Farms to forests – climate legislation economic impact

Another good example of how government regulation – in this case climate change legislation – can have unintended consequences, specifically higher food prices.President Obama’s climate change legislation passed by the House this summer may well make it more lucrative for farm operations to plant trees instead of planting food. From Edward Felker in this morning’s Washington Times.

The latest Agriculture Department economic-impact study of the climate bill, which passed the House this summer, found that the legislation would profit farmers in the long term. But those profits would come mostly from higher crop prices as a result of the legislation’s incentives to plant more forests and thus reduce the amount of land devoted to food-producing agriculture.

According to the economic model used by the department and the Environmental Protection Agency, the legislation would give landowners incentives to convert up to 59 million acres of farmland into forests over the next 40 years. The reason: Trees clean the air of heat-trapping gases better than farming does.

When the federal government and the congress-critters start messing around with the free market system in the name of cleaner air – who would not want clean air? – these types of unintended consequences always happen.

If you’re an executive at one of those monster food companies using land to grow food to feed the world, you’re in the business to make some money. If government regulations make things more difficult to do what you do, you’re going to have to game the system to ensure you keep making money.

In this example – thanks to the ugly word greed – the food growers would quickly figure out they could make more money if they stopped growing food, and planted trees instead. It’s not that the companies want to screw the world out of food production – it’s that the government is making it too damn hard (and not profitable) to do so.

The legislation would give free emissions credits, known as offsets, to farmers and landowners who plant forests and adopt low-carbon farm and ranching practices. Farmers and ranchers could sell the credits to help major emitters of greenhouse gases comply with the legislation. That revenue would help the farmers deal with an expected rise in fuel and fertilizer costs.

But the economic forecast predicts that nearly 80 percent of the offsets would be earned through the planting of trees, mostly in the Midwest, the South and the Plains states. …

The model projects that reduced farm production will cause food prices to rise by 4.5 percent by 2050 compared with a scenario in which no legislation is passed, the department found.

In other words, it could be cheaper and more profitable to just plant trees.

The Environmental Protection Agency is going back to figure out how they can tweak the legislation, but remember this cap and trade crap is simply designed to create a new commodity market – for a commodity that is impossible to keep track of – ensuring a select few make millions of dollars and you loose more liberty.

2 replies
  1. OkieJim
    OkieJim says:

    Farmers have a long history of doing whatever the USDA pays them to do. The truly ugly part about this proposal is that while crops are annual, trees are forever. Reclaiming land that once had trees planted on it is much harder than merely replowing.


    More Soviet-style thinking from this Administration.

  2. Dimsdale
    Dimsdale says:

    From 5 year plans to 40 year plans.  Same ideas as Stalin, just longer term.


    How long before we are waiting in lines all day for a loaf of bread or a roll of toilet paper, a la the late "great" USSR?

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