An analysis of six economic studies by a Kansas State University team has concluded that the effect of proposed U.S. climate legislation would be largely neutral to positive for the agricultural sector.

Team leader Bill Golden of KSU’s agricultural economics department said, "Overall, the research suggests U.S. agriculture has more to gain than lose with the passage of H.R. 2454," which is also known as the Clean Energy and Security Act of 2009, or the Waxman-Markey bill. "The bill specifically exempts production agriculture from emissions caps, provides provisions to ease the transition to higher fertilizer prices and fosters the development of carbon offset markets, which will likely enhance agricultural revenues."

The studies considered by the KSU team make different assumptions about key variables that can have significant impact on the results, and not all of them included the various offset categories as they exist in the House-passed legislation. By analyzing the studies in light of recent revisions to the legislation, the KSU team was able to make the following key findings:

  • In the short-run, per-acre profitability for both crop and livestock producers may decline but, for the most part, the short-term declines will be modest, with changes in production costs ranging from 0.3% to 6.4% by 2025.
  • If other countries adopt similar legislation, the market for agricultural commodities will adjust in the long run and return producers' profits to pre-H.R. 2454 levels.
  • The economic impacts will vary regionally and by crop and livestock sub-sector. The impacts depend on cultural and management practices and the farm-specific ability to sequester carbon and receive offset income.
  • H.R. 2454 establishes a renewable energy standard that mandates a portion of all U.S. electricity be produced from low-carbon renewable energy sources. As the market for these energy sources expands, the agricultural sector will benefit financially.

"At the present time, it is not completely clear how renewable energy legislation and climate offset markets will function together," said Golden. Potential offsets include dairy digesters, improvements in soil management and tillage practices, advancements in nutrient management and alternative manure-management systems. “What is clear is that these markets have the potential to provide significant financial benefits to agricultural producers.”

American Farmland Trust sponsored the research, which did not cover the testimony presented to the House Agriculture Committee in December. The organization expects to conduct another summary analysis that will include this new research.

A copy of the KSU Study is available on American Farmland Trust's Web site or through Kansas State University.

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