carbon storage potential based on principles of soil science, silviculture, and forest ecology). Through consultation, FSI can estimate the land s carbon budget by analyzing its carbon storage based on past, present, and future potentials of annualized rates of sequestration. Ultimately, FSI can expose the carbon credits generated to the appropriate markets. FSI provides reviews for both buyers and sellers with components of the reviews differing depending on one s role in the marketplace. Carbon Sequestration Opportunities for Agricultural and Forestry Sectors The GHG trading and offset programs described above could prove favorable for farmers, ranchers, and members of the timber industry by providing supplemental income through carbon sequestration practices. Economic evaluation of the carbon sequestered by farmers, ranchers, and foresters suggests that all three sectors could compete in both national and international carbon markets, albeit in the latter only to a limited extent because the United States has not agreed to the Kyoto Protocol. This participation is being enhanced by state and U.S. Department of Agriculture carbon storage projects that develop carbon equations to establish soil carbon models, and by their collective research and development efforts that continue to improve the reliability of both carbon storage potential and valuation of that potential. Taking advantage of this opportunity through legislation could also help states manage resource bases, gain competitive advantages, and provide an additional revenue stream to help alleviate the pressure on state budgets if such activities are applied to state-owned lands. Carbon emission reduction credits (CERCs), measured in metric tons of sequestered carbon, represent the amount of carbon stored by the sequestration practice. A 10,000 square meter (m 2 ) forest with a sequestration rate of, for example, 6 tons per 10,000 m 2 per year that matures at year seventy, yields a total of 420 tons of carbon. International Carbon Bank & Exchange, available at www.icbe.com/ (last visited June 23, 2005). But once generated, CERCs must be calculated and verified against a carbon accounting standard before they may be sold into an emissions trading market. Estimates of the value of carbon emissions in 1999 ranged from $15 to $348 per mt. In 2002, studies put the nonweighted average price paid per metric ton of 22 Natural Resources & Environment American Bar Association Summer 2005 Volume 20 Number 1

carbon dioxide at $4 in a buyer s market created by legal uncertainties surrounding emission reduction requirements. In 2004, parties ranging from PacifiCorp, a power company in the Pacific Northwest, to C*Trade, a sustainable energy developer, agreed on a trading price of roughly $8 per mt, while CCX reported prices consistently under $2 per mt. Forests and cropland may offer the most promise in terms of carbon sequestration. Although policy and cost factors remain to be fully resolved, agricultural studies suggest that changes in rotation and tillage practices provide the most cost-effective carbon sequestration processes. Certain types of tilling and organic farming increase the potential of agricultural land to serve as carbon sinks and sequester carbon. American forests have constituted a significant carbon sink since at least the 1950s but, due to poor ecosystem management practices in agriculture and forestry, the rate of sequestration is decreasing. Alternative practices aimed at sequestration on both public and private lands could increase both the amount of carbon storage and the rate at which soils and forests store carbon. Farming and ranching carbon sequestration activities include tree planting; forest preservation; land conversion and restoration; improved water and fertility management; and improved cropping systems, including the use of conservation tilling on croplands. These may be carried out as subsidized projects, which may in turn be used as GHG offsets for GHG emissions from another entity, such as a power plant. Agronomists and soil scientists estimate that U.S. croplands could sequester more than 200 million metric tons of carbon (mmtc) per year from acreage conversion and use of BMPs. They estimate the overall carbon sequestration potential of U.S. grazing lands to be between 29 and 110 mmtc per year over a twenty-five-year period. R.F. Follett et al., Research and Development Priorities, in THE POTENTIAL OF U.S. GRAZING LANDS TO SEQUESTER CARBON AND MITIGATE THE GREENHOUSE EFFECT 427, 431 (2001). Agriculture activities themselves produce at least 20 percent of manmade greenhouse effects. Holly L. Pearson, Climate Change and Agriculture: Mitigation Options and Potential, in CLIMATE CHANGE POLICY: A SURVEY 307, 307 (Stephen H. Schneider et al. eds., 2002). The agriculture sector has the ability to mitigate these effects through use of Best Management Practices (BMPs). If a farmer generates a total carbon reduction by changing to sequestration-increasing practices, brokerage firms calculate that change into CERCs. Farmers owning carbon-productive and/or large tracts of land stand to While several organizations actively establish and assess agricultural and forestry projects as GHG offsets, states have yet to agree on a binding uniform national or regional standard. earn supplemental income through use of BMPs. In fact, in the increasingly regulated carbon trading environment, some commentators discourage farmers from agreeing to long-term contracts that lock in a low carbon credit price, as they expect the price of credits only to rise. The worth of this supplemental income to carbon credit suppliers in the agricultural sector depends upon the cost to change practices, and whether the returns increase after a short enough period to offset those costs. In addition, it can take cropland twenty to thirty years to achieve equilibrium after its conversion back to, for example, a native ecosystem. Additional storage after reforestation may take between sixty and one hundred ten years. The point at which an ecosystem reaches equilibrium and begins storing carbon in addition to that stored through the former land use depends upon the starting state of the land. Expert consultants can estimate the economics of this conversion. Policy considerations and potentially hidden costs also factor into decisions to actively sequester additional carbon in crop or grazing land. For example, industries required to purchase carbon credits may supply farmers with operating materials. As regulatory costs for supply companies increase, farmers may pay for that through increased fuel and fertilizer costs. In addition, some farmers flood their land after harvest, providing seasonal habitat for migratory birds. Although environmentally beneficial, this practice precludes some carbon sequestration BMPs. Policymakers must weigh many competing interests, such as the relative importance of GHG reduction and creation of wildlife habitat in novel ways, as well as both opportunity and hard costs of sequestration against its public benefits. Sustainable forestry management results in increased sequestration of carbon, and carbon credits are also traded for stored carbon, such as standing forest land. Timber companies can benefit from reducing logging and modifying harvesting schedules, instead allowing a standing forest to continue sequestering carbon most effectively. Forest landowners can increase carbon storage through the following conservation practices: reforesting underproducing lands; managing woodlands to conserve soil and improve growth; improving forest health and reducing fire risk; and restoring and protecting wetlands. Landowners can then obtain a forestry carbon offset, a transferable certificate verifying the amount of carbon dioxide removed from the atmosphere and stored as carbon in the forest, and sell that certificate to power companies that are regulated or voluntarily enrolled in GHG Number 1 Volume 20 Summer 2005 American Bar Association Natural Resources & Environment 23

reduction programs. Because the Pacific Northwest is one of the most productive areas in the United States for carbon sequestration, it is no surprise that Pacific Northwest states have adopted GHG programs that foster carbon sequestration. For wood products to be counted as part of the carbon budget rather than a carbon loss, timber companies must keep records of logs sorts, markets, and other products to enable accurate assignment of values to those products. Members of both timber and agricultural sectors have the option of agreeing to carbon easements on their land once they implement sequestration practices, or simply selling the carbon credits generated by BMPs. Carbon brokerage firms known as aggregators assess carbon sequestration inventories through biological assessments and assist landowners and forest stewards by providing recommendations for increased carbon storage benefits. These include improved logging practices, conversion of pasture to forestry, and lengthening rotation cycles. Aggregators include conservation organizations, farming coalitions, and consultants. After the initial period of assessment, carbon storage quantity estimates, and eligibility, the broker aggregates the carbon offsets, and then markets and sells either carbon rights to the land to industry partners or carbon credits generated by the landowner to interested investors and utilities companies. If the aggregator brokers an easement, it pays the landowner up front for the easement, and then conveys the carbon rights to the investor in a separate agreement. Because most carbon benefits are not realized until the ten- to forty-year tree growth period, up-front forest projects may amount to approximately $10 per mt for a new forest, exceeding the $6 per mt cost estimated for agricultural projects. The long-term worth of sequestration projects in both forestry and agriculture depends upon the sequestration capability of the land, the up-front costs to maximize that capability, the duration of the project, and factors driving the demand for credits created by sequestration projects. All of these variables drive the price of easements and carbon credits to the aggregator, investor, and regulated entity. Hard costs for developing carbon credits in the farming, ranching, and forest sectors include up-front expenses required for reforesting, afforesting, and otherwise converting lands to uses that result in greater carbon storage; continuing maintenance, monitoring, and verification of actual storage convertible to CERCs; and long-term capital investments required for a successful, long-term storage project. Benefits flow to both the project managers, presumably farmers, ranchers, foresters, and brokers, and the public at large. According to soil scientists, farmers benefit from improved soil quality and a lesser susceptibility of soil to erosion; the public receives multiple off-site societal benefits like decreased water pollution, improved habitat conditions for wildlife and, of course, mitigation of the greenhouse effect. R.F. Follett et al., Research and Development Priorities, in THE POTENTIAL OF U.S. GRAZING LANDS TO SEQUESTER CARBON AND MITIGATE THE GREENHOUSE EFFECT 431, 434 36 (2001). A recent study conducted for the Pew Center on Global Climate Change provides an in-depth analysis of such costs, as well as of factors affecting them and the effects of discount rates. See Robert N. Stavins & Kenneth R. Richards, The Cost of U.S. Forest-Based Carbon Sequestration 5 33 (Jan. 2005), available at www.pewclimate.org/docuploads/sequest%5ffinal%2epdf (last visited June 23, 2005). The Pew Study synthesizes prior ad hoc valuation studies that varied widely in their cost estimates and provides central tendencies of normalized marginal costs of carbon sequestration projects. It concludes that prior studies (not including regional studies, because inclusion would unrealistically oversimplify the analysis by assuming that regional characteristics typified national characteristics) converge at the conclusion that, for projects sequestering 300 million tons of carbon annually, supply functions cost between $25 and $75 per short ton of carbon; for projects sequestering 500 million tons of carbon annually, costs range from $30 to $90 per short ton. The Buyer s Market for Carbon Credits: Investors and Regulated Entities While several organizations actively establish and assess agricultural and forestry projects as GHG offsets, states in the United States have yet to agree upon a binding uniform national or regional standard. Various industries including utilities companies, sanitary services, textile mills, chemical companies, concrete and metal industries participate in DOE s voluntary GHG reporting program established by Section 1605(b) of the Energy Policy Act of 1992, 42 U.S.C. 13385 (2000). These industries use DOE program standards when submitting EIA-1605 or EIA 1605EZ forms to DOE, which record emissions and reductions. For more information, see DOE Energy Information Administration, Voluntary Reporting of Greenhouse Gases 2003, xi (Feb. 2005); and Guidelines for Voluntary Greenhouse Gas Reporting, 70 Fed. Reg. 15,169 (Mar. 24, 2005) (to be codified at 10 C.F.R. pt. 300). In addition to DOE s voluntary GHG reporting program, the U.S. Department of Agriculture, the Department of the Interior, and other federal agencies responsible for carbon management in forest and agricultural lands of the United States have designed monitoring methods to collect data on carbon sequestration, including the NASA Ames CQUEST application. This is a combination of NASA remote sensing technology, ecosystem process modeling, and field-based measurements that characterizes land management impacts on the carbon cycle. In addition, Oregon has required the development of a forestry carbon offset accounting system as a means of consistently reporting forestry carbon offsets. OR. 24 Natural Resources & Environment American Bar Association Summer 2005 Volume 20 Number 1

REV. STAT. 526.783 (2004). The state forester is to develop the system to register, transfer, and sell forestry carbon offsets, but the statute provides only that the state forester [u]se accepted principles and standards relating to the creation, measurement, accounting, marketing, verifying, registering, transferring and selling of carbon offsets used as mitigation for carbon dioxide emissions consistent with State Board of Forestry rules. Id. Though not yet standardized, these modeling and statutory tools, in combination with regional partnerships designed to formulate workable models for domestic GHG accounting, may facilitate realistic carbon trading within non-protocol parties through forestry and agriculture sequestration projects in the near future. Some electric utilities and oil companies operating in unregulated states are also building up credits in anticipation of GHG emissions regulation. American Electric Power (AEP), for example, voluntarily participated in DOE s Climate Challenge program. This program has now evolved to the Climate Vision program under the Bush administration. AEP planted 15 million trees in five years and developed a Climate Action Project in Brazil expected to sequester 1 mmtc over forty years. In addition, the U.S. utility provider Entergy entered into an agreement with Blue Source, Inc. in 2002 to purchase geologic carbon sequestration credits to meet voluntary carbon dioxide limits. In the Pacific Northwest, Portland General Electric and PacifiCorp have both sought similar means of offsetting carbon dioxide emissions since the early 1990s. If a power company enters into an agreement with a landowner to reforest, adopt BMPs, or otherwise increase the land s carbon sequestration potential, the company can claim credit for reducing carbon dioxide emissions. Therefore, in addition to investors, both regulated power companies and companies that have voluntarily committed to emissions reductions drive demand for CERCs. As mitigation requirements become more widespread and a standardized verification system is established, the U.S. carbon market will build buyer and investor confidence. The Future of Carbon Sequestration A standardized verification system for non-protocol carbon credits created by sequestration projects does not yet exist. This absence, along with the lack of widespread binding emissions reductions, currently limits the demand for carbon credits in the United States, creating a buyer s market with a low price tag on carbon credits. The science and economics behind carbon sequestration has developed despite this, albeit in largely ad hoc studies. Carbon sequestration activities now need policy guidance to become a widespread economic reality. The decision to not participate in the Kyoto Protocol will continue to affect development of a domestic carbon market in several ways. While U.S. companies with facilities in participating countries are regulated by the Protocol, they can also participate in the international Kyoto Protocol emissions trading market by, for example, sponsoring emission-reducing projects in developing countries. In contrast, American companies operating only in the United States cannot participate in emissions trading or any of the Kyoto Protocol s other flexibility mechanisms, so companies in participating countries cannot purchase carbon credits from, for example, U.S. sequestration projects to meet their emissions reductions under the Protocol. The price of carbon credits from Protocol-eligible projects on the international market may therefore outpace the price in the United States. Because of this lower cost, U.S.-based power companies that are subject to mandatory state GHG reduction requirements will likely purchase less expensive, domestically produced carbon credits on the U.S. market to comply with state regulations, rather than Protocoleligible credits created by international sources. Companies may also invest in CERCs as a way of buying time to develop emissions-reducing technology or for public relations reasons. Another issue potentially affecting the development and use of carbon sequestration projects in this country and elsewhere is the physical limits of carbon sequestration. Some scientists warn that its benefits may be short term. Once a carbon sink reaches equilibrium, it is storing the maximum amount of carbon of which it is capable. At this point, project managers must continue BMPs to ensure not only that the sink continues storing its maximum, but that no carbon is released back into the atmosphere through fire, pests, human activity, and various effects of climate change itself. As mitigation requirements become more widespread and a standardized verification system is established, the U.S. carbon market will solidify further and build buyer and investor confidence. As long as agriculture and timber sectors carefully assess their options and minimize up-front costs for sequestration practices (or ensure that investors or utilities companies pay those costs), carbon credits could provide a significant supplemental income to boost agricultural and forest economies, facilitate mitigation compliance, and help mitigate the greenhouse effect. Number 1 Volume 20 Summer 2005 American Bar Association Natural Resources & Environment 25