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Breaking: Waxman, Peterson announce agreement on cap-and-trade bill paving way for final vote this week

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"Breaking: Waxman, Peterson announce agreement on cap-and-trade bill paving way for final vote this week"

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From a scientific perspective, the deal Waxman made with the aggies is not optimal.  From the perspective of consequences in the real world, however, I just don’t see how this deal changes any of the major outcomes of the bill much, if at all.

UPDATE:  I’ve added comments on the deal from Dr. Michael MacCracken, a top U.S. climate scientist.

E&E News (subs. req’d) reports on what it took to secure the farm vote:

Two powerful House Democratic committee chairmen announced terms of a deal this evening on a comprehensive global warming bill, paving the way for a vote later this week.

Agriculture Chairman Collin Peterson (D-Minn.) told reporters today he would vote for the House climate bill — and bring dozens of rural lawmakers with him — after Energy and Commerce Chairman Henry Waxman (D-Calif.) agreed to make a number of concessions that had drawn the ire of farm state members….

“We have something that I think works for agriculture,” Peterson said. “We have a couple of areas that may get resolved down the line, but I think we have a meeting of the minds about where we are generally headed.”

Like the bill as a whole, the deal is imperfect.  But in the real world, I think the compromises are unlikely to have much if any overall impact on the bill’s key outcomes.  Let me start with the deal on the life-cycle analysis of biofuels:

Waxman also consented to block EPA from calculating “indirect” greenhouse gas emissions from land-use changes when implementing the federal biofuels mandate. The Democrats will impose a five-year moratorium to allow further study of the issue, with consultation from Congress, EPA, the Energy Department and USDA instrumental in restarting the measurements in the biofuels rules.

From a scientific perspective, this is certainly not a great idea since the indirect emissions from land use can be quite large (see “About those two studies dissing biofuels“).  That said, how exactly was anyone going to calculate these indirect emissions anyway?  How exactly does one know how much extra deforestation occurred because some farmer in Iowa planted more corn or switchgrass?  As Dr. MacCracken, Chief Scientist for Climate Change Programs with the Climate Institute, emailed me tonight:

Now, on the question of indirect effects of switching to biofuels, my understanding is that this is a pretty controversial issue””saying that if a US farmer converts acreage from soybeans to corn for biofuels and this makes the price of soybeans go up so Brazilian farmers clear Amazon forest and this counts against the biofuels. If you get started down this line, then anytime any farmer changes anything could become subject to an indirect C fee, etc.–how can one possibly be sure that this is happening because of that””maybe the Afghan farmer will switch from growing opium to growing soybeans and that will help the drug problem. I just don’t see how such counting could work””when one uses coal-fired electricity, does one just count the C in the coal, or also the C in the gas the worker used to get to work, or also the C used to produce the food the worker and his family eat. This indirect stuff could get really complicated””so, if putting indirect accounting off for five years to get a better sense of this sounds like a reasonable compromise if that is what it takes to get the bill passed.

This is doubly complicated by the fact that the nation and the world have to solve the deforestation problem in any case — and this bill has major provisions to direct substantial sums of money toward national-accounting based efforts (see discussion here).  So if in 2020 we are, as most people expect, simultaneously reducing deforestation and increasing biofuels, then demonstrating an indirect land-use effect from the biomass is going to be difficult.

Moreover, in the real world, this part of the agreement will probably have very little consequence.  Why?  Well, as I noted before, the enviros made a terrible deal back in the 2007 Energy Bill where they agreed to allow the corn ethanol industry a mandate for 15 billion gallons with a full exemption from lifecycle analysis in return for a mandate of 22 billion gallons of nonexistent cellulosic biofuels.  If they thought they could undo that deal, they were wrong.

And that 15 billion gallons of corn ethanol is pretty much all of the corn ethanol one could imagine US producing — I think it would take us to more than 40% of the corn crop.  Now I have no idea when (if ever) we’re going to get substantial amounts of cellulosic biofuels, but it won’t be for well past 5 years from now, and probably not until 2020 or beyond (see “Are biofuels a core climate solution?“).

Waxman has kicked the can down the road for 5 years (on an issue that was probably going to take years to resolve scientifically anyway) and not given up anything of much actual consequence.  Hard to lose any sleep over this one.

Waxman agreed to put the Agriculture Department — rather than U.S. EPA — in the lead for management of the offset program that pays farmers and other landowners to conduct environmentally friendly projects. Congress will turn to the Obama administration for guidance on how to fold in EPA.

The devil is in the details on this one, and I’ll need to see the actual language before passing final judgment.  I probably wouldn’t have agreed to put Agriculture in charge here.  This sounds to me like the result of Waxman being in too much of a hurry to get a vote this week.  But I basically agree with Dr. MacCracken that “I would not react negatively on this point without knowing a lot more about what is going on and how it is to work.”

Indeed, I fully expect that the Obama administration will make sure EPA gets to have its say.   I would add that if environmentally friendly projects are to become legitimate offsets, then the Agricultural Department was in any case going have to be heavily involved, probably funding a bunch of in situ studies to see what actually saves carbon (and N2O and methane) and what doesn’t.  I am assuming that the other provisions in the bill to maintain offsets integrity are kept.

Finally, CBO had modeled that the some 300 million domestic offsets would be used in 2020, of which about half were from tree planting and soil/farming practices.  That is triple what I expect — see “Game changer, Part 2: Why unconventional natural gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet” — but still leads to a 12% emission reduction in 2020 in capped sectors.  Interestingly, EPA’s new analysis (here) finds a “50% increase in the percent of cropland using conservation-tillage and no-till by 2020 in response to a $15/ton CO2 incentive payment.”  And yet EPA finds that only about 170 million total domestic offsets would be used in 2020.

The point is, even with assuming a fairly large amount of domestic offsets, even with a significant change in domestic tillage practices driven by Waxman-Markey, the overall impact on the 2020 target is pretty small.  And the relative impact on the 2030 target would be far smaller.

Bottom Line:  If you supported the bill before, nothing in this deal is a game-changer.  If you didn’t, you’ve got more to gripe about.  Finally, I would like to see the Senate and Obama toughen up the offsets’ oversight and integrity issue.

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32 Responses to Breaking: Waxman, Peterson announce agreement on cap-and-trade bill paving way for final vote this week

  1. Thomas says:

    Does that not mean that Waxman capitulated on just about every point of contention? Were any concessions were made by Chairman Peterson?

    [JR: Pretty much. Not many.]

  2. max says:

    I believe that cellulosic ethanol is not only possible but coming sooner than you think. If not we can still use all of the biomass for other beneficial purposes.

  3. Jim Beacon says:

    Well, if you took the $60 billion Waxman-Markey hands the coal industry to “develop” clean coal/css technology and put say 20% of that money into a cellulosic ethanol “Manhattan Project”, I bet you’d have that technology viable in 5 to 10 years. It’s certainly more likely than the coal industry actually coming up with clean coal in a similar time frame. And then we could use the $48 billion left over to build concentrating solar plants to replace the coal plants. But I guess that, in the era of capitulation masquerading as compromise, something like that makes too much sense.

  4. BBHY says:

    How many coal power plants will be closed after WM becomes law?

    I’m still not at all clear on what WM provides in terms of actual results. Does anyone have any results oriented estimates? For example when will coal start becoming unprofitable as a power source because of the limits on carbon emissions?

  5. ecostew says:

    The focus for qualifying all biofuels needs to be on EROEI (as the environment is protected as well as our food supply) – say nothing less than 3 in 3 or so years and 5 by 2015 or no subsidies.

  6. Yuebing says:

    (some gripes, but this bill is a wonderful thing overall) (call your legislator today)

    In a world where cropland expansion would happen even in the absence of biofuels, taking cropland out of food production to make biofuels just means more forest clearing. Bad idea.

    We could just cut some of the animal protein in our diets, but most of the world is adding meat to their tables. More chicken, less cow?

    Cellulosic ethanol (at reasonable rates of energy return–don’t hold your breath, a viable process has been just around the corner since WW I) would be neat.

    However, takin that corn, or soy bean oil, or tree and burning it in a high efficiency central power plant, and then delivering that electricty to a plug in hybrid will ALWAYS get you far more more mileage per pound of feedstock than going the IC route.

    How many lobbyists do the AG people have?

  7. Yuebing says:

    Could someone work on drawing the lines between what this bill proposes to deliver, and the 16 wedges? That would cheer me up.

  8. 12 volt says:

    A question..

    Converting 40% of the corn yelds to ethanol will have an effect on the price of corn for feed and food. Does anyone have any studies on the effects of this in relation to the world supply and prices in the future?

  9. Yuebing says:

    12V, hundreds of studies. They are all disputed by the US corn and soybean interests, so be aware that you will be looking at two different sets of interests. One group is interested in higher profits for agriculture, one group doesn’t agree with having the world’s poorest people priced out of their daily 1200 calories.

    Google

    biofuels rising food prices

    biofuels controversy

  10. Midwest says:

    Joe,

    There was another change made that may have a direct effect on emissions. The text reads:

    “…no electricity local distribution company shall receive a greater quantity of allowances under this subsection than is necessary to offset any increased electricity costs… Any emission allowances withheld from distribution to an electricity local distribution company pursuant to this paragraph shall be distributed among all remaining electricity local distribution companies ratably based on emissions pursuant to paragraph (2).”

    So a hydro company with big retail sales and no emissions is going to lose a bunch of allowances, which are then going to be given for free to a coal heavy generator. That coal user would previously either had to buy the allowances or shut down production–now they don’t have to make that choice. Presumably this means more emissions but I haven’t seen anyone try to quantify this yet.

    [JR: Remember, the overwhelming majority of the allowances go to the local distribution companies -- not the generators. So what you are describing is at most a second order effect. From an economic perspective, certainly to the first order, it is the allowance price that determines what happens to coal use. If you read the next post, you'll see that even EPA, which has an incredibly low allowance price and nonsensically high number of international offsets, still foresees W-M stopping all new dirty coal and shutting down 50 GW more of existing coal by 2015 than EIA had just forecast.]

  11. 12 volt says:

    Yuebing Says:

    June 24th, 2009 at 8:27 am
    12V, hundreds of studies. They are all disputed by the US corn and soybean interests, so be aware that you will be looking at two different sets of interests. One group is interested in higher profits for agriculture, one group doesn’t agree with having the world’s poorest people priced out of their daily 1200 calories.

    Agreed, the net effect of diverting corn to ethanol will drive prices up and effect the poorest nations first. My point was how much? diverting 40% of the corn yelds will reduce exports by what percent? Are there any studies exploring the actual numbers? My understanding is that the States are the largest exporter of corn world wide and removing that much will have a substantial effect on world grain prices. I can apreciate the need for greener fuels but shouldn’t we be more aware of the effects these policies have on other concerns such as feeding the nations of the world. I realize too that grain is a comodity and is traded as such so that prices could spike due to market Volatility.

    As climate change takes a firmer grip and as nations now are posturing to secure their grain supplies I wonder what the effect of diverting that much corn will have on poorer nations to feed their populations?

    We appear to have problems keeping up supplies now with population growth. It would seem that unless there’s some sort of new green revolution there is going to be some real problems.

  12. Crush says:

    Yuebing, instead of saying this: “One group is interested in higher profits for agriculture, one group doesn’t agree with having the world’s poorest people priced out of their daily 1200 calories.”

    You should have said this: “One group is interested in higher profits for agriculture, other groups want to keep feed prices low and hold onto their transportation fuel market share.”

    The oil industry and grocery manufacturers are the ones shouting this claim out the loudest.

    Truth is there are legitimate conflicting studies on food v. fuel. However, ethanol opponents, including livestock producers looking for cheap feed, called for a study of the issue. Congress complied, and the results from Food and Agricultural Policy Research Institute last month showed that if you removed all support for ethanol, food prices would drop by three-tenths of a penny for every dollar.

    Don’t cast it as Big Ag vs. starving children. That’s just pandering.

  13. envirolawyer says:

    I agree that Waxman gave Peterson a political victory here without really giving up all that much because large quantities of advanced biofuels won’t be available within the next five years and corn ethanol doesn’t qualify for 3 our of the 4 categories under EISA anyway. However, this is still a major problem for the nascent advanced biofuels industry, as investment requires certainty and this does nothing but say we will make a decision in five years.

    In addition, Waxman has gone and completely blown up the RFS-II program at EPA.

    At least California’s LCFS isn’t going anywhere, so that will provide a guaranteed market for the least GHG intensive fuels regardless of whether these fuels have to now compete with lesser fuels in the RFS market.

  14. Sam says:

    It’s a crappy bill–bad policy and bad politics–but we’re in a corner now. I’ll never understand why Waxman decided to use this outdated policy framework, instead of the clear path Obama laid out.

    I’d like to see Joe explore what happens when/if this bill passes. We’ll see some reductions, some investment–but clearly not nearly enough to meet to immensity of the problem.

    What happens to public/political support once a bill has passed?

    Onto Copenhagen, I guess…

  15. Yuebing says:

    Crush writes: “Truth is there are legitimate conflicting studies on food v. fuel. However, ethanol opponents, including livestock producers looking for cheap feed, called for a study of the issue. Congress complied, and the results from Food and Agricultural Policy Research Institute last month showed that if you removed all support for ethanol, food prices would drop by three-tenths of a penny for every dollar.”

    I would definitely recommend stepping outside of the Bubble and even the US for studies detailing the relationship between grain-to-biofuels vs global grain prices. I’ve looked over the US material, and seen biofuel’s industry reps give their talks. The contortionist reasoning explaining how US markets are not driving global markets would make Ken Leigh proud.

    Simply put, with gas at $3/gallon, and Ethanol subsidies, the ethanol people can (and did) pay more for corn, wheat, etc than the poorest several hundred million people. People turned to rice. Rice ran out. Food riots.

    As we have seen elsewhere, US industries do not hesitate to hire the very best PR firms to make their case. You have got to take the time to fact check.

    Start here http://www.fao.org/docrep/011/i0100e/i0100e00.htm and keep looking, there are hundreds of reports out there.

    Ethics? If pushing for some amount of biofuels on a timetable also pushes a few million people under the starvation line–what is the relationship?

  16. Yuebing says:

    Sam writes: “It’s a crappy bill–bad policy and bad politics–”

    Details, please?

  17. Yuebing says:

    12V, The World Watch Institute has been tracking grain, poverty, etc for decades:

    Try this: http://www.worldwatch.org/search/node/biofuels

  18. ecostew says:

    A World Bank 2008 report estimates that biofuels have increased food prices by 75%.

  19. Sam says:

    Well, how about some questions:

    Does it get us the reductions we need in GHG emissions?

    Does it protect consumers enough to insulate the D’s from the R demagoguery that is sure to follow?

    Does it create a simple mechanism for Congress or the administration to adjust to the latest science?

    Those would be my main three questions to judge climate policy and I think the answer to each is no.

    But, as I said–we cannot let this bill fail to pass this week.

  20. Ngrate says:

    What is being missed in this one sided debate is how little this bill will do to reduce CO2 in the atmosphere, since most of it is caused naturally. Do the math. This is a hugely expensive bill written by Don Quixote, who admitted on May 21st he did not understand the details. IPCC says it will take a 40% reduction and their models do not correspond to recently observable data (suppressed EPA report).

    This bill will benefit agribusiness, utilities, and the ruling elite at the expense of average Americans. Duke Energy got $400 million in positive cash flow from H.R. 1. Collin Petersen’s biggest supporters in the 2008 election cycle were the American Farm Bureau, the sugar industry and the cattleman’s association. Democrats are extorting exemptions for their constituencies by threatening opposition. So, this bill is not a product of science as the Chairman claims. Its a scam.

    The European Renewable Energy Federation states: A well designed emission trading scheme can be an important instrument to combat climate change, but given the political reluctance of some governments of high emitting countries, it is not a global solution in the short term.

    I support decentralized power to extent it is feasible but not the coversion of food crops to fuel. Until we get some real intelligence in Congress, we should dismantle the Capitol and erect a circus tent for the House of Representatives.

    You should at least use scientific method instead of ideology if you want to starve half the world’s population.

  21. Yuebing says:

    Sam, Excellent questions. I am going to just go here to my favorite summary of ACES and paste in the relevant bits in answer to you third question.
    http://butterfield.house.gov/SupportingFiles/documents/AmericanCleanEnergyandSecurityActSummy.pdf

    question: “Does it create a simple mechanism for Congress or the administration to adjust to the latest science?”

    answer: “Section 705, Review and Program Recommendations: Directs the Administrator to submit a report to Congress every four years. These reports will include: an analysis of the latest science relevant to climate change, an analysis of capacity to monitor and verify greenhouse
    gas reductions, and an analysis of worldwide and domestic progress in reducing global
    warming pollution. The reports will identify steps that could be taken to better improve our
    understanding of climate impacts, improve monitoring and verification, and any additional
    reductions in emissions that may be needed to avoid dangerous climate change.

    Section 706, National Academy Review: Directs the Administrator to commission reports
    from the National Academy of Sciences every four years. These reports will include: an
    update on the progress of various clean technologies, and an evaluation of the most recent
    EPA report submitted under Section 705. The reports will identify steps that could be taken
    to better improve our understanding of climate impacts, improve monitoring and verification,
    speed the deployment of clean technology, and any additional reductions in emissions that
    may be needed to avoid dangerous climate change.

    Section 707, Presidential Response and Recommendations: Directs the President to use
    existing authority to respond to recommendations in the reports. If the National Academy
    review confirms that further emissions reductions are needed, either domestically or globally,
    the President must submit a report to Congress recommending steps (including legislation) to
    achieve those reductions.”

    question: “Does it get us the reductions we need in GHG emissions?”

    answer: NO WAY, but it is a massive U-turn away from the suicidal policies in place. We have two wheels off the road already, so let’s take this opportunity to start sending the right signals to the US economy. BTW, we don’t just need reductions, we need negative emissions over the next one hundred years. 350 ppm is just first base.

    Question: “Does it protect consumers enough to insulate the D’s from the R demagoguery that is sure to follow?’

    Answer: I am confused as to whether you are speaking of consumers or D’s. There is a lot of nifty mechanisms in HR2454 to insulate the consumer from an evolving energy industry, like this from the link above:

    “Section 783, Electricity Consumers: Provides approximately 30% of allowances to local
    electric distribution companies, whose rates are regulated by states, to protect consumers
    from electricity price increases. Provides approximately 5% of allowances for merchant coal
    generators and certain generators with long-term power purchase agreements. Provides for
    phase-out of allowances over a five-year period from 2026 through 2030.”
    “Section 262, Community Energy Efficiency Flexibility: Amends the Energy Independence
    and Security Act to remove limits on funds received by communities through the Energy
    Efficiency and Conservation Block Grant program that can be used to fund revolving loan
    accounts or through sub-grants for purposes of the program.
    Section 263, Small Community Joint Participation: Amends the Energy Independence and
    Security Act to allow small communities to join with other neighboring small communities in
    a joint program of sufficient size to be defined as an eligible local government recipient
    under the Energy Efficiency and Conservation Block Grant program.
    Section 264, Low-Income Community Energy Efficiency Program: Authorizes grants to
    community development organizations to provide financing to improve energy efficiency,
    develop alternative, renewable, and distributed energy supplies, promote opportunities for
    low-income residents, and increase energy conservation in low income rural and urban
    communities.”

    I did not see a provision for “insulating D’s from the R’s demogoguery”. This would be a useful feature. We could point it at the TV.

  22. David B. Benson says:

    BBHY — No power plants get shut down. Some, usually due to state ulitity commision mandates for renewable energy, get converted to burning biomass instead of coal.

    12 volt and ecostew — Biomass to biofuel has a fairly small impact of food prices, anywhere in the world. The run-up in food prices last year was entirely due to the world’s corn (i.e., grains) supply falling below a 60 day reserve. Similar price run-ups have occurred each time that has happened; the World Watch Institute knows all about that.

  23. David B. Benson says:

    Ngrate — Food crops for biofuel actually make considerable sense in some regions. Tubers such as casava are not preferred foods but will grow on poorer soils. Plant tubers there; if the main food crop (partially) fails, then eat tubers. Otherwise, if all goes well, sell the tubers to the local biofuel manufactures as a cash crop.

  24. Yuebing says:

    D B Benson writes: “Biomass to biofuel…”

    I assume you are differentiating between biomass and food crops.

    Biomass to biofuel? Please provide an example of where this is actually working. I am not referring to Iogen, who still will not release data on their plant efficiencies. Just curious. Because if someone has come up with an economical route to make biomas into biofuel, I haven’t seen it. Hopeful.

  25. David B. Benson says:

    Yuebing — Any biomass can be turned into biofuel, it is just a matter of cost.

    There are several sizable projects in South Asia and Southeast Asia to grow Jatropha to produce biodiesel. While the Jatropha oil needs some minor processing for use in diesel engines, there is an alternative for stationary ones; modify the engine to burn the virgin oil. I know of a project in India where the latter is done to provide a village or two with electric power in the evenings.

    As for the United States, see the latest issue of Scientific American for the article on grassoline.

  26. Chris Winter says:

    Two items, not directly relevant to W-M, but encouraging nonetheless:

    !. Entergy had been planning to convert its Little Gypsy power plant in Louisiana from natural gas to coal and petroleum coke, claiming this would lower consumer electricity costs. After a protracted legal battle, the advent of the Obama administration and the likelihood of tighter regulations induced Entergy to put off the conversion for three years.

    http://www.sourcewatch.org/index.php?title=Little_Gypsy_Repowering

    2. Meanwhile, Ontario is on track to convert its four coal-fired plants to alternate fuels (maybe biomass), since the province will ban coal for power-plant use in 2014.

    http://dcnonl.com/article/id34111

  27. 12 volt says:

    Yuebing Says:

    June 24th, 2009 at 2:24 pm
    “12V, The World Watch Institute has been tracking grain, poverty, etc for decades:”

    Looks like a good site for information, I’ve bookmarked it and will spend some time reading the reports

    ecostew Says:

    June 24th, 2009 at 2:53 pm
    “A World Bank 2008 report estimates that biofuels have increased food prices by 75%.”

    I’ve found lots of links to the media but no link to the actual report. Have you got a link? I’d like to read it.

    David B. Benson Says:

    June 24th, 2009 at 6:13 pm

    “12 volt and ecostew — Biomass to biofuel has a fairly small impact of food prices, anywhere in the world. The run-up in food prices last year was entirely due to the world’s corn (i.e., grains) supply falling below a 60 day reserve. Similar price run-ups have occurred each time that has happened; the World Watch Institute knows all about that.”

    And this is my point. If reserves continue to fall and more corn is diverted from export then what effect will that have on world prices? It’s a supply and demand situation and the poorer Nations could be hardest hit.

    From what I’ve been reading the amount diverted to fuel production In the states currently is about 25% so it would be only 15% more diverted according to the numbers. That doesn’t seem like much but if (and I realize this is an “if”) food production world wide doesn’t keep up with demand due to a varity of reasons not the least is global warming then this decision could have consequences elswhere.

    If you have some links to show what your saying I’d be happy to read them. I have the UN report from /07 but it doesn’t delve much into this situation.

    Good to see that Ontario is testing biomass. As some one who lives in this province It gives some hope but with the record of this provincial goverment in power generation so far i’m not exactly holding my breath. The plant closure date has been pushed back once so far since it was first announced while consumption is still rising. Let us hope the will to convert continues to a sutable solution.

  28. Morris says:

    ecostew Says:

    June 24th, 2009 at 2:53 pm
    “A World Bank 2008 report estimates that biofuels have increased food prices by 75%.”
    http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2008/07/28/000020439_20080728103002/Rendered/PDF/WP4682.pdf

  29. 12 volt says:

    Thank you, thats what I was looking for.

  30. Crush says:

    Yuebing blames this on ethanol: “Rice ran out. Food riots.”

    USDA report last month acknowledges ethanol’s impact on worldwide grain, but says it had little to do with any political strife and other such issues:

    “In fact, the rice price rise occurred in a year of record global rice production, larger supplies, and a buildup in stocks. For rice, the most important factors behind the price increase in late 2007 and early 2008 were export restrictions by major suppliers, panic buying by several large importers, a weaker dollar, and record high oil prices.”

  31. Crush says:

    And that “World Bank report” was not the finding of the World Bank. It was one researcher from among MANY weighing in on the issue.

  32. Crush says:

    I say, “Let’s teach people to farm better.” US corn yields are about 150 bushels per acre and have been on a steady increase for the last half century. Other places in the world don’t even come close to that, but could see substantial increases with better practices, equipment, seed technology, etc. China has 90 bushels per acre. Brazil is at about 55.

    That would be more corn on the same land. Everybody wins.