The Wonk Room

Brookings: Fears That Cap And Trade Will Hurt Farmers Are Baseless

A new economic study reveals that concerns a cap on global warming pollution could hurt American agriculture are unfounded. As the Waxman-Markey green economy legislation (H.R. 2454) moves toward passage in the House of Representatives, the farm lobby and rural officials have questioned the bill’s costs to farmers. Last week, Rep. Frank Lucas (R-OK), the ranking member of the House Committee on Agriculture, cried that farmers are “a prime target for a national energy tax“:

From higher energy costs to lost jobs to higher food prices, cap-and-trade promises to cap our incomes, our livelihoods, and our standard of living, while it trades away American jobs and opportunities. . . . Whether it’s the fuel in the tractor, the fertilizer for the crops or the delivery of food to the grocery store, agriculture uses a great deal of energy throughout production. On average, 65 percent of farmers’ variable input costs are fuel, electricity, fertilizer, and chemicals. Even a small increase in the operating costs for our producers will hurt American agriculture.

Yesterday, the Brookings Institute released the topline results of an economic analysis of cap-and-trade systems, with sectoral impacts. This study models the worst-case economic scenario for cap-and-trade programs, modeling the impact of an inflexible system that does not include offsets, incentives for renewable energy development, or other cost-control measures. Even without the inclusion of an offset program to allow the agriculture sector to benefit from carbon market, their analysis found the impact on agriculture to be minimal:

Chart compiled by the Wonk Room from Brookings Institute data. The “Obama” and “Waxman-Markey” models do not include banking and borrowing of pollution allowances, unlike the actual Waxman-Markey legislation. The “hotelling” models include banking and borrowing, but no models include agricultural offsets.

Not only will the transition to a green economy not hurt America’s farmers, but it will save their livelihoods from the increasing threat of climate disruption, which impact the Brookings study did not model. In reality, the only sectors that face measurable pressure from a cap on carbon pollution are the coal and oil industries, who have enjoyed extreme profits at the expense of the rest of the economy — and yet have failed to make any real investments in clean energy.