USDA PREDICTS AG BENEFITS FROM CLIMATE BILL, BUT QUESTIONS STILL UNANSWERED

News Date: 07/28/2009

 

USDA predicts positive outcomes for agriculture in its new economic analysis of the American Clean Energy and Security Act (H.R. 2454), the climate change legislation which passed the House of Representatives last month. Agriculture Secretary Tom Vilsack, along with other critical agriculture stakeholders, testified on the new report and the potential impacts of the climate legislation.

USDA’s analysis shows that the agricultural sector will have modest short-term costs and net benefits, with possible significant long term benefits. Secretary Tom Vilsack said that short term costs of the bill would remain low because of the bill’s provisions to keep fertilizer prices low. The impact on net farm income is less than a one percent decrease. He said that the agricultural offset market should cover the costs, and fertilizer manufacturing would be unaffected until 2025. Longer term costs would rise, but remain relatively low, ranging from 3.5 to 7.2% decreases in net farm income.

Vilsack said this analysis is conservative because it assumes no technological change, no alteration of inputs in agriculture, and no increase in demand for bio-energy as a result of higher energy prices. He said that the offset market would be highly beneficial to farmers. Selling carbon offsets “could generate gross domestic agricultural and forestry offset revenues of $2 billion per year in real 2005 dollars in the near term, rising to about $28 billion per year in real 2005 dollars in the long term.”

This early USDA analysis reports similar conclusions to the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) report. The FAPRI report is criticized for only focusing on the bill’s impact on Missouri agriculture. The FAPRI report predicts relatively modest impacts such as an 8.8% cost increase for irrigated corn in Missouri by 2050. The American Farm Bureau Federation (AFBF) predicts a 9% increase in corn production costs by 2020.

The Farm Bureau also assumes that 40 million acres of crop or pastureland could be converted into forestry in the bill’s aforestation language. When questioned regarding the affects of aforestation efforts, both Secretary Vilsack and Environmental Protection Agency (EPA) Administrator Lisa Jackson failed to provide specifics about the amount of land taken out of production and the price increases of commodities, food and feed.

Senator Mike Johanns (R-NE), a former Agriculture Secretary under President George W. Bush, warned Secretary Vilsack, “Unless you can quantify this, you can’t sell this plan. It’s only a hope and a prayer. It is no conciliation to stand with one foot in the campfire, one in the ice bucket and say on average, I’m in good shape.” Other Senators also conveyed concerns regarding the new report, which included a lack of information regarding the likely impacts on ranchers and the livestock industry, as well as the legislation’s potential effects on food prices.  (By: Kasey Miller, Policy Contact: David Hickey)