No. 102 - Greenhouse Gas Control: Implications for Agriculture (Part 5)
Part 5 -- Summary and Conclusion
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Legislation is being considered at both the federal and state levels that would reduce greenhouse gas emissions or pay farmers and foresters to adopt practices that increase the amount of carbon stored in their soil, trees, or harvests. Biological carbon sequestration is part of President Bush’s Global Climate Change Initiative, and 10 states have biological carbon sequestration programs in start-up or operating modes. Four more states considered sequestration projects in 2003.
Reducing emissions is terribly expensive. Multiple independent researchers have found that reducing greenhouse gas emissions to 7 percent below 1990 levels by the year 2010 would cost the typical family over $3,000 a year, inflicting unjustifiable harm on consumers, the poor, and the elderly. State programs would be even more costly.
On the surface, biological carbon sequestration is an attractive alternative to reducing greenhouse gas emissions. Farmers already are switching to practices that increase carbon sequestration, such as no-till cultivation, for other reasons, such as lower production cost and less erosion. But this study has shown there are problems and unintended consequences connected with biological carbon sequestration that should prevent it from being a major part of greenhouse gas control efforts.
Greenhouse Gas Programs and Agriculture
Asking to be paid by taxpayers or utilities to capture and store carbon may lead to taxation or regulation of farmers on account of their own greenhouse gas emissions. During the Clinton administration, a long list of new regulations on farmers was proposed, including limitations on production per acre for some crops, mandatory fallowing of cropland, restrictions on livestock production to reduce methane emissions, and restrictions on the use of fertilizer. Farmers cannot realistically expect to benefit from greenhouse gas control programs without also being subject to new taxes and regulations.
Similarly, making biological carbon sequestration an important part of a greenhouse gas program means endorsing caps on emissions from other sources and forcing emitters to pay for permits when they exceed their caps. Absent such “cap and trade” programs, emission permits will lack sufficient value or longevity to justify the effort and investment needed to earn them. But a cap and trade program would have the same effect as an energy tax equivalent of about 50 cents per gallon of gasoline in order to achieve emission reductions environmentalists view as being “barely a start” and a “small first step” toward forestalling global warming.<74>
Our analysis shows higher energy prices would have a significant negative impact on the U.S. agricultural sector. Farmers stand to see their net income fall by as much as 51 percent if gasoline taxes are raised by 50 cents per gallon. Even a 25 cents-per-gallon tax would likely lower net income by 26 percent.
Total annual U.S. farm production expenses would rise almost $12 billion under the 25 cents-per-gallon scenario and by more than $23 billion under the 50 cents-per-gallon scenario. State-specific programs would cause energy prices to rise much higher, and consequently would have even larger negative effects. Many farmers, especially those who are just getting started or who operate on small margins, would be unable to cope with these declines in income and would be forced off the land.
Sequestration
When we turn to biological carbon sequestration, we find more complications. Farmers with carbon-rich soil won’t benefit from a new sequestration program, and may even have to start paying for their soil’s carbon emissions. Farmers who already use practices that retain carbon in the soil will not be able to increase the capacity to store as much as other farmers who do not, in effect punishing early adopters of conservation tillage and other worthy practices.
Corn and soybean producers in the Midwest may be able to earn permits, but fruit and vegetable producers may not. Livestock production is a net emitter of methane and other greenhouse gases, so many ranchers and dairy farmers would find themselves having to pay more for emission permits than they earn by changing their cultivation practices.
The net amount of carbon U.S. farmers sequester each year is less than 1 percent of total U.S. greenhouse gas emissions. Agriculture-related emissions are 35 times as great as emissions currently being sequestered by their soil. It is difficult to square these numbers with claims that farmers would be net beneficiaries of a system that made emitters pay those who reduce their emissions.
Trees are far better for carbon storage than any crops, but subsidizing tree planting would prompt U.S. farmers to switch from crops to trees, reducing U.S. farm exports and prompting more farm output in countries where there are no artificial constraints on farming. This would lead to more clearing of forests in Third World countries, where deforestation is already a major problem and where yields are far lower than in the U.S., meaning several acres must be cleared somewhere else in the world for every acre reforested in the U.S.
Trouble with Emissions Trading
Emissions trading has shown some success in other areas, but it is doubtful whether this concept can be applied to greenhouse gases and carbon sequestration. The ubiquitous presence of carbon dioxide in ambient air makes it impossible to trace the gas to specific sources. Unlike sulfur dioxide, there are potentially hundreds of thousands or even millions of sources of greenhouse gases.
Contrary to claims that emissions trading has worked smoothly in other areas where it has been tried, we find evidence of thin markets, government over-regulation that kills innovation, changing rules that leave investors high and dry, and programs that have crashed and burned because of verification problems and government meddling. We believe these problems are inherent in the concept of emissions trading, since the requirements for a real market are so very different from the conditions tolerated by bureaucracies.
Emissions trading cannot be expected to work if buyers and sellers are not given a property right to the permits in which they invest, and yet the major emissions trading programs in operation today deny such rights. Unsurprisingly, they see little traffic. Emissions trading also cannot work if it is layered on top of best available control technology (BACT) requirements, which constitute an alternative method of compliance and an expense shared by all emitters, reducing the variation of cost of production and consequently the benefits of exchange. Nor can emissions trading work if fraud goes undetected and unpunished, and if rules are subject to frequent and unpredictable changes.
Advice to the Agricultural Community
Biological carbon sequestration by farmers and ranchers in the U.S. holds only a limited promise for those seeking to be paid to do what many would do anyway. It is a false dream for environmentalists who see it as a major part of the solution to global warming. And it is a poor strategy for an industry that should know better than to join a movement that is anti-industry and anti-technology first and pro-environment only secondarily.
This does not mean farmers and other members of the agricultural community should be silent in the debate over global warming and greenhouse gas controls. Being absent from the political arena allows others to shape public policies that benefit them but hurt the larger community. Emissions trading programs, in particular, raise this risk. The open letter to President Bush from Fred Smith and other policy experts, previously cited, warned of this complication:
Although touted as “voluntary” and “win-win,” transferable credits create a coercive system in which one company’s gain is another’s loss. For every company that gains a credit in the pre-regulatory period, there must be another that loses a credit in the mandatory period (or else the emissions “cap” will be broken). Consequently, companies that do not “volunteer” will be penalized--forced in the mandatory period to make deeper emission reductions than the cap itself would require, or pay higher credit prices than would otherwise prevail.<75>
Farmers and their allies should forcefully oppose greenhouse gas control programs at both the national and state levels. Such programs are unnecessary, enormously expensive, and particularly injurious to the agricultural community. Biological carbon sequestration is not a stand-alone policy to cope with global warming, even if it is presented that way by its advocates. It is part of an expensive and intrusive government program that would profoundly and negatively affect every producer and consumer who uses energy--in other words, all of us.
Businesses that invest in carbon emissions trading schemes, whether out of sincere interest in advancing the public interest or selfish hopes of profiting from them, will likely achieve neither objective. In the process, they will lose customers to companies that do not invest in such risky propositions.
NOTES TO PART 5
1 Joseph Bast is president of The Heartland Institute in Chicago; Dennis T. Avery, an agricultural economist, directs the Center for Global Food Issues at the Hudson Institute in Indianapolis; Alex Avery, a biologist, is Director of Research and Education at the Center for Global Food Issues; James L. Johnston is a senior fellow in regulatory affairs for The Heartland Institute and retired senior economist for Amoco; John Skorburg and Terry Francl are economists at the American Farm Bureau Federation. The authors would like to thank Carlos Stagnaro and David E. Wojick for their comments on early drafts of the manuscript. Any errors that remain are strictly the responsibility of the authors.
74 The first phrase is from Eileen Claussen, president of the Pew Center on Global Climate Change, July 17, 2002. The second is from Jennifer Morgan, climate campaign director, World Wildlife Fund, July 23, 2001.
© 2003 The Heartland Institute. Permission is granted to quote from this Heartland Policy Study, provided appropriate credit is given. Nothing in this Heartland Policy Study should be construed as reflecting the views of The Heartland Institute, nor as an attempt to aid or hinder the passage of legislation. Questions? Contact The Heartland Institute, 19 South LaSalle Street #903, Chicago, IL 60603; phone 312/377-4000; fax 312/377-5000; email think@heartland.org; Web http://www.heartland.org.