Western Farmers Likely to Benefit from Climate Legislation

Farmers in Arizona, Colorado and New Mexico are likely to benefit from federal climate change legislation, according to a comprehensive study released by the American Farmland Trust (AFT). 

The advocate group sponsored an analysis of existing data and cost-benefit studies to assess the effects of climate change legislation on the agricultural economies of those states.

“Overall, the research suggests that while the legislation would challenge the agriculture sector in these states, there are improved revenues from higher crop prices, new bio-fuel markets, carbon-sequestration and offsets,” says Dr. Brian Hurd, New Mexico State University, and co- author of the study. And co-author Dr George Frisvold of the University of Arizona notes that “only small changes are expected in regional land use as some farmers can benefit from reducing tillage and putting land into conservation reserve and grass.”

“It’s clear that there will be a relative rise in energy and fertilizer costs. But we were surprised to learn that provisions in the legislation would likely limit fertilizer cost increases to between 0.3 % and 2% by 2020, and that estimates from a variety of studies show energy cost increases of between 4% and 13% in 2020. Although modest increases, it’s always a factor for farmers who operate on thin profit margins,” adds Dr. Chris Goemans a co-author from Colorado State University. “However, in many cases, the higher commodity prices that are estimated by many studies will contribute to farm revenues and could largely offset these projected cost increases.”

“The Rocky Mountain region is quite diverse and has unique agricultural characteristics,” says Anita Zurbrugg, Assistant Director of AFT’s Center for Agriculture in the Environment. “We wanted to learn how the agriculture sector might fare economically under various legislative proposals to limit greenhouse gasses, and to learn more about the potential for agriculture to earn new sources of income for providing carbon offsets or renewable energy.”

In the western states, cattle and dairies are important segments of the agricultural economy. “Higher feed and energy prices will pose challenges,” Zurbrugg added. “Traditional ranchers, or those with significant feeding costs, could be the hardest hit–while dairies and concentrated feeding operations may be able to use methane digester technologies to generate income two ways: through carbon offsets and electricity generation.”

Zurbrugg noted that many producers perceive cost increases to be much more certain than revenue increases. “The study shows that the expected cost increases are well within the range of recent energy-price variability. I think this may give farmers some measure of confidence that we’re looking at a timeframe that should allow them time to adjust to the increases.”

A team of researchers from New Mexico State University, the University of Arizona and Colorado State University conducted the analysis collaboratively. They assessed eight existing studies and relevant reports to consider the implications of climate change legislation, such as the American Clean Energy and Security Act of 2009 (ACES), on the region’s agricultural producers, and also looked at potential land use changes and carbon offset potential.

The key findings of the analysis include:

• Energy costs are expected to rise by as little as 4% or as much as 13% by 2020 while fertilizer cost increases range only between 0.3% and 2% because of rebates to manufacturers of Energy Intensive Trade Exposed Entities (EITEs) and projected decreases in natural gas prices.
• Improved revenues are expected from higher crop prices, new bio-fuel crop markets and opportunities to sequester carbon and gain offset revenue.
• While higher commodity prices along with new production and revenue opportunities will generally benefit farmers and possibly more than offset rising costs in this region, resulting feed price increases could adversely affect many livestock and dairy producers.
• Dairy producers and concentrated livestock feeding operations may be able to generate additional income by capturing and converting methane to electricity, thus providing not only revenue through carbon-offset markets but also through electricity sales.
• Even in cases where cost increases are not offset, expected increases are within the range of recent energy-price variability.
• On balance, preliminary findings suggest the possibility for increases in state-level, net farm income of 1.2% in Arizona, 2.9% in Colorado and 4.1 % in New Mexico in 2020, based on expected patterns of cost and price changes.
• Evidence suggests only small and limited changes in land use with some potential to sequester carbon from reduced tillage and conversion of cropland to grassland, as well as some limited capacity for afforestation by converting irrigated cropland to fruit and nut orchards.

“Climate and clean energy legislation has waxed and waned and there have been a number of economic studies,” adds Zurbrugg. “We believe it is important to have a well respected third-party like this team to review the studies and look at the various legislative and economic scenarios. Then we can better understand costs and opportunities and find good policy options.”

“Farmers and ranchers have a great deal at stake in federal legislation,” says Jon Scholl, AFT President. “Agriculture can play an important role in helping reduce and mitigate GHG, and if no clean energy bill is passed, the EPA is mandated by the Supreme Court to enact regulations under the Clean Air Act, which will affect agriculture. And they are implementing those regulations now. Regulations without opportunities only brings costs to producers.”

Scholl also points out that the impacts of climate change–changes in weather, some extreme and volatile–on agriculture are projected to be significant.

A copy of the study is available to download on the AFT website at the link below.