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Climate Change Legislation & Agriculture 2010 Iowa Turkey Federation Meetings Department of Economics GHG Emission Rules • Greenhouse gas rules are coming – Whether through legislation or regulation • EPA has the authority to regulate GHGs – Via Clean Air Act • However, Congress would like to set the rules – H.R. 2454, American Clean Energy and Security Act of 2009, • Passed in U.S. House of Rep. on 6/26/09, 219-212 – S. 1733, Clean Energy Jobs and American Power Act • Introduced 9/30/09, In committee (actually, six committees) Department of Economics Agricultural GHG Emissions Soil fertilization Belching cows Department of Economics Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007 Climate Change Legislation American Clean Energy and Security Act of 2009 (H.R. 2454) • Requires utilities to supply an increasing percentage of their demand from a combination of energy efficiency savings and renewable energy (20% in 2021-2039). • Provides for issuing, trading, banking, retiring, and verifying renewable electricity credits. • Establishes targets to cap and reduce greenhouse gas (GHG) emissions, annually, so that GHG emissions from capped sources are reduced to 97% of 2005 levels by 2012 and 17% by 2050; and establish a federal GHG registry. • Provides for trading, banking and borrowing, auctioning, selling, exchanging, transferring, holding, or retiring emission allowances. Source: Congressional Research Service Department of Economics Key Assumptions • The US economy was already on a slow growth path for energy consumption, the analysis assumes that this continues • Coal fired plants largely shut down and are replaced by nuclear • Enormous reliance on international and domestic offsets • If we cannot build the large number of nuclear plants or find the international offsets, then the price of carbon will increase at about twice the reported rate Source: ISU, Dermot Hayes presentation, Oct. 2009 Department of Economics GHG Emissions & Abatements Source: EPA Analysis of H.R. 2454, June 23, 2009 Department of Economics Energy Sources Source: EPA Analysis of H.R. 2454, June 23, 2009 Department of Economics Shifting Land Patterns Department of Economics Source: EPA, “Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture”, Nov. 2005 International Offsets • Must be a developing country that is a member of an emissions reduction agreement with the United States • Must have the technical capacity to monitor, measure, report and verify forest carbon fluxes resulting from deforestation • Must have the capacity to reduce emissions from deforestation, including strong forest governance • The international offset project itself must be shown to result in permanent verifiable reductions that are net of any leakage measures Department of Economics Map Source: CIA World Factbook data, Wikimedia Commons Carbon Prices Increase Over Time Source: EPA Analysis of H.R. 2454, June 23, 2009 Department of Economics Prices Are Sensitive to Offsets Source: EPA Analysis of H.R. 2454, June 23, 2009 Department of Economics Impacts on an Average Household Source: EPA Analysis of H.R. 2454, June 23, 2009 Department of Economics Climate Change Legislation Analysis Source: USDA, Office of Chief Economist, “The Impacts of Department of Economics the American Clean Energy and Security Act of 2009 On U.S. Agriculture” Climate Change Legislation Analysis Source: USDA, Office of Chief Economist, “The Impacts of Department of Economics the American Clean Energy and Security Act of 2009 On U.S. Agriculture” Climate Change Legislation Analysis Source: USDA, Office of Chief Economist, “The Impacts of Department of Economics the American Clean Energy and Security Act of 2009 On U.S. Agriculture” Concluding Thoughts • Crop prices and feed costs will likely track carbon prices • Land conversion will benefit landowners through higher rents • Potential offsets from the turkey industry: Tree planting and on-farm “green” energy generation • Agriculture will experience the benefits and the costs of climate change legislation Department of Economics Thank you for your time! Department of Economics