Minnesota Climate Forum | Informa Economics Study


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Minnesota Climate Forum | Informa Economics Study

  1. 1. Potential Economic Opportunities for Agriculture of Climate and Energy Policy Minnesota Ag, Climate and Energy Forum June 28, 2010
  2. 2. AFT’s Mission <ul><li>Stop the loss of farmland and protect it for future generations </li></ul><ul><li>Help farmers and ranchers produce a cleaner environment </li></ul><ul><li>Maintain economically sustainable agriculture sector </li></ul>
  3. 3. 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
  4. 4. AFT & NAWG Conduct Study to Understand Economic Impacts <ul><li>Study presented at the 2010 Commodity Classic, Anaheim, CA </li></ul>April 2010
  5. 5. Informa Study Conclusions <ul><li>Cap & trade has potential to provide significant long-term benefits, if properly structured </li></ul><ul><li>But there are policy designs that can be harmful </li></ul><ul><li>Production cost increases modest </li></ul><ul><li>Opportunity for farmers to gain more income from offsets, renewable energy </li></ul><ul><li>EPA regulation would be worse for farmers </li></ul>
  6. 6. Additional findings <ul><li>Land use shifts regional impacts; but marginal not prime land switches first </li></ul><ul><li>Not all farmers able to participate in offset markets </li></ul><ul><li>Not all about offsets; additional revenue via energy policies such Renewable Electricity Standard (RES) </li></ul>
  7. 7. Key Conclusion <ul><li>To benefit from policies, agriculture must be actively engaged in developing those policies, working with others and Members of Congress </li></ul>
  8. 8. Carbon Price Drives Costs for Farmers <ul><li>Carbon cap will decline </li></ul><ul><li>Carbon price increases </li></ul><ul><li>Energy price increases </li></ul><ul><li>The cost of fuel and fertilizer = increase in production costs </li></ul><ul><li>Significant allowances to fertilizer industry will help offset costs </li></ul><ul><li>until 2035 </li></ul>
  9. 9. 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%
  10. 10. Carbon Markets Provide Revenue Opportunities for Agriculture <ul><li>Agriculture is not a capped sector </li></ul><ul><li>Agriculture, including livestock, has opportunities to sell offsets </li></ul><ul><li>No-till is potentially the most widely adopted carbon sequestration practice </li></ul><ul><li>Other activities can be implemented to “farm carbon” and increase farmer revenues </li></ul><ul><li>Most other industries do not have offset alternatives </li></ul>
  11. 11. Variety of activities can generate offsets
  12. 12. Adoption of No-Till Economically Sound
  13. 13. Additional Opportunities for Farmers thru Renewable Energy Production <ul><li>Target 20% of electricity by 2020 to be from renewable sources </li></ul><ul><li>EIA projects renewable sources to account for ~15% of electricity by 2020 without cap-and-trade </li></ul><ul><li>Biomass (e.g., crop biomass, energy crops, forest residues) expected to contribute the bulk </li></ul><ul><li>Implications by 2020: more biomass, more land in energy crops, more revenue for farmers </li></ul>
  14. 14. Land Use Shifts Affects Marginal Land <ul><li>Pastureland will shift to forests before cropland </li></ul><ul><li>Marginal acres may shift to forage </li></ul><ul><li>South has a competitive advantage in biomass </li></ul><ul><li>Even at higher carbon prices, prime cropland will not shift to forestry or perennials </li></ul>
  15. 15. Livestock Offset Revenue Opportunities <ul><li>Two General Practices to Sequester Carbon </li></ul><ul><li>1. Enteric Fermentation </li></ul><ul><li>2. Manure Management </li></ul><ul><li>Dairy - greatest opportunity </li></ul><ul><li>Poultry - few opportunities </li></ul><ul><li>Swine - some opportunities via manure management </li></ul><ul><li>Feedlots - some opportunities via enteric fermentation </li></ul>
  16. 16. Climate Bill Better Than EPA Regulation <ul><li>Cap-and-Trade is more efficient than direct EPA oversight </li></ul><ul><ul><ul><li>EPA Regulation = Higher production cost impacts </li></ul></ul></ul><ul><ul><ul><li>EPA Regulation would not provide revenue opportunities for agriculture </li></ul></ul></ul><ul><ul><ul><li>EPA Regulated case could include agricultural and livestock producers – C&T does not. </li></ul></ul></ul><ul><li>Production cost impacts could potentially be multiple times more than that of cap-and-trade </li></ul>
  17. 17. Policies that Matter to Agriculture <ul><li>Fertilizer allowances (and ensuring they are passed on to farmers) </li></ul><ul><li>Maximizing number of domestic offsets </li></ul><ul><li>USDA manages ag offset program </li></ul><ul><li>Specific list of approved ag offsets </li></ul><ul><li>Opportunity to add new offset practices </li></ul><ul><li>Involvement in methodologies and protocols to calculate impact on GHG </li></ul><ul><li>Treatment of early actors </li></ul>
  18. 18. Informa’s Bottom Line <ul><li>Gains are expected to exceed costs within agriculture sector as a whole, if policy structured correctly </li></ul><ul><li>Cost of production impacts are relatively small </li></ul><ul><li>Numerous potential revenue opportunities available to farmers </li></ul><ul><li>If structured properly, C&T could benefit a large number of farmers but not all </li></ul><ul><li>Cap-and-trade approach is significantly better than an EPA regulated system </li></ul>
  19. 19. <ul><li>For more information on studies and to sign up for our e-newsletters: </li></ul><ul><li>www.farmland.org </li></ul>Keep Up With the Debate