Climate Change Legislation & Agriculture 2010 Nebraska Beef Feedlot Roundtables 1

Climate Change Source: www.conservationreport.com

Climate Change Source: Congressional Budget Office

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)

U.S. GHG Emissions Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007

CO2 Emissions Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007

CH4 Emissions Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007

N2O Emissions Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007

GHG Emissions by Sector Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007

Agricultural GHG Emissions 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 (6% in 2012, 9.5% in 2014, 13% in 2016, 16.5% in 2018, and 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, 83% by 2020, 58% by 2030, 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

Climate Change Legislation Agriculture provisions in H.R. 2454 Provides some exemptions from the GHG emission reduction requirements for agriculture and forestry Provides incentive-based approach to GHG emission reduction/capture Allows USDA to help establish eligible GHG offset practices and review of those practices Shifts question on indirect-land-use to an independent panel for study with EPA and USDA to review in the future Allows for a specific exemption for livestock (enteric fermentation from ruminant animals) from uncapped emissions guidelines Source: Craig Raysor, Gillon & Associates, PLLC

Lots of Analysis The EPA has funded the development of several models that are capable of examining the impact of this bill and other similar bills The environmental economists who worked on these models are very well respected and the work is sound However, the only certainty in the bill is the limit on carbon, everything else is assumption driven Source: ISU, Dermot Hayes presentation, Oct. 2009

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

Energy Sources Source: EPA Analysis of H.R. 2454, June 23, 2009

GHG Emissions & Abatements Source: EPA Analysis of H.R. 2454, June 23, 2009

Domestic Offsets Implementing regulations not yet written Uncertainty about how the offsets would work in agriculture, particularly for conservation tillage, but the intention is clearly to use these offsets as a way to stimulate agricultural incomes Consideration of leakage is prohibited pending a study Heavy reliance on the growth of trees on pasture and crop land Source: ISU, Dermot Hayes presentation, Oct. 2009

Domestic Offsets Source: EPA Analysis of Waxman-Markey, April 20, 2009

Domestic Offsets Source: ISU, Dermot Hayes presentation, Oct. 2009

Shifting Land Patterns 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 a unilateral or multilateral 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 Source: ISU, Dermot Hayes presentation, Oct. 2009

Allowances 2030 2016 Source: Congressional Research Service, June 2009

Carbon Prices Increase Over Time Source: EPA Analysis of H.R. 2454, June 23, 2009

Prices Are Sensitive to Offsets Source: EPA Analysis of H.R. 2454, June 23, 2009

Energy Price Paths Source: EPA Analysis of H.R. 2454, June 23, 2009

Impacts on an Average Household Source: EPA Analysis of H.R. 2454, June 23, 2009

Comparison of Results Allowance Price Source: ISU, Dermot Hayes presentation, Oct. 2009

Climate Change Legislation Analysis Source: USDA, Office of Chief Economist, “The Impacts of 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 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 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 the American Clean Energy and Security Act of 2009 On U.S. Agriculture”

Concluding Thoughts The potential for cropland conversion points to higher crop prices and feed costs Crop prices and feed costs will likely track carbon prices Cropland and pasture conversion will benefit landowners through higher rents Agriculture will experience the benefits and the costs of climate change legislation

Thank you for your time! Any questions?