This page was updated on 01/27/19 at 21:22 CST.

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 high 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.