According to a new analysis by the US Department of Agriculture (USDA) farmers will benefit, overall, from cap-and-trade legislation moving through Congress. This analysis takes into consideration estimates of production costs under the legislation.Allison Winter writes for ClimateWire online, that the USDA released an expanded economic study that estimates “farmers with energy-intensive crops could see their cost of production per acre go up to nearly 10 percent over the next 50 years. But agriculture officials insist that higher prices for fuel or feed would be offset by the gains of participating in an offset market.”
The report was release yesterday at a hearing of the House Agriculture Committee. Today the committee is having a hearing on the new market where companies would pay farmers to sequester carbon through various techniques like planting trees to offset the carbon the companies emit into the atmosphere.
The analysis of the House-passed climate bill, H.R. 2454, the American Clean Energy and Security Act of 2009 (click here) finds that there would be price increases in the first four years for commodity crop farmers, but a rebate in the bill would keep fertilizer prices lower, thus minimizing the price increases.
Still, as Winter reports, the USDA estimates farmers will see bigger price increases. However, though agriculture is not capped in the legislation, the price of energy and fertilizer is still expected to increase because of caps that will be place on the industries that provide “the inputs for fuel and fertilizer.” Livestock producers can also expect to face higher input costs because of commodity prices.
According to USDA fuel costs will rise between 2.6 and 5.3 percent from 2012 to 2018. Fertilizer’s price will increase 0.3 percent to 1.7 percent yearly. However, Winter reports the cost estimates “ignore potential benefits that farmers and ranchers might gain from selling carbon credits. Vilsack said in a teleconference with reporters yesterday that the offset market in the House bill could bring in $10 billion to $20 billion for the farm sector.”
The key, according to Vilsack, is to have good carbon sequestration potential, as that is how the increased input costs are going to be offset. Secretary Vilsack did warn at the hearing that the transition into a new type of farm economy will not be easy for all producers; however, ‘“. . . more farmers will benefit than not.”’
Naturally, members of the House Agriculture Committee remained divided depending on how they view climate change, its impact on agriculture, and the benefits, or lack of benefits, to farmers through a cap-and-trade market. For their part, industry groups also remain divided on this legislation.
Regardless, the House has passed a bill, so changes in approach will either have to come from the Senate bill or when the two bodies meet in a conference committee to mend the bills together into one that can pass both chambers. Given the time health care, Afghanistan, and the economy is taking on the Senate calendar, it is more than clear that climate change legislation will be a priority for 2010.
To read the ClimateWire story click here.
Posted: 12/03/09
