Yesterday's Senate Environment and Public Works (EPW) Committee hearing entitled "Economic Opportunities for Agriculture, Forestry Communities, and Others in Reducing Global Warming Pollution" provided another opportunity to take an honest look at the full picture of what ACESA, the House energy and climate bill, means for the agricultural community.
In a previous blog, I discussed the ways in which American farmers and ranchers are in a unique position to reap gains from the U.S. transition to a low-carbon economy, and how these gains outweigh increases in fossil energy costs. However, testimony from Bob Stallman, President of the American Farm Bureau Federation, and statements by Senator Kit Bond of Missouri show that the opposition continues to get the facts wrong and, more importantly, tell only half the story. (For a closer look at Senator Bond's convenient omissions, see my colleague Laurie Johnson's blog).
Any analysis of ACESA is fundamentally incomplete if it does not weigh the costs to farmers of higher energy prices against the benefits the bill will deliver in the form of incentives for increased energy efficiency, deployment of renewable energy sources and revenues from selling valuable carbon credits in the carbon market. Let's take these opportunities one by one and add some numbers.
Improvements in energy efficiency will reduce farmers' dependence on fossil fuels and increase their energy security. ACEEE estimates that on-farm energy efficiency measures could generate savings upwards of $1 billion annually. This means $450 in direct savings for an average 418 acre U.S. farm. To help with upfront implementation costs, ACESA offers farmers federal tax credits for energy efficiency upgrades.
The bill will also speed the development and deployment of renewable energy sources, making alternatives like solar, biogas, wind, and biomass competitive with fossil fuels, ushering in a new rural economy.
A major source of new farm revenue will come from the sale of agricultural residues such as corn stover for bioenergy production. A 2005 USDA study estimated that 75 million dry tons of corn stover could be harvested sustainably from those U.S. production acres planted with corn. At a market price of $50 per dry ton, this translates to roughly $2.85 billion in annual net profits, or roughly $13,000 a year for an average-sized farm growing corn.
Leasing land for wind turbines offers farmers and other landowners a lucrative new source of income at no additional cost. If 50-75 acres are required per wind turbine, an average U.S. farm of 418 acres can host between 5 and 6 turbines. From the Wind Powering America program (the Department of Energy's initiative to spur wind development in rural areas), landowners typically get 2%-4% of gross turbine revenue, or about $2000-$4000 per turbine. This translates into roughly $10,000-24,000 in additional annual revenues for a participating average-sized farm.
By harnessing renewable energy readily available on the farm-through solar panels on surfaces like the roofs of farm homes and livestock barns and biogas recovery systems on large U.S. livestock farms-farmers and ranchers can also avoid any increases in electricity costs, either by locking in today's business-as-usual rates or offsetting part of their energy use through on-farm production. In 2020, this could save the average farm roughly $150 in electricity costs.
Under cap and trade, biogas recovery systems that capture and flare livestock methane emissions also offer farmers a direct source of revenue from the sale of offsets, along with opportunities to sequester additional soil carbon through changes to tillage practices and reductions in nitrous oxide emissions from fertilizer application. In 2020, the EPA estimates the agricultural sector had the potential to generate 21-25 MtCO2e of offsets with a total market value of $530-744 million or roughly $270-$381 in additional income for the average farm.
Together, this diversification of energy sources and income on the farm will help our farmers continue to provide the food we all depend on, while also creating jobs and improving our national energy security. For a full analysis of what this new rural economy will mean for Senator Bond's home state of Missouri, see NRDC's Missouri state profile. Farmers should look for opportunity in clean energy and climate solutions rather than listening to messengers that are only telling part of the story.
For a more detailed analysis of opportunities for the agricultural sector under ACESA, see Opportunities for Agriculture: ACES Legislation Will Bring New Energy and Income to America's Farmers.