Thursday, July 23, 2009

New USDA study shows ACES is great for US farmers, Heritage Foundation sulks in corner

One of the concerns certain members of the House of Representatives had before voting on the American Clean Energy & Security Act was how it would impact our nation's farmers. Groups such as the Exxon-backed Heritage Foundation argued that ACES would lead to the economic equivalent of a "Permanent Drought Season." They claimed that farm incomes could drop by as much as 94% as a result of the bill in an attempt to strike fear in the hearts of American rural interests.

But have no fear: the numbers would be a lot more frightening if they were actually right.

During his testimony in front of the Senate Agriculture Committee yesterday, Agriculture Secretary Tom Vilsack discussed the findings of a new US Department of Agriculture study demonstrating that the Heritage numbers appear to be a bit off, to say the least (from Mr. Vilsack's prepared opening statement, via The Wonk Room):
HR 2454’s creation of an offset market will create opportunities for the agricultural sector. In particular, our analysis indicates that annual net returns to farmers range from about $1 billion per year in 2015-20 to almost $15-20 billion in 2040-50, not accounting for the costs of implementing offset practices.

So, let me be clear about the implications of this analysis. In the short term, the economic benefits to agriculture from cap and trade legislation will likely outweigh the costs. In the long term, the economic benefits from offsets markets easily trump increased input costs from cap and trade legislation. Let me also note that we believe these figures are conservative because we aren’t able to model the types of technological change that are very likely to help farmers produce more crops and livestock with fewer inputs.
We should also note that these findings are rather conservative in their estimates, in that they don't take into account numerous other areas farmers will see benefits (via The Wonk Room):
Furthermore, not only does the USDA analysis not take into account the rewards of technology innovation, demand for biofuels, or opportunities for wind farms, it fails to account for the costs of inaction. Global warming has already hit American farmers hard, leading to reduced crop yields from droughts, floods, extreme storms, heat waves, seasonal shifts, and increased pestilence. In coming years, these disasters for farmers are expected to increase dramatically if no action is taken to address global warming.
If a conservative USDA study isn't enough for you, the Brookings Institute similarly found that ACES' impact on agriculture would be minimal.

If you still aren't satisfied with a USDA study AND the Brookings Institute's findings, Laurie Johnson over at NRDC's Switchboard does an excellent job deconstructing the Heritage Foundation's so called "study." I guess the Heritage folks forgot that not actually modeling the bill can make one's findings rather inaccurate:
So what's going on? It's pretty simple: the Heritage Foundation doesn't model the bill. Billions of dollars of allowance value going toward consumer relief, clean energy, adaptation, and other measures are ignored. There is little to no discussion of cost containment provisions, such as banking, the strategic reserve, and offsets.

[...]

Calling their study an analysis of the Waxman Markey bill, while not modeling any of its provisions and ignoring all the benefits of reducing dangerous pollution, may produce results that the Heritage Foundation likes, but it won't change the facts.
With that all said, we hope we can put to rest that false notion that America's farmers will be hurt by transitioning to a clean energy economy. The fact is, rural America stands to be one of the biggest beneficiaries from such legislation, gaining upwards of $20 billion a year. So we're sorry, Heritage Foundation, but last we checked, an extra $20 billion is hardly an economic "permanent drought season."