…FAPRI's Conclusion on Impact of Climate Change Legislation: It Depends…
Senate Majority Leader Harry Reid, D-Nev., this week said he plans to unveil a composite energy and climate-change bill within the next 10 days, and has reserved the week of July 26 to have it considered on the Senate floor.
Reid said the bill will address four major issues: 1) a legislative response to the Gulf oil spill; 2) energy provisions modeled after bipartisan legislation (S. 1462) sponsored by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., which was approved by the committee last year; 3) a tax package developed by the Senate Finance Committee; and 4) caps on greenhouse gas emissions from the electric utility industry, which produces about one-third of the nation's greenhouse gases -- an alternative to a broader cap-and-trade bill applying to all industry sectors. As part of the electric-utility-only approach, Sens. John Kerry, D-Mass., and Joe Lieberman, I-Conn., are circulating 670-page "pared-down" draft of their previous all-encompassing climate-change bill that would cap emissions from power plants at 17 percent below 2005 levels by 2020, 42 percent by 2030 and 83 percent by 2050. The revised Kerry-Lieberman draft focused solely on power plants would reduce to 500 million tons the number of offset credits available under a cap-and-trade approach, down from the 2 billion tons provided in their original bill. Under the draft bill, as with the previous comprehensive approach, states would be preempted from implementing cap-and-trade approaches to reduce greenhouse gas emissions, but would be allowed to establish separate state performance standards.
Meanwhile, Bingaman is circulating two separate draft bills developed several months ago focused solely on reducing emissions from electric utilities. One 50-page draft bill from Bingaman would be limited to requiring electric utilities to reduce only carbon dioxide emissions -- not all six greenhouse gases -- by 17 percent by 2020 and 43 percent by 2030, compared to 2005 levels. The second Bingaman draft bill -- a 44-page version -- would apply similar reductions to all greenhouse gas emissions from electric utilities. Bingaman's bills would preempt state action until 2017.
There is concern that a climate-change bill targeted solely at electric utilities may risk exposing other industry sectors, such as manufacturers (including those engaged in certain grain processing and biofuels enterprises) to greenhouse gas regulations issued by the Environmental Protection Agency. The NGFA is working with a broad consortium of agricultural and food organizations to develop a coordinated response if such legislation is considered on the Senate floor.
New Study on Economic Impact of Climate-Change Legislation: As climate-change legislation continues to surface in Congress, numerous studies have been conducted in an attempt to determine the economic impacts such legislation could have on the U.S. agricultural sector, including studies from the U.S. Department of Agriculture, the U.S. Energy Information Administration, Texas A&M University and the University of Tennessee
The latest entrant is an analysis, issued earlier this month, of the House-passed cap-and-trade climate-change bill by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri. The study, conducted with an extended version of the FAPRI modeling system, evaluated the bill’s impact on the U.S. agricultural sector.
Working at the request of the U.S. Department of Agriculture’s Office of the Chief Economist, the analysis focused on three specific issues, specifically, the House-passed bill’s impact on: 1) farm production; 2) biofuel production; and 3) land-use decisions.
The study concluded that, for the farm sector as a whole, the impact on net farm income would depend upon the magnitude of the effects of the bill on agricultural production costs, biofuels production and land-use adjustments. "Higher production expenses reduce aggregate net farm income, but biofuel production, land-use shifts and income from the sale of offsets push farm income higher," the study found. For example, corn use for ethanol could decline by 0.6 percent by 2030 if biofuel producers do not have the opportunity to benefit from the higher prices for competing fuels. However, if biofuel producers are able to take advantage of higher consumer costs for gasoline and diesel fuel, corn use for ethanol could increase by nearly 15 percent, FAPRI said.
The study also concluded that, for the consumer, climate-change legislation likely would create higher food prices, attributable to higher farm commodity prices and higher energy costs associated with processing and transporting food.
FAPRI's analysis concluded that altering just a few key assumptions "can lead to qualitatively different estimates of the bill's impact."