Cap and trade could benefit agriculture if it has role in shaping climate legislation
WILLMAR -- Climate change legislation could offer economic benefits to farmers, if they have a role in shaping it.
That's the gist of a study by Informa Economics for the American Farmland Trust and the National Association of Wheat Growers. It was the focus for discussion recently at Ridgewater College in Willmar, when the Ag Carbon Market Working Group sponsored a forum on possible climate change legislation.
The Washington, D.C., group is a consortium of farm commodity and biofuel industries promoting agriculture's interest in climate legislation.
"If we're not at the table, we're going to be on the menu,'' said Kristin Duncanson, director of the Ag Carbon Market Working Group.
All of those attending the day-long presentation June 28 in Willmar said they do not expect any climate change legislation to emerge from this session of Congress.
Yet most of the two dozen or so attendees said they feel that some sort of legislation is inevitable in coming years. Speakers pointed out that governments around the world, including China and India, have already adopted carbon reduction policies more ambitious in their goals than those in the U.S.
And, they pointed to growing interest from the private sector in the U.S. for legislation. Some large utilities see it as likely and want to have a role in setting the rules of the game.
Companies such as Wal-Mart and General Electric see advantages too. Wal-Mart is pushing hard to see "sustainability'' standards adopted for products, according to the speakers.
Climate change regulation could come in many different forms, including straight regulation.
Most support a cap-and-trade approach as the lowest cost means of lowering pollution and meeting international standards, according to Laura Sands, a coordinator with the Ag Carbon Market Working Group.
Cap and trade also offers the most opportunities for agriculture, she said.
Cap and trade creates a market for carbon. U.S. farmers could sell the "service'' of carbon sequestration or reduction, Sands and others noted.
The Informa study found that the right sort of legislation could make carbon sequestration a commodity equivalent in value to wheat or possibly better, according to Jimmy Daukas, managing director for agriculture and the environment with the American Farmland Trust.
The Informa study found that agriculture would realize a variety of new sources of revenue that would more than make up for the increased costs that would result from cap-and-trade legislation, he said.
Daukas and others pooh-poohed predictions that cap and trade would lead farmers to convert cropland into forest, or turn away from efficient production technologies. Craft the right legislation, and farmers using precision agriculture could be rewarded for their efficiency and the resulting carbon reduction achieved by it, while still reaping the benefits of improved yields.
Others could take advantage of the incentives a carbon market would create and install anaerobic digesters and turn manure into energy. A cap-and-trade system could help provide the incentives to develop a farm-based, renewable energy industry. Farmers and rural communities alike would benefit greatly, said speakers.
Agriculture would see "moderate'' price increases in crop production costs as a result of climate control legislation, according to the Informa Economics study, said Daukas. Fertilizer and fossil-fuel costs would increase, but the rise would be less than swings that already occur in the markets, he said.
State Rep. Al Juhnke, DFL-Willmar, was among those who pointed out that policies which favored ethanol helped create economic benefits for farmers and rural communities.
The current U.S. approach toward carbon reduction is voluntary. There is effectively no carbon market as a result, according to Dr. Steven Taff, a professor of applied economics with the University of Minnesota. Carbon currently trades for 10 cents a U.S. ton on the Chicago Carbon Exchange, as compared to $20 a ton in Europe, where cap-and-trade policies are in place.
The business-world experiences of two entrepreneurs made clear the difference between a voluntary and policy approach.
John Baumgartner, of Baumgartner Environics Inc. of Olivia, said his engineering and consulting company has worked with numerous farmers in other countries installing renewable energy systems. Climate change incentives are helping develop renewable energy in those countries.
Back home in the U.S., his company has found very little opportunity for that type of business on U.S. farms, he said.
In contrast, Dan Juhl of Juhl Wind in Woodstock, has installed more than 1,500 megawatts of wind-powered electrical capacity in the last 30 years. Government policy to encourage wind development has given rise to a growing industry that offers farmers a new "cash crop,'' according to Juhl.
Consumers benefit too. Juhl said that wind-generated electricity is often the lowest-cost electricity available on the grid today.