Cap-and-trade impact on farms described by MU FAPRI
When Lori Wilcox was asked to discuss "Cap-and-Trade Legislation Impact on Agriculture" at the University of Missouri Greenley Research Center field day, she worried about explaining the complex debates in Congress.
"The only thing worse would be to hold a town hall meeting on health care reform," said Wilcox, program analyst from the MU Food and Agricultural Policy Research Institute at Columbia, Mo.
Known as the "cap and trade" or "climate change" bill, the full title of HR 2454, passed by the House of Representatives, is the "American Clean Energy and Security Act of 2009."
The legislative goal is to create clean-energy jobs, achieve energy independence, reduce global warming, cut pollution and begin transition to a clean-energy economy. There is much more in the 1,428-page bill, Wilcox warned.
The bill affects large industries, utility generating plants, transportation--and agriculture. "It would be a major mistake for agriculture to not be at the table during congressional debate," Wilcox said.
Rep. Colin Peterson, D-MN, chair of the House Agriculture Committee, has worked with bill sponsors on 300 pages of amendments, known as the Peterson-Waxman compromise.
Those amendments allow leaving agriculture uncapped on greenhouse emissions. The U.S. Department of Agriculture will determine which agricultural uses qualify as offsets. USDA also will gain farm and forestry credit programs. Definitions of renewable biomass were modified based on scientific review.
In current form, much of the regulation is assigned to the Environmental Protection Agency. Major parts of the plan aim to reduce carbon dioxide emissions into the air. However, carbon also will be captured from the atmosphere and sequestered (or buried) underground.
The "cap" in the name comes from efforts to limit greenhouse gas emissions to 97 percent of 2005 levels by 2012 and reduce emissions to 17 percent by 2050.
That limits emissions on mobile sources, including automobiles and heavy vehicles, as well as engines used in marine vessels, locomotives and aircraft.
The "trade" part of the name allows provisions for selling allowed emissions. This provides roles for agriculture and forestry. The Commodity Futures Trading Commission would set up markets for emission trades, just like futures trades in corn and soybeans.
There are many murky areas left undefined in the debate, Wilcox said. "Nitrogen fertilizer is currently listed by EPA as 'presumptively eligible.' But what does 'presumptively' mean?"
Also, potential revenues for carbon offsets and renewable energy are unknown. This could change rural land use and acreage shifts. However, the amount of shifts from agriculture into forestry is undefined. The bill contains allowances for federal assistance in rural electric generators.
MU FAPRI was asked to run its economic models to measure the financial impacts. "Quantitative analysis of qualitative language is difficult," Wilcox said. "Even the most rigorous models do not have capabilities to measure impacts over 40 years."
In a preliminary study of Missouri crop farms, the FAPRI models projected added operating costs of $30,000 by 2050 for a 1,900-acre representative panel farm in Lafayette County. That was based on projected energy price changes from an international energy consultant. However, it did not assume fertilizer was exempt until 2025.
Considerable work remains. The U.S. Senate did not take up the bill before August recess. When the Senate returns, Sen. Barbara Boxer, D-Calif., and the Environment and Public Works Committee will guide the legislation. Unknown is whether EPW or the Senate Finance Committee, chaired by Sen. Max Baucus, D-MT, will gain oversight on the money for emission allowances.
"It is a challenge to discuss the legislation without a clear view of potential costs and benefits for all sectors," Wilcox said. "The impact on consumer food prices is unknown, but potentially large depending on crop acreage shifts."
Support from agriculture sectors will be necessary for final approval, Wilcox said. Senate leaders have asked both FAPRI and USDA economists for additional analysis of the bill.
Final passage depends on other high-profile bills before Congress, such as health care reform. However, Wilcox expects the administration to push for passage prior to a United Nations conference in Copenhagen in December.
One sure thing, Wilcox said: It won't be a dull autumn for FAPRI analysts.
In addition to working with FAPRI, Wilcox operates a farm with her husband near Clarence, Mo., in Shelby County.