Study shows economic benefit for cap and trade
U.S. Secretary of Agriculture Tom Vilsack recently testified to the Senate Agriculture Committee on the role that rural America can play in addressing climate change. In his testimony, Vilsack will announce the results of USDA economic analysis showing that the economic benefits to agriculture from the cap and trade legislation will likely outweigh the costs in the short term, and that the economic benefits from offsets markets will easily outpace increased input costs over the long term.
Below are excerpts from Secretary Vilsack's prepared testimony.
"Although we realize there are a variety of specific approaches that can be used to achieve clean energy and climate goals, over the last several weeks, USDA has analyzed costs and benefits of the House-passed climate legislation for agriculture. Our analysis demonstrates that the economic opportunities for farmers and ranchers can potentially outpace-perhaps significantly -the costs from climate legislation.
"The agriculture sector will benefit directly from allowance revenues allocated to finance incentives for renewable energy and agricultural emissions reductions during the first five years of the HR 2454 cap and trade program. Funds for agricultural emissions reductions are estimated to range from about $75 million to $100 million annually from 2012-2016.
"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. Second, the analysis doesn't take into account the higher commodity prices that farmers will very likely receive as a result of enhanced renewable energy markets and retirement of environmentally sensitive lands domestically and abroad. Of course, any economic analysis such as ours has limitations. But, again, we believe our analysis is conservative - it's quite possible farmers will actually do better.
"What does this mean for the individual farmer? A Northern Plains wheat producer, for example, might see an increase of $.80 per acre in costs of production by 2020 due to higher fuel prices. Based on a soil carbon sequestration rate of 0.4 tons per acre and a carbon price of $16 per ton, a producer could mitigate those expenses by adopting no-till practices and earning $6.40 per acre. So, this wheat farmer does better under the House passed climate legislation than without it. And, it's quite possible that this wheat farmer could do even better if technologies and markets progress in such a way that allows for the sale of wheat straw to make cellulosic ethanol.
"We recognize that climate legislation will affect different landowners in different ways. This is an important point. USDA can help smooth this transition by using our Farm Bill conservation programs to assist landowners in adopting new technologies and stewardship practices. It is also worth noting that the House bill includes important provisions regarding how to adapt and increase resiliency to climate change impacts, which will be important for our nation's farmers, ranchers and forest landowners. Ensuring that landowners and communities have the tools and information they need to adapt to climate change is a priority for this Administration."