Much has been said in opposition to the cap and trade climate legislation that is currently on the Senate’s plate. Opponents have argued repeatedly that the legislation will do nothing but increase the cost of energy, which will force companies send jobs over seas, where labor is cheaper, in order to keep up with production demands. Senator Kit Bond (R-Missouri) even went as far as to call the Waxman-Markey Bill “a pig in a poke.”
A few days ago another Senator challenged the bill, and the U.S. Department of Agriculture (USDA). Senator Mike Johanns (R-Nebraska) said, “USDA knows what cap and trade will do to energy prices…Let me repeat that: USDA says energy prices will increase, but they think the opportunities from climate legislation will likely outweigh the costs.”
So we’ve heard from opponents. But what about proponents? What does the USDA have to say for itself?
Vilsack explained to the committee that the report reveals economic costs and benefits to agriculture from the cap and trade legislation. The report is not shy in admitting that energy costs will rise. Because of the increase in energy costs, the report mentions in its executive summary that “the impact on net farm income is less than a 1% decrease” in the short term (2012-2018). And that over the medium (2027-2033) and long term (2042-2048), costs to agriculture rise but remain modest (3.5% and 7.2% decreases in net farm income, respectively).
So opponents were right. The climate bill does increase the cost of energy, which will hurt those in the agriculture industry. Profits will be lost, which is something that no one wants to hear (especially not in the midst of an economic crisis, where money is hard to come by as is).
But don’t jump the gun. The report also analyzes the benefits to agriculture due to the legislation. And “our analysis demonstrates that the economic opportunities for farmers and ranchers can potentially outpace – perhaps significantly – the costs from climate legislation,” said Vilsack.
And, while an increase in energy costs is definitely going to effect the industry, not all the effects are negative. The report lifts the 1970s as an example, emphasizing the fact that high energy costs led to increased energy efficiency in all sectors of the U.S. economy.
Through the use of offset markets, the USDA claims that farmers and ranchers would be able to mitigate – and even overcome – the decreases in net income.
“Let me be clear about the implications of this analysis,” said Vilsack, “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.”
The arguments are there, and they are real. One side calls the bill “a pig in a poke” while the other side calls the bill a salvation.
“So, [farmers do] better under the House passed climate legislation than without it,” said Vilsack.
And we’ll just have to wait and see.
Photo Credit: Todd Ehlers via flickr under Creative Commons License