Cap-and-trade means plant-a-tree for U.S. farms

WASHINGTON Thu Dec 3, 2009 6:48pm EST

Related Topics

WASHINGTON (Reuters) - The lion's share of revenue earned by U.S. farmers for controlling greenhouse gases under a House-passed climate bill would be paid for growing trees, analysts told an Agriculture subcommittee on Thursday.

"The primary source of agricultural offsets would be carbon sequestration through afforestation of crop and pastureland," said Joe Glauber, Agriculture Department chief economist.

Some 85 percent of revenue from agricultural offsets from 2015-2050 would arise from creation of woodlands, said Glauber. The Congressional Budget Office estimated forestry would account for 90 percent of agricultural offsets in 2030.

The forestry offsets would be worth an average $3 billion a year according to modeling by the Environmental Protection Agency, said Glauber. The Midwest and South Central states would see most of the money and the Northeast would get 11 percent.

Not counting the forestry offsets, farm income would be an average $22 billion a year higher under the bill, mostly the result of higher crop and livestock prices, according to the EPA modeling. There also would be some income from actions by farmers to limit greenhouse gases.

Those steps might include adoption of low or no-till systems, revising fertilizer practices, altering livestock feed mixes or capturing methane from manure.

Revenue from carbon control was projected to be much larger than income for constraining methane or nitrous oxides. Most of the conversion to forestland from pasture and cropland would be in the Midwest and South Central states.

"While every commodity will be hit with increased costs, only select producers will be able to take advantage of revenue-raising offset projects," objected Rep Bob Goodlatte, Virginia Republican.

Goodlatte said a projection of 59 million acres of new woodland by 2050 was "stunning" and would mean higher feed costs for livestock and dairy farmers because of less pasture and cropland. USDA said the land conversions could start at 8 million acres, mostly pastureland, in 2015 with a carbon price of $13 per tonne and expand as carbon prices rise.

"I'm being told this baseline is not right or realistic," said Agriculture Committee Chairman Collin Peterson, who asked if additional studies were available. "We'd be more comfortable if we had another baseline," he said.

If offsets are not widely available, "the market would likely be restricted to increased demand for biofuel and bioelectricity feedstocks," said Bruce McCarl, an agricultural economist at Texas A&M University.

A University of Tennessee analysis released in mid-November says bioenergy crops could be part of a cap-and-trade system and not shift any cropland to forests.

Agricultural economist Dermot Hayes said he and colleagues at Iowa State University arrived at similar figures as EPA for possible conversion of farmland to trees. The Iowa State 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 said, 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." If crop prices rise enough, he told reporters, landowners might take idled cropland out of the 32 million-acre Conservation Reserve.

(Editing by Christian Wiessner)

FILED UNDER: