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KEARNEY — Nebraska Farmers Union President John Hansen believes an ag-friendly cap-and-trade policy to address greenhouse gas issues is better than Environmental Protection Agency regulations.

Doing something is better than doing nothing and allowing EPA to regulate carbon emissions, he said, and there’s potential for ag producers to get added income off land that qualifies for carbon sequestration credits.

However, leaders of other Nebraska farm groups aren’t convinced that potential carbon market payments will offset higher energy costs from a cap-and-trade program.

That’s why state and national Farm Bureau members are opposed to the concept of cap and trade, said Nebraska Farm Bureau Vice President Steve Nelson of Axtell.

Studies show pros, cons

Two recent university reports describe potential benefits and costs with a cap-and-trade program.

Duke and Texas A&M researchers found that the ag sector could have net gains of $1.2 billion to $18.8 billion annually under various scenarios studied. Their report says income to surpass higher production costs would come from the sale of carbon credits to “capped” industries that produce greenhouse gases, sales of bioenergy feedstocks, and higher commodity prices resulting from cropland being diverted to forests and grasslands.

The impact of higher commodity prices on food costs was acknowledged. “It is important to weigh potential gains to producers with the potential losses in consumer welfare,” the study says.

The other study by a University of Tennessee energy analysis group was done for 25x25, an organization that supports having 25 percent of U.S. energy from renewable sources by 2025.

That study says net returns would be positive for all major crops, up to $13 billion per year, under a “properly constructed cap-and-trade program.” The net would be below U.S. Department of Agriculture projections if carbon emissions are regulated solely by the EPA.

Clean energy not cheap

Nelson said consumers eventually get the bills whenever energy producers have higher costs for production changes, to fix or replace plants, or to buy offset credits to comply with environmental regulations.

He said both bills in Congress talk about enhancing nuclear energy to offset carbon-heavy power production. “But we haven’t built a nuclear plant in the United States since the 1980s, I believe,” Nelson said, and many current plants are obsolete and need to be improved, replaced or closed.

He’s read that two to four new nuclear plants would have to be built annually for the next 40 years to make up deficits in energy production from other sources. “We think nuclear energy is a great option and should have been promoted long before now,” Nelson said.

He cautioned that replacement sources for high-carbon energy won’t necessarily cost the same or less.

Ag-friendly is key

Hansen said those issues still would be of concern under an EPA-regulated program, so the best option in the view of Farmers Union members is a cap-and-trade policy done in “an ag-friendly way.”

He said farm groups were successful in getting key points included in the House bill. “We have a whole shopping list,” Hansen said, starting with putting regulations into the hands of the USDA’s Ag Research Service, not EPA.

Another plus is allowing “early actors and adaptors” to qualify for credits. Without that, Hansen said, there would be a “perverse, backward incentive” that could have farmers plowing conservation lands and then setting them aside again to qualify for carbon credits.

Also key is making sure that agriculture as a whole is excluded from emission compliance, he added.

Hansen said agriculture is responsible for about 7 percent of emissions, but has potential to claim 25 percent to 27 percent of carbon sequestration credits. That could result in returns of $3 to $7 for every $1 ag producers pay in higher energy costs.

“We’re gonna get higher energy costs tomorrow, just as we did yesterday and the day before ... no matter what you do, energy costs are gonna go up,” Hansen said.

Nelson isn’t convinced that carbon credits sold by farmers will offset higher energy costs, especially for segments of agriculture that can’t benefit from cap and trade. For example, he said sugar beet growers can’t no-till farm and benefits are limited for gravity system irrigators.

Incentives to plant trees or grass to capture carbon on millions of acres won’t necessarily benefit farmers, Nelson said, especially those looking to rent cropland.

“Carbon is a market like any other market ... Some argue that the value of carbon sequestration will grow, but we don’t know that,” he said.

Energy, food costs

Nelson estimated that crop inputs could increase $50 per acre just for fuel and fertilizer. “The numbers on both sides (credits and costs) are projections,” he said. “No one knows for sure.”

Nelson added that U.S. Department of Energy officials have estimated that cap and trade could cost every U.S. household $1,870 more for energy. Food costs would rise if crop acres and food supplies are reduced.

“There are a lot of gaps and loopholes in the legislation. What cap and trade does is let you still pollute ... and offset that with dollars,” he said.

Nelson believes a better path is a comprehensive U.S. energy policy that looks at all options and allows development of existing energy resources during the transition to new, cleaner energy. “This cap-and-trade legislation isn’t the only way to go,” he said.

Hansen said the debate is as much about energy independence as climate change. The choices are continued dependence on foreign oil or a system that enhances ag-based renewable energy.

“I keep saying that doing nothing is not an option because the EPA train has already left the station,” he said, and cap and trade is more flexible and user friendly than strictly regulatory approaches.

The Senate continues to work on a climate change bill. Hansen said the mix of partisan politics and high stakes issues such as health-care reform make it anyone’s guess when final cap-and-trade decisions might be made.

He said that if the legislation turns away from what’s right for agriculture, it would affect Farmers Union support.

  “Farmers have seen increased costs the past two to three years and the high prices (from 2008) have backed off to levels that make margins very small,” Nelson said. “My concern is how it works into profitability in agriculture. And profitability and sustainability go hand in hand.”

e-mail to:

lori.potter@kearneyhub.com

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