Almost as divisive as healthcare, the proposed legislation on climate change and carbon cap-and-trade has stirred its own war of words. Entities on both sides of the issue have funded reports detailing destruction and salvation, not only on the national economic level but the industry-specific as well. One of the industries weighing in on the subject is agriculture, which is already suffering through a dairy industry collapse and farm incomes that have fallen nearly 40% from last year and is reticent to succumb to any further potential financial woe.
A study released by Texas A&M Universityâ€™s Agricultural and Food Policy Center (AFPC) is now submitting its findings of proposed cap-and-trade legislationâ€™s impact on American farms to the ever-broadening library of evidence. The report was released just days before the Senate Committee on Agriculture, Nutrition and Forestry held hearings on the proposed cap-and-trade system of â€śThe American Clean Energy and Security Act of 2009â€ť (ACES), which passed the House of Representatives in June. The bill requires a 17% reduction from 2005 levels in greenhouse gas emissions by 2020, striving for an 83% reduction by 2050.
According to the AFPC study â€śEconomic Implications of the EPA Analysis of the CAP and Trade Provisions of H.R. 2454 for U.S. Representative Farmsâ€ť â€”which was conducted at the request of Senate Agriculture Committee Ranking Member Senator Saxby Chambliss (R-GA) â€” passage of ACES would largely have negative impacts for the 98 simulated representative farms in AFPCâ€™s database.
â€śThe ground-truth that this study shows is very serious,â€ť said Chambliss. â€śThe study says that 71 of the 98 farms will be worse off under the House cap and trade plan, even in the early years of the program.â€ť
The AFPC concluded that dairy, cotton and rice farms, as well as ranches, would experience lower cash receipts during the years projected in the study, from 2010 to 2016. Rice farms and cattle ranches would carry the biggest burden since they would not likely participate in carbon sequestration activities, but would have to cope with higher input costs that would outpace increases in their product prices. For example, the 14 rice farms in the model would experience lower net income between $30,000 to $170,000 from 2010 to 2016 under ACES. The pain of these declines would be further felt as annual costs would increase between $20,000 to $120,000, depending on the farm.
According to AFPCâ€™s estimates, not all farms would suffer, particularly feedgrain and oilseed farms located in the Corn Belt in the Great Plains. But the success of those farms in the simulation was double-edged.
â€śMost concerning, the 27 farms that benefit do so only because other producers go out of business,â€ť stated Chambliss. â€śNot one rice farm or cattle ranch benefits, while only one cotton operation and one dairy benefit mainly due to the fact that they both grow a significant amount of feed grains.â€ť
A similar study conducted by the Nicholas Institute for Environmental Policy Solutions differed from the AFPC one, and actually found that farms would benefit from cap-and-trade legislation, with revenues generated from carbon trade outpacing increases in operating costs.
â€śThe study also forecast some losses in economic welfare to consumers and agricultural processors,â€ť admitted Timothy Profeta, director, Nicholas Institute, in testimony before the Senate Agriculture Committee. â€śHowever, benefits to crop and livestock producers far outweigh these economic losses, signaling gains to the sector as a whole. If done the right way, agriculture can be made a winner in climate legislation.â€ť
He added, â€śBut no matter what the models show, no one would dispute that we should adopt the policy that achieves our goals at the lowest possible cost.â€ť
Much like healthcare, climate change legislation is an emotional topic, and some associations have seen members sever ties because of conflicts of opinion. On a whole, it is another issue that demonstrates partisanship is far from dead in the United States as the two sides are divided along party lines. ACES squeaked out a victory in the House and the campaigns against the legislation have picked up speed during the Congressional hiatus in August. The agriculture industry finds itself in the middle of the debate because the Environmental Protection Agency (EPA) has estimated that agricultural and forestry lands can sequester at least 20% of all annual greenhouse gas emissions in the U.S., while livestock and agricultural conservation practices are some of the easiest to implement to immediately reduce emissions.
It is also the industry in the United States that will be the most impacted by changes in the Earthâ€™s climate and global warming. As to that, Utahâ€™s Republican Governor Gary Herbert famously promised last month that he will host the first legitimate debate later this year on whether the actions of humans even contribute to climate change.
Matthew Carr, NACM staff writer. Follow us on Twitter @NACM_National