Methodology and Findings for the ‘California Sustainable Agricultural Lands Conservation Program: Evaluating the Use of Cap-and-Trade Funds to Promote Climate Mitigation and Adaptation.’

Tom Daniels, Crossways Professor
Dept. of City and Regional Planning
University of Pennsylvania

Introduction
The research project on the California Sustainable Agricultural Lands Conservation (SALC) program combined the broader exploration of how the SALC might serve as a national model—both to preserve farmland from conversion to development and to address climate change—together with a fine-grained analysis of the program structure, content, and performance. The SALC is unique in that it is the only farmland preservation program in the United States that is funded through the proceeds of a cap-and-trade program to reduce greenhouse gas emissions. Included in the SALC goals is the preservation of farmland to curb automobile-dependent sprawl and promote infill and compact urban and suburban development to avoid future greenhouse gas emissions. The SALC also has an equity and opportunity component to preserve farmland in areas with low-income and minority households.

The SALC was created by the State of California in 2015, meaning the program has an established structure and a track record of funding and farmland preservation projects to evaluate. The SALC program has resulted in the preservation of more than 117,000 acres in 74 projects with a substantial investment of $239.9 million. California is poised to support the continuation of the SALC program through the cap-and-trade program at least through 2030 when California aims to achieve a reduction of 40 percent in greenhouse gases below 1990 levels. But given California’s longer term goal of net zero emissions of greenhouse gases by 2045, the SALC may very well exist for several years beyond 2030.

Research Methodology
The evaluation of the SALC program began with a literature review of the farmland loss problem in the United States and how farming operations and farmland loss are related to climate change. Next, the literature review was used to explain what farmland preservation is, how the preservation process works, the goals and strategies of farmland preservation, and the experience of farmland preservation in the United States. The literature review covered several books and articles, which were cited in the end notes for interested readers.

Next, a review of the SALC program documents was conducted. This included program guidelines, calculating avoided greenhouse gas emissions from preserving farmland, and the conservation easement document. These documents totaled over 400 pages.

Then, data on agricultural land preservation from the California Strategic Growth Council were compiled and analyzed: the cost of purchasing the development rights, acreage preserved, and location. Data were also retrieved from the California cap-and-trade program which funds the SALC program.
An analysis followed of the eligibility criteria and ranking of applications for the purchase of development rights and fee simple acquisition of farmland and the deed of easement language used to regulate the use and maintenance of the property.

An Interview with the SALC staff was conducted about the program in mitigating and adapting to climate change. The interview was designed to be anonymous (no staff were identified or quoted). Information from the interview informed the evaluation of the SALC program.

Next, in the report, the potential for the SALC program to serve as a national farmland preservation model was discussed and recommendations were made to strengthen the program.
Finally, the SALC program was evaluated from a Georgist perspective, based primarily on George’s book Progress and Poverty. Although it is often risky to guess how someone from the 19th century would react to a particular idea or public policy in the 21st century, George was fairly clear about his principles. This section led to a broader discussion about land ownership, farmland preservation, and some of the benefits of the SALC program.

Findings of the Sustainable Agricultural Lands Conservation Research Project
The findings of the SALC project include:
1. The program has been cost-effective in preserving over 117,000 acres of agricultural land at an average cost of just over $2,000 per acre. This is a relatively low cost compared to other government farmland preservation programs.

2. The majority of land preserved with SALC funding has been adjacent to other preserved land. Creating large contiguous blocks of preserved farmland is essential for keeping development separate from farming operations and for forming preserved areas that channel development toward infill areas and designated growth areas, thus limiting sprawl and avoiding greenhouse gas emissions. SALC preservation projects have helped to avoid a significant amount of greenhouse gas emissions, helping the State of California meet its 2020 goal of a 30 percent reduction in greenhouse gas emissions below 1990 levels.

4. Demand from landowners for the SALC program has been strong. The program could preserve more land each year with additional funding and staff.

5.The SALC program could serve as a model for a national farmland preservation program. A national SALC-type program would have to be funded by a federal cap-and-trade program to reduce greenhouse gas emissions, and provide matching funds to states, local governments, land trusts, and Native American tribes much like the current Agricultural Conservation Easement Program that been operated since 2014 by the Natural Resources Conservation Service of the US Department of Agriculture.

6. Two important features to add to the SALC program either within California or for a national model are:
a) An Offer to Purchase at Agricultural Value (OPAV) clause in the deed of easement document, which ensures not only long-term availability of the land for agriculture, but also that the land remains affordable for agriculture, and avoids the transition of preserved farmland to rural residential estates; and
b) A separate companion easement requiring that the preserved farmland be actively farmed.

7. Two recommended adjustments are: a) A streamlined process for determining avoided greenhouse gas emissions, based on location, land use planning, and zoning. It is important that applications for farmland preservation be processed in a timely manner. The number of applications has been modest so far in California at less than 100—and about 20 completed conservation easements on farmland each year. But a national program typically involves completing closer to 1,000 easement projects a year. b) A limit on the size of building envelopes. Building envelopes pose a problem if there is any donation of an easement that was used for an income tax deduction. Ironically, the IRS does not seem to scrutinize easement deals in which there is a 100% cash payment or for an easement donation where no federal income or estate tax deduction is claimed. But for easement donations involving tax deductions, there are a plethora of requirements, see IRC 170 (h) and Treasury Regulations 1.170A-14 26 CFR 1.170A-14. The IRS has taken a dim view of building envelopes that are not clearly surveyed with a legal description. A change in or expansion of a building envelope that has been vaguely described can cause the IRS to retroactively reduce the value of a donated or bargain sale easement.

8. Henry George may have had mixed emotions about the SALC program. On the one hand, the purchase of development rights involves paying farmers for an unearned increment, the opposite of what Henry George’s Single Tax proposed: taxing away the unearned increment from increasing real estate value. On the other hand, the purchase of development rights rewards farmers for not developing their land and continuing to produce food and fiber. George would likely have approved of an OPAV clause in the deed of easement to require the landowner to give the holder of the development rights the first option to purchase the preserved farmland at its agricultural value. This practice would in effect eliminate any future unearned increment. George also would probably have approved of the equity goals of the SALC program because improving the distribution of wealth is a core principle of Progress and Poverty. The preservation of farmland to curb sprawl and promote infill and compact development would surely receive George’s support. George was a strong opponent of land speculation that kept land undeveloped or underdeveloped and resulted in vacant lots in cities and resulted in high rents. Land speculation has also led to leapfrog patterns of residential and commercial development in the outer suburbs and countryside that have proven costly for public infrastructure and have generated abundant greenhouse gas emissions. It is worth noting that emissions from transportation make up the single largest source of greenhouse gases in the United States.

Required conservation practices on preserved farmland would maintain the productivity of the land through capital investment and labor, which would be acceptable to George.

The landownership reform brought about by the purchase of development rights funded by the SALC reflects a public-private partnership. Landowners are selling an interest in their land—the development rights—to government agencies or private land trusts. Although George was not a fan of private property, he recognized that buying out the future potential unearned increment in some cases would be the best that could be hoped for.

Conclusion
California’s Sustainable Agricultural Lands Conservation program has made important and increasing achievements in land preservation since its inception in 2015. The program would benefit from clear goals of how many acres to preserve both each year and at least until 2030. So far, the program has resulted in the preservation of 117,000 acres or about 183 square miles. The pace of nearly 20,000 acres preserved each year on average compares favorably with long-established farmland preservation programs in Pennsylvania, New Jersey, and Vermont.

A hallmark of the SALC program is its effort to preserve agricultural land to avoid increases in greenhouse gas emissions arising from sprawling development patterns. This is a strategy that other farmland preservation programs could and should adopt.

The funding for the SALC comes from California’s cap-and-trade program to reduce greenhouse gases, which is due to sunset in 2030. Given that California will not be close to reaching net zero emissions by 2030, it is likely that the cap-and-trade program will be extended. This would also likely extend the life and funding of the SALC program.

To scale up the SALC program into a national program would require considerably more funding and personnel, such as a national cap-and-trade program for a funding source and close cooperation with state and local governments and non-profit land trusts. But the SALC has demonstrated that the processing and completion of preservation projects can be accomplished in a fairly timely manner.

It is worth noting that agricultural operations contribute about 10 percent of America’s annual greenhouse gas emissions. Current estimates are that if farm and ranch operators adopt climate-friendly practices—especially minimum tillage, cover crops, and reduced fertilizer use—greenhouse gases from agriculture could be cut in half.

Building up soil carbon and soil productivity are important outcomes for farmland preservation in the long run. And farmland, properly managed with no-till farming, cover crops, and crop rotation can store and sequester carbon. But agriculture contributes nearly half of the nation’s annual methane emissions and more than half of its nitrous oxide emissions. These greenhouse gases are 28 and nearly 200 times more potent in heat-trapping than carbon dioxide. Methane comes from nitrogen fertilizers that use natural gas as a feedstock and from livestock, especially burping cattle. Nitrous oxide results from the use of nitrogen fertilizers and manure. But addressing emissions from livestock will require other programs and policies in addition to farmland preservation.

References
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