Thursday, December 31, 2009

Another Food Price Riser: Cap and Trade Laws

Apparently, under the new cap and trade legislation, money will be available for people who plant trees (to be paid for by industries who need to pollute). The net result: farm land taken out of production to grow trees, so food supply falls, leading price rises. It is also understood by all that increased fuel and fertilizer costs are baked into the legislation as well, which will also serve to drive up food costs.

Agriculture Secretary Tom Vilsack has ordered his staff to revise a computerized forecasting model that showed that climate legislation supported by President Obama would make planting trees more lucrative than producing food.

The latest Agriculture Department economic-impact study of the climate bill, which passed the House this summer, found that the legislation would profit farmers in the long term. But those profits would come mostly from higher crop prices as a result of the legislation's incentives to plant more forests and thus reduce the amount of land devoted to food-producing agriculture.

The legislation would give free emissions credits, known as offsets, to farmers and landowners who plant forests and adopt low-carbon farm and ranching practices. Farmers and ranchers could sell the credits to help major emitters of greenhouse gases comply with the legislation. That revenue would help the farmers deal with an expected rise in fuel and fertilizer costs.

Allison Specht, an economist at the American Farm Bureau Federation, said other studies have largely confirmed the results of the EPA and Agriculture Department analysis. "That's one of the realities of cap-and-trade legislation. The biggest bang for your buck for carbon credits is planting trees," she said.