The Carbon Fee and Farmers Laser Talk

Agriculture in the U.S. is heavily dependent on fossil fuels for running machinery and producing fertilizers, and a carbon tax would increase the price of fossil fuels.

Price Volatility in Agriculture

For farmers, however, the impact associated with a carbon fee is not nearly as great – or volatile – as other factors, especially if the fee starts low and increases predictably over time. For example, the price of diesel fuel has more than tripled over the last decade. The price of fertilizer more than doubled between 2006 and 2008 and has never returned to 2006 levels.[1] Commodity prices, which determine the income farmers receive at any given time, are also a source of great volatility. The U.S. subsidizes farmers to reduce the risk of this volatility.

Carbon Fee vs Costs of Climate Change

The impact of a carbon fee will be miniscule, though, compared to the impact climate change will have on future farm productivity. A report from the U.S. Department of Agriculture in February of 2013 predicts in the decades ahead that droughts and floods – made more frequent and damaging from climate change – will reduce agricultural output.[2] The report also found that fighting insects and weeds will become more difficult, and higher temperatures will also make the productivity of crops and livestock unpredictable.

Minimizing the agricultural impact of climate change will depend upon how quickly we can reduce greenhouse gas emissions.

Economic Opportunities for Farmers and Ranchers

A carbon fee can also be an economic opportunity for farmers and ranchers as demand for carbon-free energy increases.[3] Wind developers are leasing land from farmers to erect turbines, paying between $4,000 and $8,000 per turbine a year.[4] They call it “mailbox money.” Solar farms can also replace cropland that doesn’t generate enough income from traditional farming.[5]

Bottom line: The additional cost of a carbon fee doesn’t compare to the increased volatility that comes with a changing climate. A gradually and predictably increasing carbon fee creates an opportunity for farmers to balance that volatility with steady cash flow from renewables that share land with their crops.