Ag Weighs in on Senate Climate Bill

One point to note on this story -- when Rick Krause says that the Senate bill could result in both a cap-trade system and EPA regulation, I think he is missing the point that the legislation will pre-empt EPA regulation, which EPA itself has said it would prefer . . . so you would not have both, you would have the legislation replacing EPA regulation. There is no reason for EPA to regulate GHG emissions under the Clean Air Act if they have a separate and specific piece of legislation directing their efforts on GHG emissions! EPA is proceeding with regulation under the Clean Air Act because they don't have climate law to use instead.

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Most ag groups dislike Senate's version of a climate bill Dan Looker Business Editor 10/02/2009, 4:12 PM CDT

Almost universal disappointment. That's the best way to describe how ag groups reacted this week to a cap and trade bill introduced in the Senate by the Chairman of the Environment and Public Works Committee Barbara Boxer (D-CA) and Senator John Kerry (D-MA), who heads the Foreign Relations Committee. "We opposed the House bill and we think this bill basically takes one step back from that," Rick Krause, the American Farm Bureau lobbyist working in clean air issues told Agriculture Online. Like the House bill passed last summer, Boxer's bill includes a long list of agricultural practices that could bring payments for carbon credits--practices such as no-till and capturing methane on big livestock operations. But the bill leaves the final decision to the President, he said. "Everything is up to the discretion of the White House as to what gets on the list," he said. Krause said Farm Bureau, which has been worried about higher fuel and fertilizer costs to farmers and ranchers from cap and trade legislation, is unlikely to support a final bill. Most Washington insiders say the Boxer-Kerry bill is a starting point and that some of their concerns may be fixed as it moves through the Senate. Senator Tom Harkin, who has stepped down as the Senate Ag Committee Chairman to head the Health Committee, told Agriculture Online Thursday, "We've got a bunch of votes on the Ag Committee and they need our votes to get this passed." But Krause, National Farmers Union and American Farmland Trust, are all disappointed that provisions in the House bill aimed at agriculture were left out of the Senate Bill. House Agriculture Committee Chairman Collin Peterson got the House bill amended to put USDA, instead of EPA, in charge of paying farmers and landowners for carbon offsets. The money would come from electric utilities, oil companies and other industries whose carbon dioxide emissions are limited, or capped. The Peterson amendment also prevents EPA from writing regulations for ethanol and biodiesel that include a theory that raising U.S. crops for those fuels leads to deforestation in the tropics. That so-called indirect land use change is strongly opposed by U.S. biofuel producers and commodity groups. The Senate bill doesn't include Peterson's amendment. "At least the House bill would have slowed EPA down," Krause said. Farm Bureau will try to get improvements for agriculture into the bill, he said. Dennis Nuxoll of American Farmland Trust, a group that sees more opportunities for farmers in cap and trade than does Farm Bureau, agrees with Krause that it would have been better for agriculture if the Senate's starting point included Peterson's amendment. Nuxoll doesn't think many farmers will participate in any carbon trading program if EPA runs it, and the bill calls for capturing two billion tons of carbon a year, in the U.S. and through credits sold to developing countries. To get to that level, "that's tens of thousands of producers signing up," Nuxoll says. Many environmental groups trust EPA to run the program more than USDA. But Nuxoll says the EPA doesn't have the scientific background on capturing carbon that USDA has. WHO CAN DO SOIL SCIENCE? "For a hundred years USDA has been doing soil science. They don't call it carbon science," Nuxoll said. If the right changes are made, Nuxoll's group might support the legislation. Nuxoll sees three opportunities that a well-written Senate bill could offer farmers to help counter increased fuel and fertilizers costs. Some farmers will be able to participate in carbon trading and get paid for those practices. Others who can't, for example, a Vermont dairy farm that's too small to put in a methane digester, might be able to be compensated through allowances. In the House bill, much of the allowances will go to coal-fired utilities and to consumers but small portion goes to agriculture. The Senate bill has not yet divided up the allowances. A third way farmers and ranchers who own land could benefit is through the cap and trade bills' requirement that utilities buy more of their electricity from renewable sources like wind generators. Rent from wind generation is another potential source of income that will counter higher fuel costs, he said. Fred Yoder, a past president of the National Corn Growers Association who has worked on carbon trading issues for several years, says the NCGA hasn't yet take a position of cap and trade legislation. The group has hired Informa Economics to analyze potential effects and its report will be out soon, Yoder told Agriculture Online. "I don't think it's going to be nearly as costly as some people think," Yoder said of cap and trade. "And I don't think it's going to be the panacea some people think, either." Yoder, who farms near Plain City, Ohio, hasn't given up on improving the Senate's bill. "There are a lot of blanks to be filled in," he told Agriculture Online. "I look at it as a chance to make the House Bill even better." Yoder wants to see the list of farm practices that could qualify to be much broader than methane capture and no-till, which won't increase carbon content much in sandy soils. "You're going to have to make a list of ag offset projects broad enough that everyone can participate," Yoder said. Some members of Congress have criticized both the House and Senate bills for paying carbon offsets to landowners in developing countries, but Yoder sees several benefits. First, if landowners in Brazil are paid to keep land in tropical forest, for example, that means less competition to U.S. corn and soybean farmers, he says. Then there's the issue of what other nations might do to fight global warming. AN UNFAIR DISADVANTAGE? Farm Bureau's Krause argues that cap and trade will put U.S. farmers at an unfair disadvantage the U.S. is along in passing climate change legislation, leaving only U.S. farmers with higher fuel and fertilizer costs. "That's the issue. We can reduce all of our emissions all we want, but if China and India don't, then we haven't gained anything," he said. And EPA's own estimate of how much the House bill would slow global warming is only two-tenths of a degree by the year 2100, he adds. But Yoder sees international carbon credits as another way to deal with that problem. "This is the mechanism we're going to give other countries to do their fair share," Yoder said. Some authorities on climate change legislation worry that the opposition of some agriculture groups to cap and trade legislation will backfire and hurt farmers with even more draconian regulations from the EPA. Sara Hessenflow Harper is a former staffer to Senator Sam Brownback (R-KS) who is now a partner in a consulting firm, The Clark Group. She has worked with farmers interested in the cap and trade issue, including Fred Yoder and others in the Agricultural Carbon Market Working Group. Harper said Friday that people are making too much of the Boxer-Kerry bill's language on agriculture. When the Senate finally votes on the bill, which may not happen this year, "it's not what's going to be there," Harper said. "It's a place holder." Both the Senate Finance Committee, headed Senator Max Baucus (D-MT) and the Senate Agriculture Committee, now headed by Senator Blanche Lincoln (D-AR) will make changes in the bill, she said. Harper said she's disappointed that Farm Bureau mainly opposing the legislation, rather than bargaining harder for changes that will benefit farmers. Large companies, and major fossil fuel industries like coal worked to get better treatment in the House bill, she said. The natural gas industry didn't but decided to participate more in lobbying the Senate. The result is that Boxer s bill is more favorable to natural gas. A BIG GAMBLE "If the Farm Bureau thinks they know more than all these people, okay, but that's a pretty big gamble," Harper said. Harper said she doesn't like big government any more than most Farm Bureau members, but opposing cap and trade legislation, if it succeeds, could just give farmers more regulation by the EPA, which is moving ahead to regulate greenhouse gases on its own. "We're talking about a cap and trade system, which is a market. The alternative is a government takeove--by the EPA," she said. If agriculture isn't involved in writing the legislation, she added, "the environmentalists define what the offset should be." Krause isn't convinced. So far, the Senate bill would set up a cap and trade system, but it wouldn't prevent EPA from regulating greenhouse gases separately. "Under the Senate bill, you get both, which would be the worst of all possible bills," he said. Agricultural interests may not be happy with Boxer's bill. But there's little doubt that in the coming months, all of them will be weighing in on potential changes. Already, the head of the Senate Ag Committee is showing her own skepticism about the Boxer bill. "I am carefully reviewing the Boxer/Kerry legislation and particularly the draft language for agriculture," the committee's chairman, Senator Blanche Lincoln said in an e-mail message from her staff on Friday. "Though an offsets program may provide some opportunities to farmers, I fear that it will not outweigh the costs." Lincoln added, "I have expressed my serious reservations about a cap and trade system, and its potential impact on the cost of fuel, feed and fertilizer, as well as food for consumers. As Chairman of the Senate Agriculture, Nutrition, and Forestry Committee, I am interested in holding more oversight hearings on climate change and will continue working with my Committee members, Senate colleagues, and stakeholders."

China To Launch Its Own Voluntary Offset Market

An interesting thing happened today -- China announced it will launch its own voluntary ag/forestry carbon offset exchange (see the story below). Furthermore, this new exchange will utilize a measurement/verification protocol similar to the Voluntary Carbon Standard project.

For those who believe China will never move forward on climate, think again -- they already have (with higher fuel efficiency standards for their cars and a massive build up of wind power). Interestingly enough, China is hoping to draw investment from the U.S. for its offsets system.

Groups that blindly oppose a cap-trade system with offsets in the U.S. using the excuse that "China and India will never act, so we don't have to worry about the issue" had better get educated about what is really going on in the developing world. I'm not saying that China and India (and other developing countries) are close to agreeing to take a cap on their emissions -- but they are getting more comfortable with becoming a provider for offsets for the emissions reduction market. Those offsets will only count in a mandatory system if the countries generating them, have taken a cap themselves . . . so, you might say, these countries are building the foundation for themselves to be ready for the day when it may make market sense for them to enter the market and cap their emissions.

Its a pity that by that time, China will be ready to swamp the mandatory international market with offsets that we in the U.S. had ample time, research and opportunity to create ourselves.

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CLIMATE: China exchange will set voluntary GHG standard (09/23/2009 -- Environment & Energy PM)

Nathanial Gronewold, E&E reporter

NEW YORK -- China will establish a limited, domestic greenhouse gas offset credit as part of the experimental establishment of a voluntary carbon market, officials announced today.

The offset standard, which the China Beijing Environmental Exchange (CBEEX) is calling the "Panda Standard," will be limited to carbon abatement projects in agriculture, forestry and fisheries.

CBEEX officers and the head of Europe's giant BlueNext carbon allowance and offset exchange pitched the idea here in hopes of drawing interest from U.S. investors and firms interested in financing the pilot system or in secondary trading of the credits once they are created.

Organizers are also hoping that Chinese companies will jump on board, giving firms there a first taste of emissions trading.

Proponents of the voluntary carbon market in the United States often describe it as offering "pre-compliance" practice for companies that could eventually face a federal cap-and-trade system, but officials behind the Panda Standard took pains to make it clear that their foray into voluntary emissions offsetting in no way should be seen as a prelude to cap and trade in China.

The details have yet to be worked out, but CBEEX and BlueNext, both collaborating in what would become the first Chinese-only voluntary offset project verification standard, indicated the system would closely resemble the U.S. Voluntary Carbon Standard or the international Gold Standard and not the Chicago Climate Exchange, which is a membership-based system. That means trading will be open and there will be no established cap on emissions or requirements for meeting reduction targets for participating companies.

There will be "no cap limits, so we have to make it clear," said Mei Dewen, general manager of CBEEX, at a press conference at the New York Stock Exchange.

Mei described the Panda Standard as strictly a pilot project. The main purpose of new voluntary offset credit is to encourage greater corporate social responsibility in China and beyond and for environmental protection. The project is also being strictly limited to agriculture and forestry as a means of encouraging rural development, CBEEX officials said.

The Panda Standard's proponents could not give a date for when investors could expect the standard to be up and running and credits ready for trading. BlueNext officials did say that they hoped to have at least the standard itself finalized before the international climate negotiations scheduled for Copenhagen in December kick off.

It typically took anywhere from two to four years for voluntary carbon market players to develop the existing standards. But the CBEEX says it has no plans to start from scratch and will look at the work of the VCS, Gold Standard and California Climate Action Registry and other examples of carbon offset auditing and verification rules.

"Of course, this element will take a lot of time," BlueNext executive David Rapin said.

Though the Panda Standard is designed to be very limited in scope, excluding many of the heaviest greenhouse gas-emitting sectors in the Chinese economy, Panda Standard developers left open the possibility of opening the project to carbon abatement schemes in manufacturing and industry at some point in the future.

The Virtues of Biochar

Great article from the Economist talking about yet another amazing way that agriculture can help to reduce climate change WHILE improving soil fertility -- of course, it all depends on the policy recognizing what ag and forestry can do and offering the proper incentives/compensation for this important work!

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A new growth industry?

Aug 27th 2009 | BOULDER, COLORADO
From The Economist print edition

Biochar could enrich soils and cut greenhouse gases as well

Getty Images

CHARCOAL has rather gone out of fashion. Before the industrial revolution, whole forests disappeared into the charcoal-burners’ maw to provide the carbon that ironmakers need to reduce their ore to metal. Then, an English ironmaker called Abraham Darby discovered how to do the job with coke. From that point onward, the charcoal-burners’ days were numbered. The rise of coal, from which coke is produced, began, and so did the modern rise of carbon dioxide in the atmosphere.

It is a sweet irony, therefore, that the latest fashion for dealing with global warming is to bring back charcoal. It has to be rebranded for modern consumers, of course, so it is now referred to as “biochar”. But there are those who think biochar may give humanity a new tool to attack the problem of global warming, by providing a convenient way of extracting CO₂ from the atmosphere, burying it and improving the quality of the soil on the way.

Many of those people got together recently at the University of Colorado, to discuss the matter at the North American Biochar Conference. They looked at various ways of making biochar, the virtues of different raw materials and how big the benefits really would be.

The first inkling that putting charcoal in the ground might improve soil quality came over a century ago, when an explorer named Herbert Smith noticed that there were patches of unusually rich soils in the Amazon rainforest in Brazil. Most of the forest’s soil is heavily weathered and of poor quality. But the so-called “terra preta”, or “black earth”, is much more fertile.

This soil is found at the sites of ancient settlements, but it does not appear to be an accidental consequence of settlement. Rather, it looks as though the remains of burned plants have been mixed into it deliberately. And recently, some modern farmers—inspired by Wim Sombroek, a Dutch soil researcher who died in 2003—have begun to do likewise.

Char grilled

The results are impressive. According to Julie Major, of the International Biochar Initiative, a lobby group based in Maine, infusing savannah in Colombia with biochar made from corn stover (the waste left over when maize is harvested) caused crops there to tower over their char-less peers. Christoph Steiner, of the University of Georgia, reported that biochar produced from chicken litter could do the same in the sandy soil of Tifton in that state. And David Laird, of America’s Department of Agriculture, showed that biochar even helped the rich soil of America’s Midwest by reducing the leaching from it of a number of nutrients, including nitrate, phosphate and potassium.

All of which is interesting. But it is the idea of using biochar to remove carbon dioxide from the atmosphere on a semi-permanent basis that has caused people outside the field of agriculture to take notice of the stuff. Sombroek wrote about the possibility in 1992, but only now is it being taken seriously.

In the natural carbon cycle, plants absorb CO₂ as they grow. When they die and decompose, this returns to the atmosphere. If, however, they are subjected instead to pyrolysis—a process of controlled burning in a low-oxygen atmosphere—the result is charcoal, a substance that is mostly elemental carbon. Although life is, in essence, a complicated form of carbon chemistry, living creatures cannot process carbon in its elemental form. Charcoal, therefore, does not decay very fast. Bury it in the soil, and it will stay there. Some of the terra preta is thousands of years old.

Moreover, soil containing biochar releases less methane and less nitrous oxide than its untreated counterparts, probably because the charcoal acts as a catalyst for the destruction of these gases. Since both of these chemicals are more potent greenhouse gases than carbon dioxide, this effect, too, should help combat global warming. And the process of making biochar also creates beneficial by-products. These include heat from the partial combustion, a gaseous mixture called syngas that can be burned as fuel, and a heavy oil.

Taking all these things together—the burial of the charcoal and the substitution for fossil fuels of the heat, gas and oil produced by its manufacture—Johannes Lehmann of Cornell University and Jim Amonette of the Pacific Northwest National Laboratory in Washington state suggest that a reduction of between one and two gigatonnes of carbon-emission a year might be achievable. That compares with current annual emissions of some 9.7 gigatonnes. But the truth is that the computer modelling involved in making these estimates is a work in progress, as researchers do not know a lot of pertinent things accurately enough: how much material is available for conversion, for example; how much land is available for biochar to be ploughed into; how much char that land could handle. Dr Amonette’s estimate is that 50 tonnes per hectare—a figure larger than that used in most of the experiments conducted so far—could go into soils without harming productivity. Some soils could take even more.

The claims for biochar are not supported by all, however. Biofuels Watch, a British lobby group, worries that a craze for the stuff could see virgin land tilled specifically to grow crops such as switchgrass, whose only purpose was to be pyrolised and buried. That tillage would release carbon dioxide and methane. But the alternative, growing those crops on existing farmland, would encourage the clearance of more land to grow the food crops that had been displaced. Indeed, Kelli Roberts, another researcher at Cornell, told the meeting that, taking all factors into account, growing switchgrass for biochar may do more harm than good. Corn stover, garden waste such as grass clippings, and offcuts from forestry and timber production are better bets, she reckons.

And if sequestration by biochar is deemed sensible, there remains the question of how, exactly, to go about it. Making the charcoal is not a problem. Pyrolising stoves are easy to construct and available models range from the portable to industrial-scale machines costing tens of thousands of dollars. Moreover, Jock Gill of Pellet Futures, a company based in Vermont that makes grass and wood pellets for use as fuel, told the meeting that a teenage protégé of his has invented a stove that can be fed continuously, rather than processing batches of raw material. If that proves successful, it would be a breakthrough of the sort that has enabled other industries (not least ironmaking) to take off in the past.

The benefits of improving their soil should be enough to persuade some farmers to make and bury biochar. Others, though, may need more incentives—probably in the form of carbon “offsets” that compensate for emissions elsewhere. In the rich world, Europe already caps carbon-dioxide emissions, and trades permission to emit the gas. America may soon do so too. CO₂-emitting industries could pay farmers to buy stoves to char and sequester farm waste. That would mean working out how much of what kind of biochar counts as a tonne of CO₂sequestered, and would also need a lot of policing.

A charcoal sketch

If the details can be nailed down, though, farmers in poor countries could get in on the act too, through the Clean Development Mechanism, a United Nations’ programme that allows rich-world emitters to buy offsets in the poor world. And Lakshman Guruswamy, of the University of Colorado, told the meeting of another advantage if poor-world farmers can be brought in. Many of them burn wood, waste and dung indoors for heating and cooking. The soot released into the air as a consequence is also a climate-changer because, being dark, it absorbs heat. Much worse, though, about 1.6m people are killed each year by inhaling it. But pyrolytic stoves produce almost no soot—the carbon is all locked into the biochar. Worldstove, a firm based in Italy, seeks to provide small and simple pyrolising stoves to poor countries.

It is all, then, an intriguing idea. It certainly will not solve the carbon-dioxide problem, but it could be what Robert Socolow of Princeton University refers to as a wedge—one of a series of slices that, added together, do solve it. And there would be a nice historical justice in the substance that was displaced by coal playing an important role in cleaning up the mess that coal has left behind.

Garbage In = Garbage Out

Another day, another "study" about the costs of climate change legislation. Don't get me wrong. I'm not one of those people who says there will be no cost for taking action on climate change - or that it will be all upside with green jobs, etc. I have always maintained that like any policy, there is a cost of action and a cost of inaction (which often does not get discussed on the climate issue). What I object to - strenuously, is the cherry-picking of scenarios run by economic models that spit out cost estimates for that scenario, not necessarily for the underlying policy which could be implemented or unfold in numerous different ways.

The American Farm Bureau Federation's recent "studies" on the cost of climate change have been guilty of just such cherry-picking of data - assuming what they believe will be the outcome of a climate bill, modeling the economic costs -- and then, and here is the problematic part, marketing that study as if it represents the whole and only way the policy would be implemented.

Today, we have another "scenario study" which was done by the oil industry, specifically sponsored by the American Petroleum Institute (API). It finds -- no surprise, that the policy will be very costly for domestic oil refiners and will actually increase the amount of foreign fuel we purchase while raising costs.

Yet - look into what the assumptions are of this study - and just like the farm bureau, you see that there are assumptions being made that do not reflect what is in the bill, but rather, a potentially worse case outcome designed to show that costs outweigh benefits.

For example, look at a quote from today's Wall Street Journal story on this new "study" sponsored by the American Petroleum Institute:

The API study is based on the current state of the industry, assuming scant use of nuclear power or new technology to reduce emissions of greenhouse gases -- a reflection of doubts over how widely such technologies can be used. The study also assumes there will be no international program allowing companies to offset their emissions by buying pollution credits.

When you limit the market options for a plan like cap-and-trade, you are limiting the market's ability to mitigate cost. So, when you assume, as this newest "study" does that nuclear plants will not come on line (even though the bill sends the largest market signal for more nuclear ever) or that there will be no international offsets/permit trading (even though the bill allows for over 1 billion tons of international offsets per year), then of course you will get a costly, yet skewed cost estimate.

I find it particularly ironic that there is now being so much faith placed in computer models of cost (based on select and skewed assumptions) from the same people who have long criticized the use of computer modeling to predict climate impacts. If computer modeling is bad, its bad -- it doesn't magically become good because someone on the other side is using it.

My answer to these skewed studies of climate legislation costs is this:

Sure, Congress could create this program in a stupid way that will be very expensive if they follow the assumptions being input by these negative cost analyses. That is EXACTLY why it is important for people with common sense to stay involved in this issue and shape it in a way that means the most market options, the most trading flexibility, the most potential revenue for farms, forests and ranches and the least cost for the overall economy.

A climate cap-and-trade bill could be the largest market maker for nuclear power, for renewable energy and for agricultural offsets generated from conservation practices and direct GHG reductions like methane capture from manure -- OR, it could be done in a way that is designed to punish industry, drive up costs and stifle the economy in a vain attempt to drive down energy use.

It seems to me that leaving the debate to those whose only concern is for the environment risks making all these hyped up cost estimates more likely to be realized than engaging in thoughtful policymaking!

New Perspective on Climate Costs & Ag

One of the greatest concerns about a climate change law is the potential increase in energy costs that could arise.  Just like virtually any other policy, a climate law can be done in a way that is very expensive to implement, and thus, very expensive for consumers -- OR, it can be done in a way that creates a modest increase in cost and yields a new market for conservation, renewable energy and leads to far greater energy diversity and security.

The devil really is in the details.

When federal agencies like EPA and DOE model various climate proposals, they usually look at multiple scenarios that could emerge off of a given proposal.  In this way, the modeling tries to account for the numerous variables that could affect a climate law's cost and/or implementation.  

Unfortunately, this modeling is often complex and very difficult to distill down to a level that the public would be interested in and could understand.  As a result, what often happens is interest groups on the right and the left pick and choose the scenarios and the data that they want to see and present that to the public as "the cost assessment" of a given policy.  

To get a more accurate view of climate policy, it is important to take full account of all the scenarios and variables involved.  In fact, a better way to look at modeling is as a means to detect which policy levers will cause an effect (raise or lower prices) based on how they are utilized in the law.

For example, recently, the American Farm Bureau and the Fertilizer Institute have made claims about the high cost of cap-and-trade climate proposals that may encourage some folks to see it as a net negative for agriculture.  However, closer scrutiny of the underlying analysis being used by these groups (a study conducted by the Doane Advisory Services, 2008) shows that this picture is not a complete one and may in fact present a misleading view of the potential economic opportunity that a cap-and-trade system represents.  Of course, it all depends on WHICH type of cap-trade system is put into place and of key importance, how many offsets are allowed and how well constructed is the agriculture offset market.

Its worth really understanding this important issue, because otherwise the agriculture industry could miss out on major economic opportunities by not participating in the debate.  Meanwhile, the absence of that participation has little chance of preventing a climate bill from passing -- it just means the TYPE of bill that passes is likely to be less positive for the agriculture sector

But don't take my word for it -- a new analysis out by Duke University's Nicholas Institute and Texas A&M professor Bruce McCarl goes through this issue in detail and points out some of the flaws that exist in the Doane analysis.

Below is a brief excerpt of the beginning of their white paper as well as a link to the full report.

Commentary on Impacts of Carbon Prices and Energy Costs on Returns to Agricultural Producers 

 

Brian C. Murray, Nicholas Institute for Environmental Policy Solutions, Duke University 

Bruce A. McCarl, Department of Agricultural Economics, Texas A&M University  

Justin Baker, Center on Global Change, Duke University 

 

A report issued by Doane Advisory Services in May 2008 titled An Analysis of the Relationship between 

Energy Prices and Crop Production Costs, has received recent attention as some interest groups have 

used it as evidence of how a U.S. federal cap-and-trade program – or any similar climate policy that 

creates a price on greenhouse gases (GHGs) would negatively affect U.S. farmers.   The study takes 

energy prices from EPA’s economic analysis of the Lieberman-Warner America Climate Security Act 

(S.2191) and combines this with USDA data on input costs from the eight largest crops (by value) in the 

United States to gauge how the higher energy costs expected under GHG controls translate into higher 

farm operating costs.  Higher farm operating costs provides the study’s lone measure of farmer well- 

being and the authors thereby imply that the economic harm to farmers equals their increased 

operating costs.  

The Doane report usefully addresses an important set of issues.  Yet there are a number of reasons why 

the results provide a misleading view of the impact on farmers of a carbon price including: 

-- Recent projections of cap-and-trade policy in EPA’s analysis of the Waxman-Markey bill shows 

smaller energy sector impacts than the estimates used in the Doane report 

 

-- The study uses a simple crop budget rather than a full structural economic model to capture the 

complex market linkages and substitution among inputs that determine net returns to 

agricultural producers.   

-- The study ignores the following factors that raise the returns to farmers 

o higher prices received by farmers reflecting the input higher costs 

o biofuels as an income source 

o offsets from agriculture as an income source 

-- Other recent independent studies of carbon price impacts on agriculture capture many of the 

missing features identified above and tell a different story 

To read the full report, click here.

EcoTech's Miracle Mineral

Recently, I and others at my firm completed a scoping report for a company called Ecotech, which mines a natural "miracle" mineral called zeolite.  Zeolite is a unique mineral with many agricultural applications that provides environmental benefits, including improved water quality, reduced greenhouse gas (GHG) emissions from manure and fertilizer, and enhanced methane capture in anaerobic digestion.  We were looking into the potential greenhouse gas benefits or carbon credits that could come from using zeolite.  It turns out that when you feed this mineral to livestock (cattle and pigs especially) it binds the nitrogen in the manure so well that there is very little run off when the manure is then applied to a crop field as fertilizer. Also, when you put zeolite directly into a digester used to capture methane from manure, you are able to increase the amount of methane you can capture by 10-30%.

The ability to reduce nitrous oxide (one of the greenhouse gases coming off of manure) would be hugely significant because it is some 300 times more potent in terms of global warming than the main gas, carbon dioxide.  Methane is some 25 times more potent than C02 and will be a very important part of the coming carbon market.

You can check out the report at the Clark Group website by clicking here.

Testifying on the Need for Ag Offsets

Fred Yoder testified this week before the Small Business Committee on behalf of the National Corn Growers Association regarding the role of agriculture in climate change. Fred is a member of the Ag Carbon Market Working Group and the past President of the NCGA (check out earlier posts on this blog to read about his experiences at the UN Climate Change Conference in Poland).

Fred's testimony focused on the importance of designing an offset policy that allows agriculture to contribute to the solution for climate change and produce revenue for rural America. There was particular emphasis during the hearing on the need for offsets to counterbalance any potential cost increase from cap-and-trade. Fred was joined on the panel by Roger Johnson, new President of the National Farmers Union, alongside reps from other industries (roofing, steel). Fred and Roger both outlined the necessity to create an offset policy that incentivizes farmers to reduce and sequester GHG emissions – and how that would mean crediting early actors, involving USDA, designing effective protocols, and allowing unlimited domestic offsets.

Questions from Committee members covered the role of ag in climate change solutions and the potential for costs to the economy. Fred and Roger both highlighted that the potential for cost increase coupled with the current economic situation underscores the critical need to design an offset policy that lowers the cost to the economy.

The hearing is available online and below.
http://www.youtube.com/view_play_list?p=0B9D4A59DF00BDD2

Fred’s testimony:
http://www.youtube.com/watch?v=GlObhoGk9q8&feature=PlayList&p=0B9D4A59DF00BDD2&index=2

Fred’s discussion of potential costs and the importance of engaging from 1 min 50 to 5 min 25:
http://www.youtube.com/watch?v=1q509kFUy-Y&feature=PlayList&p=0B9D4A59DF00BDD2&index=8