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Vilsack lays out income benefits to agriculture from cap and trade bill

Agriculture.com Staff 02/07/2016 @ 4:37am

For the first time, Agriculture Secretary Tom Vilsack on Wednesday laid out specific benefits to farmers and landowners from the House version of climate legislation that includes carbon trading for agriculture.

Vilsack told the Senate agriculture committee that between 2012 and 2018,  the House-passed cap and trade bill (which senators from both parties say they will change) would cut the nation’s net farm income by about 1%. That’s partly because the bill delays the effect of capping carbon emissions in trade sensitive energy-intensive industries like nitrogen fertilizer production and corn wet milling. But carbon credits sold by farmers would offset even those increased costs, Vilsack said. Later, as energy costs go up more, carbon trading would bring in even greater increases in net farm income.

“So let me be clear about this analysis and its implications,” Vilsack said. “In the short term, the economic benefits to agriculture from cap and trade legislation will likely outweigh the costs. In the long term, the economic benefits from offsets markets easily trump increased input costs.”

Vilsack said the analysis is conservative because it doesn’t include technology that will make crop production more efficient or the increased demand for biofuels and wind energy that will come from rural America.

Vilsack cited one example to show how the legislation might work later on.

“A Northern Plains wheat producer, for example, might see an increase of $.80 per acre in costs of production by 2020 due to higher fuel prices. Based on a soil carbon sequestration rate of 0.4 tons per ace and a carbon price of $16 a ton, a producer could mitigate those expenses by adopting no-till practices and earning $6.40 per acre,” Vilsack said.

Both supporters and critics of the House legislation have been urging USDA to come up with some numbers to support Vilsack’s optimism about the potential for agriculture to benefit from cap and trade.

On Wednesday Vilsack still faced skepticism from Republican members of the ag committee, including former Agriculture Secretary Mike Johanns, now a senator from Nebraska.

Johanns cited an American Farm Bureau Federation study that suggests that 40 million acres of farmland, about 10% of the nation’s total, would shift into forest so that landowners could get higher benefits from selling carbon credits.

Vilsack wasn’t willing to concede that, saying that part of the shift might come from Conservation Reserve Program acres instead of the most productive cropland.

Both Johanns and his fellow Nebraska Senator Ben Nelson, a conservative Democrat on the ag committee, said that when they walk in parades in their home state, they hear people in the crowd yelling “ No to cap and trade.”

Senator John Thune, a South Dakota Republican, said that when he talks to farmers and ranchers these days, he hears their worries about cap and trade, food regulations, and the EPA regulations that view gasoline more favorably than ethanol.

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