Minnesota Climate Forum | Informa Economics Study
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Minnesota Climate Forum | Informa Economics Study

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Minnesota Climate Forum | Informa Economics Study Minnesota Climate Forum | Informa Economics Study Presentation Transcript

  • Potential Economic Opportunities for Agriculture of Climate and Energy Policy Minnesota Ag, Climate and Energy Forum June 28, 2010
  • AFT’s Mission
    • Stop the loss of farmland and protect it for future generations
    • Help farmers and ranchers produce a cleaner environment
    • Maintain economically sustainable agriculture sector
  • Agriculture & Environment Initiative Helping farmers and ranchers to improve water quality and combat climate change while expanding their sources of revenue AFT’s New Campaign
  • AFT & NAWG Conduct Study to Understand Economic Impacts
    • Study presented at the 2010 Commodity Classic, Anaheim, CA
    April 2010
  • Informa Study Conclusions
    • Cap & trade has potential to provide significant long-term benefits, if properly structured
    • But there are policy designs that can be harmful
    • Production cost increases modest
    • Opportunity for farmers to gain more income from offsets, renewable energy
    • EPA regulation would be worse for farmers
  • Additional findings
    • Land use shifts regional impacts; but marginal not prime land switches first
    • Not all farmers able to participate in offset markets
    • Not all about offsets; additional revenue via energy policies such Renewable Electricity Standard (RES)
  • Key Conclusion
    • To benefit from policies, agriculture must be actively engaged in developing those policies, working with others and Members of Congress
  • Carbon Price Drives Costs for Farmers
    • Carbon cap will decline
    • Carbon price increases
    • Energy price increases
    • The cost of fuel and fertilizer = increase in production costs
    • Significant allowances to fertilizer industry will help offset costs
    • until 2035
  • Increasing fuel and fertilizer costs will raise cost of production only “moderately” % chg costs 1.2% 1.9% 1.2% 3.7% 4.1% 2.1% 7.8% 7.3% 3.3%
  • Carbon Markets Provide Revenue Opportunities for Agriculture
    • Agriculture is not a capped sector
    • Agriculture, including livestock, has opportunities to sell offsets
    • No-till is potentially the most widely adopted carbon sequestration practice
    • Other activities can be implemented to “farm carbon” and increase farmer revenues
    • Most other industries do not have offset alternatives
  • Variety of activities can generate offsets
  • Adoption of No-Till Economically Sound
  • Additional Opportunities for Farmers thru Renewable Energy Production
    • Target 20% of electricity by 2020 to be from renewable sources
    • EIA projects renewable sources to account for ~15% of electricity by 2020 without cap-and-trade
    • Biomass (e.g., crop biomass, energy crops, forest residues) expected to contribute the bulk
    • Implications by 2020: more biomass, more land in energy crops, more revenue for farmers
  • Land Use Shifts Affects Marginal Land
    • Pastureland will shift to forests before cropland
    • Marginal acres may shift to forage
    • South has a competitive advantage in biomass
    • Even at higher carbon prices, prime cropland will not shift to forestry or perennials
  • Livestock Offset Revenue Opportunities
    • Two General Practices to Sequester Carbon
    • 1. Enteric Fermentation
    • 2. Manure Management
    • Dairy - greatest opportunity
    • Poultry - few opportunities
    • Swine - some opportunities via manure management
    • Feedlots - some opportunities via enteric fermentation
  • Climate Bill Better Than EPA Regulation
    • Cap-and-Trade is more efficient than direct EPA oversight
        • EPA Regulation = Higher production cost impacts
        • EPA Regulation would not provide revenue opportunities for agriculture
        • EPA Regulated case could include agricultural and livestock producers – C&T does not.
    • Production cost impacts could potentially be multiple times more than that of cap-and-trade
  • Policies that Matter to Agriculture
    • Fertilizer allowances (and ensuring they are passed on to farmers)
    • Maximizing number of domestic offsets
    • USDA manages ag offset program
    • Specific list of approved ag offsets
    • Opportunity to add new offset practices
    • Involvement in methodologies and protocols to calculate impact on GHG
    • Treatment of early actors
  • Informa’s Bottom Line
    • Gains are expected to exceed costs within agriculture sector as a whole, if policy structured correctly
    • Cost of production impacts are relatively small
    • Numerous potential revenue opportunities available to farmers
    • If structured properly, C&T could benefit a large number of farmers but not all
    • Cap-and-trade approach is significantly better than an EPA regulated system
    • For more information on studies and to sign up for our e-newsletters:
    • www.farmland.org
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