Develop policies for carbon trading rights and risk management.

A New Mexico DOT experience with carbon sequestering

February 2009
New Mexico,United States

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Lesson Learned

Early results from the NMDOT CSPP, released in February 2009, offer some valuable insights that may be useful to other DOTs and FHWA Division Offices evaluating the viability of carbon sequestration practices in lands they control. Each of these lessons fall s into three broad categories: Policy Lessons, Process Lessons, and Human Resources Lessons, presented in three separate articles.

Policy Lessons
  • Implement sound land management practices statewide. Sequestering carbon in one region does not allow for deficient land management practices in another.
  • Resolve questions as to what rights a DOT has within the easements it has with federal partners. Coordination at the federal level is likely necessary to establish policy recommendations for non-traditional land management practices, such as carbon sequestration, that state DOTs may undertake on easements it manages. Currently, it is unknown whether carbon credits resulting from a DOT’s management practices that are generated on federal lands are possible, and if so, how they can be traded.
  • Beware that agencies’ district offices sometimes act on their own authorities, resulting in dissimilar decisions regarding similar topics. Standard business practices do not always translate from one district to another within an agency. This is important because agreements made with one field office that has jurisdiction in a particular DOT district or region may need to be duplicated in regions under jurisdictions of other field offices.
  • Identify, manage, and mitigate risks that could affect the ability to trade carbon credits. NMDOT has had to determine what uncertainty it is willing to tolerate in pursuing carbon sequestration in its ROW. One uncertainty NMDOT staff has contemplated is drought and, in response, development of a drought response plan is being considered. While NMDOT may be creating processes for DOTs to participate in marketing carbon credits, other DOTs will need to assess their own unique risks and develop contingencies for the distinctive risks it faces.
  • Evaluate options. In some cases, reducing emissions through modified management practices, such as reduced mowing, can contribute more to meeting GHG goals than carbon sequestration.
Early experience from the NMDOT’s carbon sequestration pilot project demonstrates the need for setting up policies that will help establish carbon trading rights of the state DOT, facilitate risk management, and foster standard business practices.

[1] Markets for trading "carbon credits," or offsets, are in the early stages of development. The Chicago Climate Exchange (CCX), launched in 2003, is one such market. It offers a “legally binding integrated trading system” to reduce GHG emissions by facilitating the sale of surplus carbon allowances or the purchase of emissions contracts by its members. Entities seeking to voluntarily reduce their emissions can buy and sell the allowances to offset their excess emissions. Under a national “cap and trade” system, which is an emissions reduction tactic using a national emissions ceiling that is reduced over time, participation in a carbon market would not be voluntary for those with emissions greater than the established threshold.

Related market-based initiatives, such as the Regional Greenhouse Gas Initiative (RGGI) and Western Climate Initiative (WCI), target specific sectors for emissions reduction. RGGI is a coalition of 10 northeastern and Mid-Atlantic States that uses a market-based cap-and-trade approach to reduce CO2 emissions from the power sector. WCI is a collaboration of seven U.S. governors and four Canadian Premiers. Much like RGGI, the WCI identifies and employs cooperative ways to reduce greenhouse gases in the region, focusing on a market-based cap-and-trade system. Both RGGI and WCI have established coalitions of states or jurisdictions to engage in coordinated market-based emissions reduction.

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Carbon Sequestration Pilot Program: Implementation and Next Steps

Published By: Federal Highway Administration

Source Date: February 2009

URL: www.climate.dot.gov/documents/FINAL_C-Seq_Report_021109.pdf

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Lesson Analyst:

Firoz Kabir


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New Mexico


United States

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Lesson ID: 2009-00501