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The Climate Bill’s Impact on Farmers

The Climate Bill’s Impact on Farmers

In the News

December 20, 2009

Could the carbon offset business be a boon to farmers? Possibly, according to the USDA’s recent report on the House-passed climate bill. The report estimates that, under the new legislation, commodity crop farmers would face big price increases over the longer term, but could benefit from selling carbon credits to the tune of $10 to $20 billion.

The business of buying and selling carbon credits is typically referred to as “cap and trade,” and is essentially a way to limit carbon emissions. Businesses who release carbon emissions would be required to obtain permits allowing them to do so, however, not all businesses will get these permits – or as many as they need. This process helps put a “cap” on the total emissions. Those with permits who have found other ways to clean up their emissions can sell their permits to those who still need them. That’s the “trade” part.

While agriculture does not have a cap under the bill, inputs that supply fuel and fertilizer do, and analysts estimate that farmers will see higher energy and fertilizer costs as a result. Energy intensive crops, like corn, would see the biggest increases – by some estimates as high as $25.19 per acre. Overall, the USDA projects that fuel costs could rise as high as 5.3% by 2018. Fertilizer could go up as high as 1.7% annually.

To help control these costs and avoid passing them on to the consumer, farmers could become part of a carbon sequestration market, analysts say. Companies with carbon emissions would pay farmers to reduce emissions through the planting of trees, sustainable management of native rangelands, sustainable farming methods like no-till and grassland farming, and the use of anaerobic digesters. In fact, some of these offset programs already exist.

More than five million acres are currently participating in the Farmers Union Carbon Credit Program, along with close to 4,000 producers in 31 states. The program has earned enrolled farmers and ranchers nearly $9.5 million since its inception in 2006, according to The National Farmers Union. They support a mandatory cap and trade system to reduce non-farm greenhouse gas emissions, and estimate that the program is offsetting emissions from 320,000 cars annually.

Not everyone is enthusiastic about the carbon offset business, though. Rick Krause, Senior Director of Congressional Relations for the American Farm Bureau, says that the House climate bill will impose higher fuel, fertilizer and energy costs on farmers and ranchers, putting them at a competitive disadvantage in the world marketplace while having little or no effect on climate absent an international agreement. Additionally, Krause points out that the bill does not promote any energy source to “plug the hole” left by removing fossil fuels as energy sources, thus possibly leading to energy shortages.

“The USDA report also says that over 85% of the carbon credits that producers could generate would come from planting trees on lands now used for crops or rangelands, leading to a loss of about 60 million acres of croplands,” says Krause. “The loss of these lands will decrease food production in the United States at a time when U.S. and world population is growing.”

The American Farm Bureau has launched a campaign against emissions curbs called “Don’t Cap Our Future,” and they are hoping Senators will consider their concerns when the climate bill hits the Senate debate floor in 2010. In the meantime, House Agriculture Secretary Tom Vilsac is optimistic that farmers will warm up to the idea of cap and trade.

“I think we are on the cusp of some real new opportunities in rural America that we have not seen in quite some time,” he says. “And I don’t think we should be fearful of it, I think we should embrace it.” 

Krause adds, “Even though we see some issues from offset, we would rather have them in any bill than not have them in. They help defray at least some of the costs.”