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USDA Estimates Of Waxman-Markey’s Costs To Farmers Are Mostly Fertilizer

Posted By Ben Lieberman On July 23, 2009 @ 10:40 am In Energy | Comments Disabled

The Congressional Budget Office’s low-ball analysis [1] of the Waxman-Markey global warming bill’s costs allowed President Obama to claim that this bill would cost each household no more than a postage stamp per day. Now, a preliminary analysis by the US Department of Agriculture insists the news is even better for farmers – this bill will have negligible costs in the near term and might actually make them money over the long term.

The Heritage Foundation strongly disagrees, not to mention the American Farm Bureau Federation and most other farm groups. The reality is that farming is energy-intensive, and Waxman-Markey is a massive energy tax will deal a severe blow to that sector.

According to the Heritage analysis, higher diesel fuel, electricity, and natural gas-derived fertilizer costs would cut deeply into farm profits. They drop by 28 percent in 2012, the first year the bill’s provisions take effect, and average 57 percent lower over the life of the bill. And since the bill only affects the U.S., American farmers would be at a competitive disadvantage to other food-exporting nations, virtually all of whom have made clear that they would never impose Waxman-Markey-like energy price increases on their farmers.

Granted, the agricultural sector got a few benefits added as the bill worked its way through the House towards narrow passage (it awaits consideration in the Senate, probably beginning in September). For example, some farmers may get paid to plant trees or engage in farming practices that supposedly reduce greenhouse gas emissions. But these so-called offsets will return to farmers only a fraction of each dollar this measure cost them in the first place. Bob Stallman, Farm Bureau president, noted in recent Senate testimony that “revenue from offsets will defray only a portion of the increased input costs resulting from a cap-and-trade program, and not all of the costs.”

Like CBO, USDA downplayed or ignored many factors to come up with such a rosy outlook for agriculture under Waxman-Markey. For one thing, it used EPA’s estimates of energy costs increases, which are far lower than those of the Heritage Foundation and others. At least, USDA could have provided a more realistic range of energy cost increases rather than focus only on the low end. It also assumes that offsets will be both plentiful and highly profitable for a great many farmers, when in reality they will simply not be an economically viable cost-cutting option for many of them. The agency also ignores the impact of having to take many acres of productive land out of use in order to comply.

USDA also makes the far-fetched assumption that fertilizer costs won’t go up under Waxman-Markey. In contrast, a recent study by the University of Missouri calculates higher fertilizer costs for three selected Missouri farms ranging from $4,100 to $9,700 annually by 2020 and nearly three times that by 2050.

It should be noted that there’s another group who doesn’t believe Waxman-Markey would be cheap or easy for farmers and others – the bill’s supporters. All of them voted against measures to place cost caps in the bill that would essentially relax the provisions if the impact turned out to be higher than anticipated. Even they don’t have confidence that Waxman-Markey would be cheap.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/07/23/usda-estimates-of-waxman-markey%e2%80%99s-costs-to-farmers-are-mostly-fertilizer/

URLs in this post:

[1] low-ball analysis: http://blog.heritage.org http://www.heritage.org/Research/EnergyandEnvironment/wm2503.cfm

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