Climate bill a farm income boost, USDA estimates – 7/2009

U.S. farmers and foresters could earn more money from carbon contracts than they pay in higher costs from legislation to control greenhouse gases, the Agriculture Department estimated on Wednesday.

In the near term, most of the money would go to people who plant trees to lock carbon in the soil or enroll woodlands as carbon sinks. Relatively small amounts would be generated by changes in tillage or crops.

USDA's "preliminary analysis" was one of the first attempts at a broad-spectrum examination of the House-passed climate bill. Most of its 13 pages were devoted to grains, cotton and soybeans. Limited space went to livestock and none to fruits and vegetables.

Skeptics like the American Farm Bureau Federation say climate legislation will drive up sharply the cost of farm fuel, fertilizer and pesticides. A carbon offset market will not benefit all farmers or all parts of the country, it says.

Agriculture Secretary Tom Vilsack said the House climate bill would increase farm expenses by $700 million, or 0.3 percent, from 2012-18. That would be offset by revenue from a carbon offset market, estimated by USDA at $1 billion a year in the near term and $15 billion in 2040. EPA administrator Lisa Jackson said offsets would be worth nearly $3 billion a year in 2020 for farms, ranches and forests.

"In the short term, the economic benefits to agriculture from cap and trade legislation will likely outweigh the costs," said Vilsack. "In the long term, the economic benefits from offsets markets easily trump increased input costs from cap and trade legislation."

Beyond that, said Vilsack, is income from biofuels, worth a net return of at least $600 million a year.

Two senators from the arid Great Plains, Republicans Mike Johanns of Nebraska and Pat Roberts of Kansas, asked Vilsack and Jackson, without success, how much pasture and crop land would shift into trees if a carbon offset market is created. Roberts suggested 40 million acres might be converted.

"There is possibly the idea many farmers will choose to do that (plant trees)," said Jackson. "We don't have a number." Vilsack said the tree-planting may be focused on land already idled in the Conservation Reserve or on poor-yielding land and that U.S. crop output would not suffer.

"Unless you can quantify this, you can't sell the plan," said Johanns. Most of the carbon-control income would go to forestry, he said, while row-crop farmers will face higher energy costs with little income to offset it.

USDA's report said there could be a small decline in cropland as forestland expands, which would result in higher livestock feed costs, but provided no details.

Democrat Ben Nelson, of Nebraska, and Johanns described hostile reaction among voters to the House-passed climate bill. At a community parade, said Nelson, people shouted "No to cap and trade."

Agriculture Committee chairman Tom Harkin said the Senate climate bill should include an "off ramp" to relax U.S. controls on greenhouse gases if other nations fail to act against climate change. He said he would give other nations three to five years to get on board.

"We can't do it all by ourselves," said Harkin.

Climate change poses the threat of more frequent droughts in the U.S. Midwest and Plains and lower livestock production in the U.S. Southeast due to heat stress, said EPA's Jackson.

The EPA estimates U.S. cropland accounts for 6 percent of greenhouse gas emissions but growing vegetation removes 1 billion tons of carbon dioxide from the atmosphere.

(Editing by Christian Wiessner)