Department of Economics 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, –S. 1733, Clean Energy Jobs and American Power Act Introduced 9/30/09, In committee (actually, six committees)

Department of Economics Agricultural GHG Emissions Source: EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: Belching cows Soil fertilization

Department of Economics Climate Change Legislation Source: Congressional Research Service 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 ). 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.

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 Source: EPA, “Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture”, Nov. 2005

Department of Economics 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 Map Source: CIA World Factbook data, Wikimedia Commons

Department of Economics 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 the American Clean Energy and Security Act of 2009 On U.S. Agriculture”

Department of Economics 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”

Department of Economics 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”

Department of Economics 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!