Agriculture and the Carbon Fee

Agriculture and the Carbon Fee Laser Talk

Question:  How will a carbon fee affect agriculture?

Answer:  Agriculture is intimately connected to both climate and energy. Direct fuel usage and energy-intensive fertilizer comprise a significant part of farm costs, [1] as much as 61 percent of operating expenses for some crops. [2] It’s understandable that farmers would be wary of any policy that could further increase these costs.

At the same time, negative effects of climate change are starting to appear. Extreme, unseasonable weather can harm crops directly and contribute to soil degradation. [3,4] Other climate threats include heat stress and water shortages [5,6] and increased insect damage, [7] all of which could have serious impacts on both crops and livestock.

The Energy Innovation and Carbon Dividend Act [8] is aimed squarely at putting a lid on climate-changing emissions recognizing the unique challenges farmers face. Fuels used on farms, chiefly diesel fuel for tractors and other equipment, will be exempt from the carbon fee. In the short term, carbon pricing may still increase costs for operations most reliant on fossil fuel inputs, [9] but it will also give a huge boost to private investment in renewable and energy efficiency innovations.

Many of these will benefit agricultural communities, [10] enhancing the competitiveness of not only wind energy, but also energy storage technologies that will make it work better with the grid. [11] The policy will also help advance new concepts in more sustainable biofuels and bioenergy from residues, energy crops, and agroforestry. [12,13]

At the same time, reducing fossil fuel emissions will lessen climate impacts. Farmers who prioritize regeneration of carbon-enriched soil will assist this process and also require less fossil energy inputs, [14] as well as increasing soil fertility and resilience to floods and drought.

In a Nutshell: Agriculture and climate are intimately connected. Unmitigated climate change will increasingly damage crops and livestock. A carbon fee is the most efficient way to reverse that trend. The Energy Innovation Act takes steps to relieve the impact on farmers while opening up new business opportunities in the agricultural sector.

  1. “Selected Farm Production Expenditures by Rank, Year – United States.” U.S. Dept. of Agriculture (Aug 2017).
  2. “Energy for growing and harvesting crops is a large component of farm operating costs.” U.S. Energy Information Administration (17 Oct 2014).
  3. “Climate Impacts on Agriculture and Food Supply.” U.S. EPA (archived) (accessed 5 Apr 2018).
  4. Baumhardt, R.L., B. Stewart, and U.M. Sainju. “North American Soil Degradation: Processes, Practices, and Mitigating Strategies.” Sustainability 7(3):2936-2960 (Mar 2015).
  5. Marshall, E., M. Aillery, S. Malcolm, and R. Williams. “Climate Change, Water Scarcity, and Adaptation in the U.S. Fieldcrop Sector.” Report by U.S. Department of Agriculture Economic Research Service (Nov 2015).
  6. Marshall, E. and M. Aillery. “Climate Change, Water Scarcity, and Adaptation.” USDA Economic Research Service (25 Nov 2015).
  7. Deutch, C.A. et al. “Increase in crop losses to insect pests in a warming climate.” Science 361:6405, 916-919 (31 Aug 2018).
  8. “H.R.2307  – The Energy Innovation and Carbon Dividend Act of 2021.” Library of Congress (01 Apr 2021).
  9. Sands, R. and P. Wescott. “Impacts of Higher Energy Prices on Agriculture and Rural Economies.” ERR-123, U.S. Dept. of Agriculture, Econ. Res. Serv. (Aug 2011).
  10. Cusick, D. “Farmers Find New Cash Crops: Renewable Energy.” Scientific American (26 Nov 2014).
  11. Hofstrand, D. “The Coming Electricity Storage Revolution.” Agricultural Marketing Resource Center (Apr 2015).
  12. Kindberg, L. “An Introduction to Bioenergy: Feedstocks, Processes, and Products. ATTRA Sustainable Agriculture (2010).
  13. “Agroforestry: Working Trees for Energy.” USDA National Agroforestry Center (Feb 2012).
  14. “Reduction in Annual Fuel Use from Conservation Tillage.” USDA Natural Resources Conservation Service (Aug 2016).

This page was last updated on 05/04/21 at 22:50 CDT.