By 2050, U.S. landowners will switch almost 60 million acres from their current use as pasture and cropland to forests under the greenhouse emissions cap-and-trade bill that already has passed the House, according to USDA Chief Economist Joe Glauber.
Testifying at a recent House Agriculture subcommittee hearing, Glauber said that as the value of carbon allowances increases over time, the amount of U.S. land devoted to forests also rise.
Under the House bill, industries that produce greenhouse gases would be able to purchase "offsets" from farmers and others who take steps to sequester GHG emissions. The establishment of an agricultural and forestry offset program was a major provision in House-passed climate change legislation that is intended to recognize and reward these sectors for conservation activities and clean energy production.
Under the bill, USDA will work with farmers, ranchers and forestland owners to design and implement plans that reduce or avoid greenhouse gas emissions and sequester carbon on their operations. Participants will earn offsets for these actions, and they can sell the credits to utilities, refiners, or other firms subject to limitations on greenhouse gas emissions.
The major share of revenue earned by U.S. farmers for controlling greenhouse gases under the House-passed climate bill would be paid for growing trees. "The primary source of agricultural offsets would be carbon sequestration through afforestation of crop and pastureland," Glauber said. Some 85 percent of revenue from agricultural offsets from 2015-2050 would arise from creation of woodlands, said Glauber.
"In 2015, when the price of carbon allowances is about $13 per ton of CO2 equivalent (eq), additional afforestation occurs on about 8 million acres," said Glauber. "This represents a 3 percent increase in forestland against the projected baseline."
"By 2013, when the price of carbon allowances increases to about $27 per ton of CO2eq, additional afforestation occurs on almost 27 million of acres. By 2050, when the price of carbon allowances increases to $70 per ton of Co2eq, additional afforestation occurs on almost 60 million acres, 35 million of which comes from cropland (14 percent decline from baseline) and 24 million acres from pasture (almost 9 percent decline from baseline)."
Glauber said that early-on (in 2015, for example), when carbon allowances are relatively low, almost all of the afforestation occurs on pastureland, but as they rise to about twice the price in 2030, slightly more than half of the additional afforestation occurs on cropland. He said the USDA analysis indicates that almost all of the additional afforestation occurs in four regions of the country: Corn Belt, Lake States, Rocky Mountains and South Central.
In 2015, Glauber noted, commodity production impacts are relatively modest, except for rice. "Corn and soybean production are 3.5 and 1.4 percent lower, respectively, compared to baseline production levels," he said. "By 2030, corn and soybean production are about 7 percent and 9 percent lower, respectively, when compared to baseline levels of production in 2030. By 2050, corn and soybean production are 22 percent and 29 percent lower than baseline levels."
Importantly, Glauber said the baseline counts on yield growth to offset production losses due to acreage taken due to afforestation. "For example, while corn production is 22 percent less than baseline production levels for 2050, this lower level of production is 13 percent higher than baseline levels in 2015," he said. "Only for soybeans and sorghum are 2050 levels of production under cap-and-trade less than baseline levels of production in 2015."
As for crop prices, Glauber said by 2030, corn, rice and wheat prices are 15 percent, 5.5 percent and 3 percent higher compared to baseline prices, and by 2050, they are 28 percent, 8 percent and 13 percent higher, respectively. Other crops, such as soybeans, cotton, sorghum and barley, would see prices 21 percent, 25 percent, 40 percent and 57 percent higher compared to baseline prices.
"Lower domestic crop production and higher prices could spur increases in agricultural production abroad as producers make up for reductions in U.S. crop exports relative to the baseline," said Glauber.
Glauber noted that higher real commodity prices will result in higher production costs for livestock producers. USDA estimates hog slaughter will fall 7 percent by 2030 and fed cattle kill will be down 3 percent compared to baseline levels. In 2050 those reductions would be 23 percent for hogs and 10 percent for beef, with a 17 percent decline in milk output in 2050. This will result in higher prices for these commodities, he added.
Another witness, agricultural economist Dermot Hayes, said he and colleagues at Iowa State University arrived at similar figures for possible conversion of farmland to trees. The Iowa State University exercise compared land rental rates in the Corn Belt with potential earnings from carbon sequestration. A sampling of livestock producers and crop farmers found broad opposition to converting cropland to trees, said Hayes. But, he added, a hefty portion of Midwestern cropland is rented and landowners might welcome a new income source.
Glauber cautioned there are many uncertainties in making multi-decade forecasts and "a lot of issues in implementing a (cap and trade) program." For example, he said, if crop prices rise enough, landowners might take idled cropland out of the 32 million-acre conservation reserve program.
