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From Cap and Trade to Carbon Farming

The EPA’s decision to regulate carbon emissions, made on the eve of the Copenhagen climate summit, immediately incurred the wrath of industry. Businesses are petrified, as Iain Murray writes in The National Review online, that the agency will regulate “everything larger than a Gore-sized mansion.”
What are we to make of this fear?
There’s really no need to panic over the prospect of EPA dominance. Instead, industry should take the hint that’s it high time to push hard for climate-change legislation. Sure, the move by the EPA to exercise regulatory authority over carbon — a power granted to it by a 2007 Supreme Court ruling — was designed to give President Obama moral leverage in Denmark. But it also serves as a presidential prod to Congress to pass a climate-change law. No matter how you feel about global warming, greenhouse-gas emissions are not going to go unregulated. I suspect Obama ultimately nudged the EPA because he wants the U.S. Congress to do the regulating. Industry should support him on this.
But here’s the less obvious point: the EPA’s wake-up call — assuming it’s listened to — will have as much impact on agriculture as it does industry. Climate-change legislation — insofar as it hinges on cap-and-trade rather than a carbon tax — could be quite advantageous to agriculture.
Cap-and-trade is a policy that aims to limit greenhouse-gas emissions by requiring certain industries to buy carbon offsets if emissions exceed the legal cap. According to the House version of the bill (and almost certainly the Senate’s), agriculture would not be capped.
This matters primarily because farmers would be in a position to sell carbon offsets. Indeed, through a wide variety of carbon sequestering techniques that are achievable in most agricultural operations — things like preserving pastureland, improving soil quality, planting trees, transitioning to no-till farming, cultivating perennials, reducing fertilizer application, etc. — agriculture could significantly counteract the increasing costs of fuel and fertilizer that cap and trade would cause while improving a much-maligned agricultural environment. It could profit while going eco-correct.
Financial projections on this score are optimistic. Fred Yoder, former president of the National Corn Growers Association, claims that, with “a properly constructed system,” farm revenues could grow by as much as $13 billion a year. A recent study undertaken by the University of Tennessee’s Bio-Based Energy Analysis Group (and released in November by the 25x’25 Carbon Work Group) found that, even with the increased energy costs, farmers would see positive net returns on all major crops.
Commenting on these findings, Bart Ruth, chairman of 25x’25, explained, “The study has found that income from offsets and from market revenues is higher than any potential increase in input cost, including energy and fertilizer, if cap-and-trade is done right.”
If it’s done right. Agricultural interests would be well served to focus on this caveat as the Senate churns away at a bill. I don’t know a whole lot about how legislative sausage gets made, but I do know that a bill done right for agriculture will be a bill that protects cap-and-trade from EPA regulation, confirms the right of industry to buy offsets, and ensures that big agriculture will, as long as it is selling offsets, remain exempt from being capped.
The EPA’s aggressive dodge toward regulatory diktat frightens many because of the specter of unchecked power. It frightens me, however, because it threatens to deny agriculture this very real chance to do what critics have been asking it to do for decades: get greener. The EPA would not rely on cap and trade. Instead, it would rely on the Clean Air Act of 1970, thereby setting a carbon limit and fining anyone who exceeds it. Growers would not only find themselves in the same regulatory group as cars and coal-fired power plants, but they would be denied the financial incentive to become something that our farming forbears would have well understood: carbon farmers.