If the Senate follows through, the U.S. energy revolution will be underway.
On June 26, the U.S. House of Representatives passed HR 2454, the American Clean Energy and Security Act, with last-minute amendments that benefit the agriculture industry.
The bill, which narrowly passed with a vote of 217-205 and now goes to the Senate, is the framework for a new federal energy policy designed to ignite the renewable energy industry, reduce greenhouse gas emissions and decrease our dependence on foreign oil.
The bill creates a Renewable Energy Standard for utility companies that calls for 20 percent of their energy to be produced by wind, solar or other renewables by 2020. It raises the bar for energy efficiency in buildings and fuels and provides incentives to drive a surge of investment in clean energy technologies, including fuel-efficient cars. The goal is to put America in the driver’s seat of the clean energy boom.
“The nation that leads the world in creating new energy sources,” said President Barack Obama, “will be the nation that leads the 21st-century global economy.”
Leading the world in a competitive new industry is a tall order, and Kansans, like everyone else, are split on whether or not HR 2454 is the way to go. When it comes to agriculture’s role in the new policy, the Kansas agriculture secretary believes it could be a good deal. Three out of our four U.S. representatives disagree. The plus side for the ag sector is the cap and trade system; the downside is higher fuel and other energy costs. Kansas Ag Secretary Adrian Polansky predicts that the cap and trade factor will outweigh the higher fossil fuel costs for a net positive benefit for farmers.
If you’re a bit rusty on your grasp of market-driven emissions trading economics as I was when I began researching this bill, you may be asking — what the heck is cap and trade? Here’s how it works in the clean energy bill.
To reduce carbon dioxide in the atmosphere, the bill calls for CO2 emissions to be capped at 42 percent below 2005 levels by 2030. Through a cap and trade system, the upper limit of allowable emissions gets tighter ever year and companies can buy or sell “carbon credits” according to where they stand with the cap.
If an electric company goes over the legal limit of emissions, for example, it can buy carbon credits to make up for it; conversely, if another company stays below the emissions limit it can sell its credits to others. The point is to make CO2 emissions expensive so that companies will have a strong incentive to integrate clean energy systems.
Among many controversial points that came up when the bill was being drafted was the lack of a similar carbon credit system for the agriculture industry. In the final hours, however, House Agriculture Committee Chairman Collin Peterson (D-Minn.) introduced an amendment that lets farmers be rewarded with carbon “offsets” for implementing practices that sequester carbon dioxide from the atmosphere into the soil. The amendment also puts the ag offset program under the control of the Department of Agriculture rather than the Environmental Protection Agency, which also benefits agriculture.
Kansas Republican Reps. Jerry Moran, Lynn Jenkins and Todd Tiahrt voted against the bill and Democrat Dennis Moore voted for it. Their contrasting views echo the wide-ranging analyses of how the bill will affect the economy, including the ag sector.
The bill’s detractors believe that the new rules for clean-produced energy will drive up utility prices because energy companies will pass along the expense of updating their plants to consumers. They also predict that jobs will be lost as traditional fossil-fuel energy companies are replaced by renewable energy firms. Moran calls it a “jobs elimination bill” and “energy tax” that is “very harmful to our rural communities” because it raises fuel and other costs for farmers.
On the other hand, Moore states that the new policy will “create new industries and jobs that can’t be shipped overseas” and “revitalize the economy.”
So what is HR 2454 — a job killer and energy “tax” or job creator and energy cost saver? It depends on which analysis you read.
The Kansas camp’s opposing views reflect the conflicting reports about the net cost of the legislation. The conservative Heritage Foundation reported that the bill will cost a family of four about $2,979 between 2012 and 2035. According to the nonpartisan Congressional Budget Office, the cost to consumers will be about $175 per household by 2020, and low-income consumers would receive a net benefit of about $40 in 2020. The nonpartisan American Council for an Energy Efficient Economy projects that the bill will save households about $4,400 per year by 2030.
Analyses of the job loss-creation issue are just as split. The Heritage Foundation study estimates that the net job change between 2012 and 2030 will result in 1.14 million jobs lost. A study from the Political Economy Research Institute and the Center for American Progress, however, projects a net increase of 1.7 jobs across the country.
Getting down to the facts about Kansas, the Renewable Energy Policy Project study reports that legislation like HR 2054 will create 11,491 new jobs in Kansas in the wind, solar, geothermal and biomass energy industries that already exist in the state. Those gaping discrepancies are just one element of a very complex piece of legislation. But with so much at stake for Kansas farmers, I called Polansky to get his take on the bill.
“It’s going to depend a great deal on the details of the agriculture offset program that Chairman Peterson was able to insert into the legislation,” he said. “I think if that’s done appropriately, it could have a very positive impact on agriculture and mitigate to a large extent, or even more than mitigate, potential cost increases in terms of energy inputs for agriculture. I certainly think that’s possible.”
Polansky, who will soon leave his state post to become the director of the USDA’s Farm Service Agency in Kansas, emphasized that Kansas agriculture could benefit significantly from a market-based program like cap and trade if the soil sequestration offset program is based on good science.
“I believe if that is done correctly, agriculture should be in a very good position,” he said. “We have significant science-based data here in Kansas and are developing more, which I think should bode well for Kansas agriculture.”
If there is a carbon currency in the future and Polansky is right, Kansas farmers will be able to cash in on cap and trade and become key players in the energy revolution.
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