Greenhouse gas emission legislation will be either a boon to agriculture or a nightmare to farmers and ranchers.
“We’ve heard from two ends of the spectrum today,” said Steve Verett, executive vice president, Plains Cotton Growers, Inc., as he and other commodity and farm industry spokesmen summed up presentations at the recent Texas Ag Forum in Austin, Texas.
Verett said discussions over the course of the day ranged from positive to negative for agriculture. “That leaves us in a quandary. It’s difficult to see whether it will be good or not.”
Many farm commodity representatives voiced concern about legislation which would create a cap and trade system for carbon emissions.
Some economists predicted that cap and trade would provide new sources of income for agriculture and that final analysis will show an advantage, even with higher production costs.
Several issues broached little debate. Economists, farm group representatives and those involved in the politics of climate change legislation agree that cap and trade, as well as other legislative fixes for environmental concerns, will mean:
• Higher costs for consumers with both energy and food prices rising,
• Higher production costs for farmers and ranchers, particularly for fertilizer and energy, and,
• Less land devoted to production agriculture and more acreage planted in trees or conservation uses.
Burl Carraway III, program manager for Sustainable Forestry and Economic Development with the Texas Forest Service, said timber owners may benefit from cap and trade, but the details will make the difference.
Carraway said woodland owners currently are receiving payment for carbon sequestration in Texas, where the Texas Forest Service serves as the official verifier. “We just finished the first verification pool in Texas,” he said. That pool included 129 landowners and 14,000 acres, from which more than 269,000 metric tons of carbon dioxide equivalent was signed up. “We verified 210,000 metric tons,” Carraway said.
Income, based on $5 per carbon credit unit, came to just over $1 million. After fees were assessed, landowners received about $580,000, about $3000 per landowner.
“Returns depend on the market, the species and the location,” Carraway said. Credit price has dropped to only $1 but is as high as $20 per credit in Europe.
Carraway said the way regulations are written in cap and trade legislation will determine how widely landowners accept it. Long-term contracts will reduce participation, he said. “We prefer sort-term contracts.”
Bruce McCarl, regents professor and distinguished professor of agricultural economics at Texas A&M University, said if carbon prices remain low agriculture will lose money with cap and trade. “As carbon prices go up, agriculture producers are better off. Consumers are worse off because commodity prices will rise,” McCarl said, as farmers divert land from food to fuel. “I think agriculture should support cap and trade.”
He said livestock would be at a disadvantage with higher energy costs and higher prices for feed grains. Higher prices for crops, however, will offset rising energy prices and a volatile fertilizer market. For irrigated farms, “energy bills could be quite high.”
Justin Baker, a research analyst for the Center on Global Change and Climate Change Policy at Duke University, said policy is “moving faster than science,” but said a shift in demand for energy crops and a shrinking agriculture land base could favor farmers as they capitalize on higher commodity prices. They also may tap into new revenue sources such as biofuels and carbon sequestration.
“The offset markets will drive up agriculture prices,” he said.
Baker offered four scenarios of carbon pricing possible under cap and trade legislation. Two would set prices at a constant, either $15 or $30 per unit. The other two would initially set carbon prices at those rates but rates increase over time.
“Agriculture and forestry could serve large roles in carbon mitigation in the United States,” he said. “Farmers come out on top with all four (pricing) schemes. Agriculture will benefit from climate legislation through new opportunities.”
He agreed that livestock would be less likely to benefit because of higher fuel and feed costs.
Farm interests beg to differ.
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