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North Dakota ag commissioner calls for study of effects of cap and trade on state's farmers

North Dakota Agriculture Commissioner Doug Goehring has commissioned a broad-based study of the possible economic consequences to the state's farmers if a national carbon cap-and-trade policy is implemented as part of the climate change legislati...

North Dakota Agriculture Commissioner Doug Goehring has commissioned a broad-based study of the possible economic consequences to the state's farmers if a national carbon cap-and-trade policy is implemented as part of the climate change legislation now working its way through Congress.

"There's a lot of unknowns," he says. "That was the reason I asked Dr. Won Koo, at the Centers for Agricultural Policy and Trade Studies at NDSU, to look at an economic impact study."

Goehring recently attended a meeting of the National Association of State Departments of Agriculture in Montgomery, Ala., to discuss issues and policies that affect agriculture. There, he says he found it interesting to learn of other ag leaders' positions regarding the climate change legislation now before Congress.

"I did not know what the feeling was going to be across the country concerning climate change legislation, because I think there's this feeling that people may not be aware of all the consequences of what would happen in these situations," he says.

Trickle-down costs

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There are indeed open questions about how the legislation could affect the agricultural industry, particularly with respect to overall energy usage.

"You're going to be looking at putting an assessment or a tax on the energy sector, whether it's going to be at coal, oil or gas," Goehring says. "That gets passed on, right on down the line."

He also points out the expected additional costs to manufacturers of products that support agriculture. Everything from fertilizers and pesticides to tractors and tractor parts could cost more, he says.

"Then there's the transportation aspect, which means for agriculture, transportation costs from the farm gate to wherever our market is. It hits a rail or it goes on a barge. If it goes to a processor, there's going to be increased cost there," he says. "There's transportation of supplies back to us, there's transportation of parts and equipment that come back to us."

Offsetting legislation

Goehring is concerned about what affect, should the new legislation assesses taxes in the energy sector, it would have on agriculture.

"No one seems to have a model that completely spells out: 'Here are the costs to agriculture,'" he says.

One of the most talked-about possibilities on the plus side for agriculture in the environmental legislation concerns a carbon cap-and-trade policy. Under it, companies that emit more greenhouse gases than the cap allows would have to reduce them or purchase offsets from those who can store carbon. These "suppliers" -- farmers and ranchers -- earn credits for the carbon they sequester from the atmosphere, which in turn are sold to the gas-emitting companies in the form of offsets. The offsets are used to balance their greenhouse gas books.

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Farmers and ranchers in some states already are earning $1 to $7 for each ton of carbon they can keep in the soil. Some experts contend that if a national cap-and-trade policy is instituted, stored carbon prices could reach $30 or $40 per ton.

To qualify as a carbon credit supplier, farmers are required to commit to five years of carbon sequestration. Goehring suggests that programs of this type, if made national, would not be equally advantageous for all farmers.

"The type of program that exists to participate in a carbon trade program is that there is a prescribed method of agricultural practices," he says. "In other words, you have to be a no-till farmer."

In North Dakota, Goehring sees the western part of the state as being more able to use best management practices with no-till farming, but doubts it would be the same in the eastern half of the state, where light tillage and deep tillage are common techniques used to maintain soil health.

Information first

The commissioner, himself a no-till farmer in central North Dakota, says tillage practices are common throughout the Red River Valley and on into the Corn Belt.

To him, this begs the question: "What do we do about the other 87 (percent) or 92 percent of the farmers in the United States that, because they have some type of tillage operation at some point in time in a five-year period, would become ineligible?"

Goehring says some of the commodity groups are "livid" about carbon cap and trade. But before anyone locks in any policy, he wants to be sure they have all the data he can get in front of them.

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"That was the reason I had asked Dr. Koo to do the study," he says. "First of all, let's find out what those economic impacts would be to our industry and then determine how we would move forward or respond to that."

Koo is conducting the study now and is expected to have a completed report in several weeks.

"He had some preliminary stuff when I talked to him last week, but he will not be making a full presentation on this until November," Goehring says.

He anticipates that, once the report is complete, he would invite representatives of the farm organizations concerned to hear Koo's presentation and open a dialog on it.

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