Fiedler, Jeff (NRDC, 1200 New York Avenue, NW #400, WashingtonDC, 20005; Phone: 202-289-2419; Fax: 202-789-0589; Email: jfiedler@nrdc.org)
J. Fiedler *
The United States and other countries are considering policies to address global warming. Countries participating in the Kyoto Protocol are limiting emissions in ways that will have at least indirect ramifications for the agriculture sector. Although the current U.S. administration is opposed to mandatory limits, most observers agree that such an approach is likely at some time in the future. The McCain-Lieberman bill (Climate Stewardship Act) provides one indication of future U.S. policy directions. It received 43 votes in the U.S. Senate in October 2003 and continues to be advocated by its sponsors. This paper surveys economic analyses of this and related proposals in order to shed light on the agriculture sector in a carbon-constrained future. Research gaps and priorities are also identified. The agriculture sector faces threats and opportunities in a carbon-constrained world. For a number of reasons, the sector is likely to be largely exempt from direct regulation under a carbon cap. Nevertheless, mandatory policies may increase the cost of natural gas, on-farm diesel, and other energy inputs for the sector, and thus have the potential to affect farm income and production decisions. Mandatory policies also may drive new energy markets for farmers, and carbon offset projects may provide additional revenue opportunities. A carbon cap will provide an incentive for lower-carbon energy sources: corn ethanol and to an even greater extent cellulosic ethanol; on-farm wind power; and methane capture and use. Offset projects may reward soil and forest carbon sequestration and reduced nitrous oxide emissions from fertilizer application. The large number of elements involved makes understanding the agriculture sector’s role in climate policy a complex undertaking. Current studies do not provide a comprehensive or sophisticated understanding of the opportunities and risks for the future.