The Foundry Blog – Heritage Foundation
Posted by Nick Loris
June 22, 2009

Click here to view this at The Foundry

"I will go along with this, even though I am somewhat skeptical, if I can be convinced that this is going to work, that it’s practical, that it makes sense. That’s where I am coming from. I am not carrying water for anybody, I’m just trying to make sense out of this.”

The “this [1]” Representative Collin Peterson, House Agriculture Committee chairman, is referring to is cap and trade, with the Waxman-Markey bill currently making its way through the House. It’s something Denver Post columnist David Harsanyi recently called “preposterously convoluted [2].” Congressman Peterson has a right to be skeptical because this is true especially for farmers.

Farmers use a lot of electricity, a lot of diesel fuel, and a lot of natural gas-derived chemicals and fertilizers to grow crops and maintain their farms. So it shouldn’t be surprising that a cap and trade program that artificially drives up the cost of energy will unfavorably affect farmers. What may be surprising is how unfavorable these effects are, causing [3]expected farm income to drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28%, 60% and 94%, respectively.

To compensate, politicians are promising farmers more income generated through offsets. If a company believes it’s cheaper not to reduce its carbon footprint, it can pay someone else to do so. For instance, a company could pay a logger not to cut down trees, or they could pay someone to grow trees since trees absorb carbon. (The Onion lays it out nicely here [4].) It’s just as fraudulent [5]and manipulative as The Onion claims it to be. A country can build a cleaner coal plant saying they were going to build a dirtier one while cashing a check from a developed country for the alleged carbon offset.

Proponents of cap and trade trying to push the bill through Congress are touting farmers as the beneficiaries of a carbon offset program because farmers can use cleaner technology, reduce nitrous oxide emissions, or simply not grow crops. Rex Woolen, a corn and soybean farmer, chose not to grow part of his crops, thereby reducing his carbon footprint. He said, “They called me a tree-hugger. Then I showed them my first check.”

But because so many can take advantage of the carbon offset program, there will be little left for farmers. Page 60 [6]of the Environmental Protection Agency’s analysis of the Waxman-Markey cap and trade bill is projecting that most of the domestic offsets will come from forestry and growing trees. The little bit for “other ag” may add up to 15 million tons per year by 2035.

The Heritage Foundation’s Center for Data Analysis estimate that the allowance price (in 2009 dollars) will be just under $140/ton in 2035 (our last year of the model). So if “other ag” and “animal waste” add up to 15 million tons per year and the allowance price is $140, then the total offset revenue going to farmers is $2.1 billion—and that’s assuming no cost of creating the offset. Compare $2.1 billion in offset revenue to $29 billion of lost farm income (again after adjusting for inflation to 2009 dollars). Just this component of lost farm income is over ten times the offset revenue.

It’s not just farmers that lose out. Manufacturing, construction, wood products, machinery, electrical equipment, transportation, textiles, paper products, chemicals, plastics and rubber, and trade are all industries hit particularly hard. But no one feels it more than the consumer. Heritage analysis of the Waxman-Markey bill found that because of higher energy prices, the average per-family-of-four costs rise by $2,979 per year. In the year 2035 alone, the cost is $4,609. And the costs per family for the whole energy tax aggregated from 2012 to 2035 are $71,493. Over the 2012-2035 timeline, job losses average over 1.1 million. By 2035, a projected 2.5 million jobs are lost below the baseline (without a cap and trade bill).

The planet isn’t the big winner, either. Climatologists predict that Waxman-Markey will lower temperatures by only hundredths of a degree [7]in 2050 and no more than two-tenths of a degree at the end of the century.

If farmers in Vermont want to change their cows’ nutritional diets [8]to reduce the methane gas they produce, that’s their prerogative. But if Waxman-Markey becomes law, they won’t have any cows to feed. At least they’ll receive a carbon offset check.

Article printed from The Foundry: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/06/22/carbon-offset-program-won%e2%80%99t-offset-farmers%e2%80%99-lost-income-from-cap-and-trade/

URLs in this post:

[1] this: http://www.nytimes.com/gwire/2009/06/17/17greenwire-tough-negotiator-peterson-rocks-climate-debate-2199.html?pagewanted=2

[2] preposterously convoluted: http://www.denverpost.com/opinion/ci_12624650

[3] causing : http://blog.heritage.org/2009/06/09/for-farmers-cap-and-trade-is-a-permanent-drought-season/

[4] here: http://www.theonion.com/content/node/90883

[5] fraudulent : http://www.news.com.au/adelaidenow/story/0,22606,25623269-5006301,00.html

[6] Page 60 : http://www.epa.gov/climatechange/economics/pdfs/WM-Appendix.pdf

[7] by only hundredths of a degree : http://www.heritage.org/Research/EnergyandEnvironment/wm2450.cfm

[8] change their cows’ nutritional diets : http://www.shortnews.com/start.cfm?id=79258http://blog.heritage.org (click here to view at The Foundry)