"New USDA Analysis: Economic Benefits Of Waxman-Markey For Farmers ‘Easily Trump’ The Costs"
In testimony before the Senate Agriculture Committee today, U.S. Secretary of Agriculture Tom Vilsack will debunk conservative fearmongering of the cost of cap-and-trade legislation on American farmers. Right-wing organizations from the Heritage Foundation to the American Farm Bureau have presented flawed analyses of the Waxman-Markey American Clean Energy and Security Act (H.R. 2454) to claim that a cap on global warming pollution would lead to a “permanent drought season” for the agricultural sector. At the request of Republican Senators Saxby Chambliss (R-GA) and Mike Johanns (R-NE), the U.S. Department of Agriculture conducted their own analysis of the clean energy legislation. As Vilsack will testify, the USDA found that “the economic benefits to agriculture from cap and trade legislation will likely outweigh the costs”:
HR 2454’s creation of an offset market will create opportunities for the agricultural sector. In particular, our analysis indicates that annual net returns to farmers range from about $1 billion per year in 2015-20 to almost $15-20 billion in 2040-50, not accounting for the costs of implementing offset practices.
So, let me be clear about the implications of this analysis. In the short term, the economic benefits to agriculture from cap and trade legislation will likely outweigh the costs. In the long term, the economic benefits from offsets markets easily trump increased input costs from cap and trade legislation. Let me also note that we believe these figures are conservative because we aren’t able to model the types of technological change that are very likely to help farmers produce more crops and livestock with fewer inputs.
This analysis comports with the findings of the Brookings Institution, which found that a cap-and-trade system without an offset program would have little economic impact on the agricultural sector. Furthermore, not only does the USDA analysis not take into account the rewards of technology innovation, demand for biofuels, or opportunities for wind farms, it fails to account for the costs of inaction. Global warming has already hit American farmers hard, leading to reduced crop yields from droughts, floods, extreme storms, heat waves, seasonal shifts, and increased pestilence. In coming years, these disasters for farmers are expected to increase dramatically if no action is taken to address global warming.
The reality is that Waxman-Markey is both necessary for the survival of American farmers and an economic boon. The real debate Washington should be having is whether the concessions made on behalf of existing industrial agricultural giants weaken that opportunity — not only for the American public at large, but for the farmers themselves.
The House climate bill will likely have small but significant effects on crop and livestock producers. Over the short run, impacts are largely negligible due to the EITE provisions of the bill which would shield producers from the effects of higher natural gas prices on fertilizer prices. After 2025, however, fertilizer prices would likely increase. While energy-intensive crops will be most affected, the legislation also provides significant opportunities to offset increased costs through carbon sequestration activities. Our analysis does not assess the change in farm income due to the Renewable Electricity Standard provisions in HR 2454. Greater demand for renewable electricity will put upward pressure on the demand for biomass and provide an added source of farm income.