There are four key findings that are significant to the discussion surrounding the implementation of the Kyoto Protocol and any related domestic policies.

Implementation of the Kyoto Protocol will not be an economic disaster for U.S. agriculture. Even with emission commitments from 2008-2012 limited to the developed economies of the world, the levels of carbon permit prices most likely to result from Kyoto implementation would affect farm income by a few percent at worst. Farmers have opportunities to adjust production systems to avoid paying higher energy bills. From 1974 and 1994 farmers cut their fuel use by 28 percent. It is simply wrong to assert that the Kyoto Protocol is an assault on American agriculture.

Trading in carbon sequestration could be an opportunity, but a small one. For all the interest in soil carbon trading, and the extraordinarily high estimates of the potential for carbon sequestration in agricultural soils, the economics do not appear to be particularly favorable for a large amount of offsets. It may be true that soils could potentially be a reservoir for many gigatons of carbon. However, the economic potential does not line up in the same way.

Incentives to reduce net emissions of all GHG's would help to capture synergies between water quality benefits and GHG reductions. Policy discussions, at least in agricultural circles, have been fairly myopic in focusing almost exclusively on soil carbon sequestration. Looking more broadly shows that larger opportunities for cost-effective reductions exist with carbon dioxide emissions from direct and indirect energy use and nitrous oxide emissions. Agriculture contributes approximately 70 percent of all U.S. nitrous oxide emissions. Further, water quality issues are prominent for agriculture as the agricultural sector is responsible for most of the nutrient loading in the U.S. The opportunity for synergy between water quality and climate is large.

Programs that pay for environmental performance improvements will yield the most cost-effective solutions. Programs that subsidize best management practices (BMP's) have been a staple of farm programs for many years. The premise has always been that BMP funding would deliver the environmental goods. This assumption can fail as we observed when we tested conservation tillage subsidies. A much better option would be to reward the desired gain, not a proxy for it. Measurement problems are of course an issue, but it would be better to deal with those than spend a lot of money on a program that does not meet the intended objective.