Tuesday, August 11, 2009 9:40 PM CDT
Cap-and-trade proposals putting the heat on agriculture
By Amy Rochkes, FBCM, Shelby County Farm Bureau Manager
For the past few years, many environmental groups and scientists have stated that green house gas (GHG) emissions from human activities are causing an increase in average global temperatures. They contend that unless drastic measures are taken to reduce GHG emissions, the cumulative effect over coming decades will adversely impact the earth’s climate and weather. GHGs include carbon dioxide, nitrous oxide, and methane.
Despite some evidence to the contrary, much of the world’s scientific community has concluded fossil fuel combustion has elevated GHG concentrations in the atmosphere and is responsible for a changing climate. The current debate in Congress is no longer focused on the science, but on developing policy to cap U.S. emissions and forge an international agreement to address the problem.
Last month, the House approved H.R. 2454, the American Clean Energy and Security Act. It is designed to reduce GHG emissions by 17 percent by 2020 and 83 percent by 2050. The bill mandates a renewable electricity standard and lays out a comprehensive cap-and-trade approach to reduce GHG emissions in the United States. It also contains extensive energy efficiency requirements.
The U.S. Senate has begun debate on its version of a bill with a mark-up scheduled to be wrapped up by the end of September. The administration supports a cap and trade policy for reducing GHG emissions and congressional leaders have expressed their hope of passing legislation out of both chambers before the U.S. government representatives’ travel to Denmark in December to negotiate an agreement on GHGs.
Although its impact on the climate is deemed to be minimal, cap-and-trade is designed to limit American consumption of fossil fuels and to replace that energy with energy generated from zero-emitting, renewable sources such as wind and solar power. The cap would legally limit the quantity of carbon dioxide that Americans would be permitted to put into the atmosphere from burning fossil fuels.
The government would then issue permits to businesses allowing them to emit carbon dioxide, nitrous oxide, and other GHGs up to the number of tons stated in their permit. Under the provisions of H.R. 2454, 85 percent of the allowances would be given away in the early years to energy intensive and trade dependent industries to reduce indirect costs on consumers and to prevent production from moving offshore.
Illinois Farm Bureau, American Farm Bureau Federation and many others groups are opposed to H.R. 2454 because capping emissions and limiting the use of fossil fuels would significantly increase energy costs and result in higher prices for goods and services throughout the economy. Farmers would be uniquely affected because they are unable to pass on such costs when selling their product.
If renewable energy sources, additional nuclear reactors, and clean coal plants don’t come on line quickly enough, there will be a tremendous surge in demand for clean burning natural gas, driving up the cost of producing fertilizer. The fertilizer industry says if that occurs, the remaining domestic fertilizer production facilities may move overseas.
Further, farmers could suffer a competitive disadvantage in global markets if other countries do not adopt similar emission reduction strategies. Consumers would feel an economic pinch from the legislation, with an average household’s utility bill raising an estimated $1,200 per year.
Opponents of H.R. 2454 are concerned that the legislation is not worth the likely economic disruption. It is also feared that the legislation does not sufficiently stimulate alternative sources of energy, and it does not give USDA a prominent role in an agricultural offsets program.
The cap-and-trade segment of the H.R. 2454 did provide the ability to provide economic opportunities for some farmers through carbon sequestration programs and emission offsets. Conservation practices such as no-till, methane digesters, planting trees, or adopting other practices could offset the cost incurred with rising fuel and fertilizer costs. The concern is that even compensation farmers may receive through conservation efforts would not be enough to offset the costs they would incur through the legislation.
Legislation to cap and reduce GHG emissions with the goal of addressing climate change concerns has passed the House, and the issue now has moved to the Senate. There are huge negative economic costs associated with the House legislation, and it is imperative that agriculture become informed about and involved with this issue.
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