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Agriculture may help mitigate climate change risks by reducing net greenhouse gas (GHG) emissions (McCarl and Schneider, 2000). One way of doing this is that agriculture may provide substitute products that can replace fossil fuel intensive products or production processes. One such possibility involves providing feedstocks for conversion into consumable forms of energy, where the feedstocks are agriculturally produced products, crop residues, wastes, or processing byproducts. Such items may be used to generate bioenergy encompassing the possibilities where feedstocks are used: • to fuel electrical power plants; • as inputs into processes making liquid transportation fuels e.g., ethanol or biodiesel. Employing agriculturally produced products in such a way generally involves recycling of carbon dioxide (CO2) because the photosynthetic process of plant growth removes CO2 from the atmosphere while combustion releases it. This has implications for the need for permits for GHG emissions from energy generation or use (Assuming we ever have such a program). Namely: • Direct net emissions from biofeedstock combustion are virtually zero because the carbon released is recycled atmospheric carbon. As such this combustion may not require electrical utilities or liquid fuel users/producers to have emissions permits. • Use of fossil fuels for power and liquid fuels releases substantial CO2 and would require emission rights. This would mean that the willingness to pay for agricultural commodities on behalf of those using them for bioenergy use would rise because their use would not require acquisition or use of potentially costly/valuable emissions permits. As a result, biofeedstocks may be a way that energy firms can cost effectively reduce GHG liabilities and also be a source of agricultural income. But, before wholeheartedly embracing biofuels as a GHG reducing force, one fully account for the GHGs emitted when raising feedstocks, transporting them to a plant and transforming them into bioenergy. This is the domain of lifecycle accounting and the subject of this conference. However, lifecycle accounting can provide biased accounting of such phenomenon. It is typically done assuming nothing changes elsewhere in the economy or world. In reality, large biofuel programs embody many violations of this assumption. For example, the recent corn boom induced changes in exports, reactions from foreign producers, and changes in livestock herds. Such issues involve a concept called leakage in the international GHG control. Additionally, these issues imply that a full analysis needs to conduct a broader sectoral level – partial (or perhaps economy wide general) equilibrium form of lifecycle accounting. Finally, biofuel opportunities embody differential degrees of GHG offsets. This is apparent by the widespread belief that cellulosic ethanol has a “better” net energy and GHG balance than does corn ethanol. This chapter addresses these issues by discussing lifecycle accounting relative to different fuels, leakage concepts and full greenhouse gas accounting in a partial equilibrium setting.


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