Cap And Trade Bill Hurts Farmers

This op-ed piece originally ran in the Kansas City Star.

The Waxman-Markey cap and trade bill passed through the House of Representatives with minimal consideration of its effects on agriculture.

In written and spoken testimony before the House Agriculture Committee, it appears cap and trade will increase food prices, decrease the amount of U.S. acreage under cultivation, decrease agricultural exports, decrease farm employment, transfer significant wealth from the U.S. to other countries, and may increase the net amount of carbon dioxide emitted worldwide.

Agricultural production relies heavily on carbon-based products, like fuel and fertilizer. For example, they account for 61 percent of sorghum and 49 percent of rice producers’ operating costs. Under cap and trade, the price of these inputs will increase significantly.

By capping and taxing carbon emissions, cap and trade is effectively a tax on energy, an $894 billion energy tax according to the Congressional Budget Office (CBO).

The left-of-center Brookings Institution estimates that petroleum prices will increase by 25% under Waxman-Markey.

Bruce McCarl, Professor of Agricultural Economics at Texas A&M University, testified that this will “inevitably lead to … higher consumer and international food costs.” He went on to say, “this means reduced consumer and rest of world welfare….”

To mitigate increased energy costs for American farmers, Waxman-Markey allows them to decrease their carbon footprint and sell the resulting “credit.” Farmers could do this in two ways: decrease carbon output or increase carbon sequestration.

The theory is that selling offsets will not only mitigate increased input costs, but will be a new source of income for farmers. However, CBO estimates that two-thirds of offsets would be supplied internationally.

In other words, two-thirds of the income from selling credits will accrue outside of the U.S. (This begs an important question: When an offset is supplied in, say Zimbabwe, who will verify and enforce the reduction in emissions?)

This transfer of wealth overseas will be further exacerbated as cap and trade induces U.S. food production to move overseas.

According to Jonathan Glauber, Chief Economist at the U.S. Department of Agriculture, the primary source of agricultural offsets would be afforestation—the conversion of crop and pastureland to timberland—with the understanding that the land will no longer be harvested.

Because land is always put to its most profitable use, cap and trade’s incentives for afforestation combined with its higher energy costs will significantly reduce the amount of productive farmland in the U.S. Agricultural jobs and exports will decrease, leading to an increase in agricultural production elsewhere.

After all, the amount of food necessary to sustain the world’s growing population must be grown somewhere. Ironically, experience shows that when more crops are grown overseas, forests are cut to create the cropland.

Proponents of cap and trade might argue that higher costs to farmers and consumers along with a transfer of wealth from the U.S. to foreign countries are worthy sacrifices to reduce worldwide carbon emissions. But there is no evidence that this will be achieved. This experiment may actually increase the net amount of carbon dioxide emitted by agriculture production worldwide.

Again, the amount of food needed to sustain the world’s growing population has to come from somewhere. “Somewhere” is developing nations, where farms are less energy efficient and produce a lower yield-per-acre than their American counterparts. In other words, more land and more energy are required to produce the same amount of food, resulting in increased carbon emissions.

The combination of increased agriculture production overseas, in countries with fewer environmental restrictions and perhaps on cleared forestland, plausibly leads to an overall increase in agricultural carbon emissions.

Senators considering cap and trade should avoid repeating the mistake of the House: passing legislation that drives up energy costs, punishes American farmers, increases the cost of food, transfers American wealth overseas, and exacerbates the problem it is attempting to solve.

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