Net returns for virtually all major crops are positive under a properly constructed cap-and-trade program, according to a University of Tennessee study released by 25x”25. However, the study goes on to show that if carbon emissions are regulated by EPA as prescribed under a 2007 Supreme Court ruling, net farm income is projected to fall below baseline projections.

The Analysis of the Implications of Climate Change and Energy Legislation to the Agricultural Sector  by the University of Tennessee’s Bio-Based Energy Analysis Group, says that an operationally efficient cap-and-trade program that allows multiple offsets, including those for bioenergy crop production, while restricting the removal of crop residues to environmentally beneficial levels, offers positive net returns for eight of the nine major crops analyzed.

Furthermore, at a moderate carbon price of up to $27 per metric ton of carbon dioxide – a price level projected by EPA – no cropland is expected to be converted to forests. In fact, no major shifts in commodity cropland use are expected under a properly constructed cap-and-trade system.
The demand for bioenergy feedstocks under the optimal cap-and-trade scenario is projected to result in significant increases in hay and dedicated energy crop acreage through pasture conversion, though crop and beef prices are not disrupted. And biomass feedstock production would offer the environmental benefits of significant direct and indirect reductions in greenhouse gas (GHG) emissions.

"The study projects how meeting selected energy and climate change policies might impact the agricultural sector," says Burton English, a University of Tennessee professor of agricultural economics and coauthor of the study. "Scenarios analyzed include alternative agricultural offset treatments and evaluates their potential impacts on the U.S. agricultural sector."

"Energy prices will very likely go up under any cap-and-trade scenario," says Fred Yoder, past president of the National Corn Growers Association. "But with a properly constructed system that maximizes the contributions agriculture can make to stemming climate change, farm revenues will grow as well, increasing by $13 billion per year."

"This study indicates higher commodity prices, and it also shows farmers will have the opportunity to get paid for growing bioenergy crops, reducing their emissions by managing fertilizers and manure, and sequestering carbon in the soil," Yoder said.

"Farmers and ranchers want to be a part of the climate change solution and this study illustrates the significant role they can play," says Roger Johnson, president of the National Farmers Union. "Failing to address climate change through legislation, and instead subjecting producers to EPA regulations, would be a huge mistake. This study illustrates this point and rejects the ill-conceived notion of massive movement from cropland into forests and grasslands under a cap-and-trade system."

Visit the 25x”25 Web site for more information about the report and the initiative.

Source: 25x’25