Sen. Chambliss Requests Data on the Impact of Cap and Trade on Agriculture Economy

U.S. Senator Saxby Chambliss (R-Ga.), Ranking Member of the Senate Agriculture Committee, today announced he sent a letter to Environmental Protection Agency (EPA) Administrator Lisa Jackson this week regarding the impacts the climate change bill will have on the agriculture economy. In the letter, Sen. Chambliss requested the EPA provide the Senate Agriculture Committee with all comprehensive data pertaining to the impact the American Clean Energy and Security Act of 2009, (H.R. 2454), will have on the forest and agriculture sector. The House of Representatives narrowly passed the measure last month 219-212.

Additionally, Sen. Chambliss sent a similar letter to Dr. Joseph Glauber, U.S. Department of Agriculture Chief Economist, requesting the Department provide the Committee with an economic analysis of the legislation. Sen. Chambliss said as the debate on the bill moves to the Senate, it is important members understand the costs producers, consumers and others will bear as a result of H.R. 2454.

Copies of the letters are below:

The Honorable Lisa P. Jackson
Administrator
Environmental Protection Agency
Ariel Rios Building
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460

Dear Administrator Jackson:

Last month the House of Representatives passed H.R. 2454, the American Clean Energy and Security Act of 2009. Among its provisions, the bill creates a “cap and trade” regime to control greenhouse gas (GHG) emissions by increasing the cost of fossil fuels and incentivizing alternative forms of energy. At the same time, the bill defines the parameters of an offset regime for the agricultural sector. As the debate on climate change legislation moves to the Senate, we require a thorough understanding regarding the impacts of H.R. 2454 on the agricultural economy.

As you know, the Environmental Protection Agency (EPA) has done significant analysis and contracted with Professor Bruce McCarl at Texas A&M University to study the impact on the forest and agriculture sector. While the research completed until now has been useful, Dr. McCarl’s model is not publically available. In order to ensure transparency and a thorough understanding of the impacts of H.R. 2454 on the forest and agriculture sector, I respectfully request EPA provide the FASOM-GHG model along with all data and supporting information including assumptions and results to the Committee. The insight and information derived from a detailed reading of the model will allow the Committee to draft legislation that fully takes into account the costs and benefits available to the forest and agriculture sector.

Thank you for your prompt attention to this request.

Very truly yours,

Saxby Chambliss
Ranking Republican Member

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Dr. Joseph Glauber
Chief Economist
United States Department of Agriculture
Jamie L. Whitten Building, Room 112-A
Washington, D.C. 20250-3800

Dear Dr. Glauber:

Last month the House of Representatives passed H.R. 2454, the American Clean Energy and Security Act of 2009. Among its provisions, the bill creates a “cap and trade” regime to control greenhouse gas (GHG) emissions by increasing the cost of fossil fuels and incentivizing alternative forms of energy. At the same time, the bill defines the parameters of an offset regime for the agricultural sector. As the debate on climate change legislation moves to the Senate, we require a thorough understanding regarding the impacts of H.R. 2454 on the agricultural economy.

It is important the Committee and Members of the Senate understand the costs that agricultural producers, consumers, and others will ultimately bear as a result of this legislation. Therefore, I respectfully request your office provide the Committee an economic analysis of H.R. 2454 with specific attention to the questions noted below.

Since agriculture and food production is an energy intensive industry, inputs such as transportation fuel, fertilizer, seed, processing and packaging of food products will have substantial impacts on the bottom line of farms and downstream operators. We need to understand the additive effect of increased energy costs at each stage of the food chain and the distribution of costs from “field to fork.” Since agricultural production is diverse across the United States, the study should provide a regional summary as well as a cost of production analysis by major crop (i.e. cotton, rice, corn, soybean, wheat and specialty crops). The livestock sector will face challenges as well. The study should also provide a discussion regarding the changes in the costs of production and retail prices for the cattle, swine and poultry sectors.

There is little doubt H.R. 2454 will impact the cost of food for U.S. consumers. Your analysis should calculate the change in the price of commodities and ultimately food expenditures by consumers if H.R. 2454 were enacted into law. The study should provide the annual increase in food costs as reflected in 2009 dollars by calculating increases in the consumer price index for food (CPI-Food) over the life of the bill (through 2050) and aggregate at the retail market basket level. If possible, the analysis should compare the change in average cost per American household for a fixed market basket of goods as a result of the legislation.

There is significant attention to the potential of agricultural lands to contribute to a future offset market and carbon sequestration. This is a promising opportunity for our farmers and ranchers and the study should quantify the potential for pasture, crop and private forest land to participate in an offset market. Specifically, the study should discuss the impact on cropping patterns, overall acreage, traditional crop rotations and conservation practices associated with an offset market. Since the price of carbon will drive new production decisions, the study should analyze the impacts and acreage shifts at different carbon prices (i.e. high, medium, low).

A potentially important piece of H.R. 2454 is the renewable electricity standard (RES) included in Title I. Both EPA and the Energy Information Administration (EIA) project biomass and wind to be an important new energy sources in this policy. Yet, U.S. land resources are finite. To the extent practicable, this piece should analyze the potential role of U.S. agricultural producers and foresters to satisfy the demands of the RES and the potential land-use changes associated with this standard and other new alternative energy policies including the renewable fuel standard.

Finally, often times, real life events rarely follow the assumptions and predictions utilized in various economic models. It would be useful for your analysis to include scenarios where various efficiency, alternative energy (i.e. nuclear) and emissions targets (among others set forth in the bill) are not met per H.R. 2454. An outstanding concern among the agricultural community is the international competitiveness of U.S. products in the world market if India and China do not participate in a carbon reduction program. The Committee would find it helpful if your analysis addressed this issue as well.

Thank you for your prompt attention to this request.

Very truly yours,

Saxby Chambliss
Ranking Republican Member