By DEBORAH BEHRENDS
Illinois Correspondent

BLOOMINGTON, Ill. — It matters not what the facts are; rather, it matters what the policymakers believe to be true, according to A. Bryan Endres, assistant professor of agricultural law at the University of Illinois.

Endres was one of several speakers traveling with the 2009 Illinois Farm Economics Summit, in five cities last month, titled The Profitability of Illinois Agriculture: Profitability at a Crossroads.
“Global climate change may have both positive and negative impacts on agricultural production. From a productivity perspective, agriculture will have to adapt to these changing conditions,” Endres said.

Key legal developments are all at the federal level, with the exception of California, “but we don’t have time to get into that,” he said.

Agriculture is an energy-intensive industry with direct consumption of multiple carbon-based energy sources, including gasoline, diesel fuel, liquid petroleum, natural gas and electricity. Nitrogen and other fertilizers require significant energy resources as well.

Energy consumption accounts for nearly 15 percent of total ag input expenses. Greenhouse gas (GHG) emissions attributed to production activities include carbon dioxide, methane and nitrous oxide. Based on relative global warming potentials, scientists convert GHG emissions into carbon dioxide equivalents.
In total, ag operations account for about 7 percent of GHG emissions in the United States. To measure domestic GHG emissions, the Consolidated Appropriations Act of 2008 directed the U.S. Environmental Protection Agency (EPA) to develop a mandatory reporting regime for GHGs.

The rule requires monitoring begin Jan. 1, 2010, with animal emissions reports starting in 2011. Only the largest operations fall within the reporting guidelines, and the EPA estimates only 107 livestock operations nationwide reach the reporting threshold.
“The federal government is likely to take significant steps to regulate GHG emissions in 2010,” Endres said.

There’s a medium- to long-term potential for input price increases from GHG regulations under either cap-and-trade or Clean Air Act rules.

However, Endres said agricultural operations may have significant opportunities to diversify farm income via GHG offset trading under the cap-and-trade system.

“Bioenergy mandates are unlikely to change, and low carbon fuel requirements will support diversified agricultural operations,” he said, with the USDA estimating expected increases in commodity prices should provide an annual annuity value of $22 billion.
He said the USDA estimates an additional $3 billion benefiting the Corn Belt.

If Congress fails to cap or reduce GHG emissions, the EPA will take action. The twist is that if agriculture groups successfully scuttle Congressional initiatives, the Clean Air Act may impose greater restrictions with relatively fewer lucrative offset opportunities.