Including Harvested Grain Biogenic CO2 to Address a Critical Flaw in Climate Accounting

Abstract

The international climate accounting system excludes both the biogenic CO₂ sequestered in harvested crops and the biogenic CO₂ emissions that occur when grain is digested or burned as biofuel. Despite being described in the literature as a critical flaw in climate accounting all parties within the United Nations Framework Convention on Climate Change continue to treat these large biogenic CO₂ fluxes as carbon-neutral activities, while analysis of the accounting issue remains largely absent from the extensive literature examining international carbon leakage and GHG mitigation policy. Using a partial-equilibrium trade model, I analyse the economic implications of measuring harvested-grain biogenic CO₂ and find in the presence of traded grain and internationally heterogeneous GHG mitigation policy, measurement would change optimal domestic agricultural GHG mitigation policy. Given estimated CO₂ damage costs of $185/t, the unmeasured external biogenic benefit from grain production, and the unmeasured external biogenic cost from grain consumption, are equal in magnitude to the price of grain. Including the biogenic harvested-grain CO₂ in Canada's national inventory reduces measured emissions by 80 million tonnes per year. The size of these effects suggest that the measurement of harvested-grain biogenic CO₂ could be extremely consequential for the design of optimal GHG mitigation policy.

JEL Classifications: Q15, Q54