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Climate change: Actual realized costs
and promise of future benefits

By Reece Langley
VP, Government Affairs
USA Rice Federation
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The debate over climate change or “cap and trade” legislation has been a prominent fixture in the 111th Congress. The U.S. House of Representatives quickly pushed through a bill last summer – the American Clean Energy and Security Act of 2009 (H.R. 2454).

The USA Rice Federation opposed this bill because of the negative economic impact it is expected to bring to both rice farmers and agricultural processors – resulting in higher production costs for the farmers and higher energy costs for processors.

House Agriculture Committee chairman Collin Peterson (D-MN) worked to include several agriculture-related provisions in the bill to help lessen the potential impacts on the agriculture sector. While supportive of those efforts, the USA Rice Federation recognized that even with the im-provements, the bill was still a bad deal for agriculture in general and for the rice industry in particular.

Expect production cost increase
Economic analysis conducted on the House-passed bill shows an expected increase in production costs for rice of $70-150/acre. This is largely due to higher fuel, fertilizer and other energy-related inputs. Rice is one of the hardest hit crops due to the nature of rice production where the crop is flood irrigated during the growing season.

Not only is rice hard hit on the cost side, there are currently few, if any, economically viable opportunities for rice to benefit under a “cap and trade” program by generating emissions offsets that can be sold into an emissions credit market.

In fact, the Agriculture and Food Policy Center at Texas A&M recently conducted an analysis of the impacts of H.R. 2454 on 14 representative rice farms across the rice-growing regions. All of the farms experienced higher costs, lower net income and a reduction in net worth.

Bill goes to the Senate
The focus on climate change has now turned to the Senate, where Senators Barbara Boxer (D-CA) and John Kerry (D-MA) are the lead sponsors of a climate-change bill recently introduced – the Clean Energy Jobs and American Power Act (S. 1733).

With debate over health care legislation raging on, the outlook for passage of any movement on a climate-change bill in the near future is not likely.

And there is no indication that any climate-change bill is near the 60 votes necessary for passage in the Senate. In fact, estimates are that most Republicans and possibly as many as 12 to 14 Democrats would oppose climate-change legislation at this time.

Were a climate-change bill to advance in the Senate, there are several key provisions that must be included so that the agriculture sector is not devastated. These include, but are not limited to, an exemption from the greenhouse gas emission reduction requirements of the climate-change legislation and the underlying Clean Air Act; a definition for “agriculture sector” relative to the exemption that includes production through processing; and the establishment of a program using the funds and authorities of the Commodity Credit Corporation to compensate producers for increased input costs.

Short-term action not likely
Other provisions that would make a potential climate-change bill more palatable to production agriculture include increased funding for research programs and activities by USDA and the land grant university system to develop improved production and management practices and technologies to help agriculture sequester greenhouse gas emissions. Also, the establishment of a robust agricultural offset program that is flexible and run entirely by USDA, not the EPA.
While Sens. Boxer and Kerry continue to pursue a climate-change bill, all indications are that the Senate will not take any action on a bill at this time, particularly in advance of the mid-term elections. There will be more hearings on the issue in a number of committees, but, as mentioned earlier, there is little indication that any climate-change bill is near the 60 votes necessary for passage in the Senate.

In the meantime, USA Rice will continue to work against passage of a climate-change bill given the unacceptable economic harm it would bring to our industry.

For more about USA rice programs, visit www.usarice.com.

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