USDA: Economic benefits of climate bill for farmers ‘easily trump’ the costs

Given the importance of the agricultural sector to climate action, I’m going to repost both a Wonk Room piece by Brad Johnson and an analysis by Jake Caldwell, Director of Policy for Agriculture, Trade & Energy at American Progress.

Tom VilsackIn testimony before the Senate Agriculture Committee today, U.S. Secretary of Agriculture Tom Vilsack debunked 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 testified, 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 USDA Office of the Chief Economist has released its analysis:

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.

[Here is Caldwell’s piece.]

Today the U.S. Senate Committee on Agriculture conducts a welcome hearing on comprehensive clean energy and climate change legislation. Rural America has a great deal to gain from Senate action on comprehensive clean energy and climate change. It represents an opportunity to raise incomes, create jobs, reduce dependence on foreign oil, stabilize volatile input prices, and reduce the threat posed by extreme weather to rural livelihoods and the nation’s food and energy supplies.

Little or no action is a huge gamble. It places the fate of U.S. agriculture in a byzantine administrative process of federal regulation led by the Environmental Protection Agency under the Clean Air Act.

What’s more, opposition to clean energy and climate change legislation could forever erase any of the benefits secured for farmers in the House version of the legislation. Senate action on clean energy and climate change legislation is necessary in order to ensure the benefits of these provisions survive and are delivered to rural America.

And inaction on clean energy and global warming represents ongoing adherence to a status quo of roller coaster energy prices, extreme weather events, and increasing dependence on disaster assistance.

The key benefits and gains for rural America secured in the House bill include:

Cap-and-trade exemptions for agriculture and forestry. The agricultural and forestry sectors are fully exempt from carbon emissions caps under the House and Senate climate legislation’s longstanding cap-and-trade approach. This means that these industries do not have to buy pollution allowances.

Incentives for farms and forests to sequester more global warming pollution. U.S. agricultural and forest lands sequester 246 million metric tons of carbon annually, absorbing 13 percent of U.S. greenhouse gas emissions. Appropriate incentives could enable these lands to ultimately absorb 50 percent of U.S. greenhouse gas emissions. Clean energy and climate change legislation promotes U.S. agricultural lands as a “carbon sink” by encouraging a whole range of good practices that many farmers are already doing, including: modest tillage practices, tree and perennial planting, erosion prevention, rotational grazing, and winter cover cropping.

The opportunity for farmers to earn real money selling carbon offsets. Clean energy and climate change legislation would establish a carbon offsets market that would allow farmers to create and sell carbon offsets to polluting entities in lieu of reductions by polluters. This would reduce the cost of emissions reductions for polluters. Farmers would be paid and rewarded for their longstanding carbon sequestration and land stewardship efforts. The Energy Information Administration has estimated the value of agricultural offsets to be close to $24 billion annually.

USDA has the lead. House bill provisions shift oversight of the offsets program from EPA to USDA. The legislation would create a Greenhouse Gas Reduction and Sequestration Advisory Committee that consists of nine individuals, plus a chairperson and vice chairperson appointed by the Secretary of Agriculture. USDA’s expertise and presence in nearly every state should assist in the development of measurement methodologies to determine scientifically rigorous high-quality offsets.

The House bill recommends a minimum and wide ranging list of practices eligible for offsets, including altered tillage practices, reduction in carbon emissions from organic soils, winter cover cropping, continuous cropping and other means to increase biomass returned to soil, and reduction in nitrogen fertilizer use or increase in nitrogen use efficiency.

Clean energy investment with facilities sited in rural America. A U.S. market-based global warming pollution reduction plan will drive demand for renewable energy in rural America. Renewable electricity standards in legislation require retail electricity suppliers to generate a percentage of their electricity from renewable resources.

Farmers would become both the direct providers of renewable energy and the beneficiaries of our economy’s low-carbon transformation as an increasing number of wind, solar, sustainable biomass, methane capture, and other energy facilities””and the jobs that accompany them””are sited in rural America.

The Department of Energy estimates that if 5 percent of the nation’s energy comes from wind power by 2020, rural America could see $60 billion in capital investment. Leasing land for a single utility-scale wind turbine could provide a farmer with about $3,000 a year in income. Farmers and rural landowners would derive $1.2 billion in new income and see 80,000 new jobs created over the next two decades.

Investment in clean fuels of the future, produced by American farms. The current renewable fuels standard establishes ambitious targets and strives to produce advanced biofuels that deliver measurable lifecycle greenhouse gas reductions, minimize the use of food-based feed stocks, and adhere to certifiable environmental and land use safeguards. Clean energy and climate change legislation works with the RFS to promote advanced biofuels grown and produced in rural America.

House bill provisions suspends the EPA’s life cycle assessment of greenhouse gas emissions attributed to indirect land use changes globally while the National Academy of Sciences reviews the methodologies and scientific basis of indirect land use assessments. It also expands the definition of renewable biomass to include broader availability of woody biomass on federal and non-federal lands.

The RFS has a production target of 21 billion gallons of advanced biofuels by 2022. It provides appropriate flexibility to allow producers to meet the RFS mandate with significant contributions from third generation biofuels without dictating a specific type of biofuel product or technology. The approximately 15 billion gallons of existing and future conventional ethanol production capacity and 1 billion gallons of biodiesel would be exempt from greenhouse gas reduction targets.

2 Responses to USDA: Economic benefits of climate bill for farmers ‘easily trump’ the costs

  1. SecularAnimist says:

    Unfortunately, the exemption of agriculture from emission caps will allow a major polluting industry to continue polluting with impunity.

    According to the United Nations Food and Agriculture Organization:

    “Cattle-rearing generates more global warming greenhouse gases, as measured in CO2 equivalent, than transportation …

    “When emissions from land use and land use change are included, the livestock sector accounts for 9 per cent of CO2 deriving from human-related activities, but produces a much larger share of even more harmful greenhouse gases. It generates 65 per cent of human-related nitrous oxide, which has 296 times the Global Warming Potential (GWP) of CO2. Most of this comes from manure.

    “And it accounts for respectively 37 per cent of all human-induced methane (23 times as warming as CO2), which is largely produced by the digestive system of ruminants, and 64 per cent of ammonia, which contributes significantly to acid rain …”

    I think the agricultural exemption is a bug, not a feature.

    [JR: Maybe so, but it’s what pretty much how every other country treats the sector.]

  2. John Kazer says:

    Measuring agricultural emissions is very hard. National Inventory data is not very accurate for farming and almost impossible to apply at the farm level. Therefore, as the UK Government has recognised in their recent Low Carbon Transition Plan, you really need to start collecting data from each farm.

    So a cap on the sector is premature and the idea of offsets not a bad one to start the data gathering process.