Monday, December 28, 2009
Will You Benefit From Climate Change Legislation?
When Congress is able to reconcile the difference between the House and Senate health care bills, the focus of Washington will undoubtedly return to the climate change legislation that was shelved temporarily. As far as the agricultural initiative within the climate change proposals, commonly known as cap and trade, there have been divergent views offered about the benefits of the concept. And those views are being offered frequently.The latest group to weigh in on the controversial cap and trade legislation is Purdue economist Bruce Erickson, who authored the December issue of the Top Farmer Newsletter. Erickson acknowledges the mixed feelings about climate change, and how science and politics are trying to reconcile their differences. The U.S. House has already approved legislation and the US delegation attempted to create a consensus in the Copenhagen conference earlier in December, so some action will be forthcoming Erickson believes. He says while some businesses will suffer, farmers could gain.
Erickson quotes University of Illinois agricultural law specialist Bryan Endres as saying farmers may have to pay more for fuel, energy, and fertilizer input, but crop producers may have significant opportunities to add income by offsetting greenhouse gases within the cap and trade legislation. Erickson says agriculture is energy intensive because of its consumption of fuels and fertilizer, and consequently is responsible for emitting 7% of greenhouse gases.
While crops really take in carbon dioxide as part of the photosynthesis process, there are other gases that are emitted by agriculture that are more concentrated, such as nitrous oxide from fertilizer and methane from livestock production. Everything is converted to a carbon dioxide equivalent, and traded on the Chicago Climate Exchange, which has been trading contracts with tons of carbon dioxide. Farmers can sell them based on tillage practices and industry buys them, based on emissions of carbon dioxide. If the legislation caps how much CO2 an industry can emit, then it has to buy offsetting contracts from farmers, which is the trade aspect of the legislation. Erickson says while the limits will eventually raise input costs, the legislation has the potential to return $22 billion per year to agriculture with 30% to the Cornbelt. At least that is the calculation of USDA’s chief economist.
While the legislation has passed the House, the Senate has not fully considered it, so the final rules are far from finished. Currently, most farmers will not have any reporting requirements, but about 100 of the largest livestock operations will have reports to file with the EPA.
Farmers who will benefit from the initiative will be those whose tillage practices qualify as those that sequester or retain carbon in the soil. No-till is the prime example, but some forms of minimum tillage may return some minor benefits to farmers. There are quite a few decisions to be made, both by policy makers and by farmers, who will pay and may be paid.
Summary:
The climate change legislation will be moved soon back to the front burner in Congress and that will increase the cost of energy consumption, but may also provide some funding for farmers whose tillage practices qualify as retaining carbon in the soil. Since agriculture can control where carbon is held, it qualifies for payments from certain industries that emit carbon into the atmosphere.
Posted by Stu Ellis on 12/28 at 01:26 AM | Permalink
Comments
Posted by: Daniel F. Borgen, M.D. at December 28, 2009 8:08AM
Granting favors and exemptions to some in return for support and votes is the modus operandi of the present administration, as we have seen in the “health care reform.” While dismissed as politics as usual, we would do well to call it what it is, namely corruption. It is playing to the dark side of human nature, betting that some will give up any concern for the common good in return for real or imagined personal, short term gain. It is a dangerous game for agriculture to try to play