Incomes Surge by ‘Growing Energy'

March 30, 2001

The Senate Agriculture Committee has been told that farmers' incomes could double into the next generation if they begin "growing energy." Witnesses told the panel such production substantially could replace imported oil. Farmers also could be close to being paid by industrial sources for absorbing carbon dioxide emissions.

"We are on the threshold of additional income for farmers but also an opportunity that improves the environment and increases the energy security of the country," committee Chairman Richard Lugar (R-IN) said. Michigan State University Professor Bruce E. Dale said that farmers could make about $40 per ton for the production of biomass, largely from farm waste such as corn stalks, bedding, straw, manure and any cellulosic material. He believes a biomass ethanol industry realistically could consume a billion tons of biomass a year.

Additionally, experts told the committee that farmers could receive an average payment of $8 per acre for absorbing carbon dioxide from emitting industries. Farms have the capability of sequestering from the air two-four tenths of a ton of carbon per acre per year, and it is estimated that the market could pay farmers between $20-30 per ton. Richard Sandor said that his company will have the opportunity to trade carbon sequestering credits on the Chicago Climate Exchange in the next 6-9 months.

U.S. forests and farms sequester about 300 million metric tons of carbon per year, and there are opportunities for improved agricultural and forestry practices that would increase the amount of carbon that they store, the committee was told. Sequestering carbon is an important mechanism for mitigating the threat of climate change. And carbon storage provides many "co-benefits" such as controlling erosion, helping to keep nutrients and pesticides from washing into water bodies, and increasing soil productivity.

In addition, there are many opportunities in which environmental trading could be used to further nitrogen management or nutrient management. These opportunities could reduce emissions of such powerful greenhouse gases as nitrous oxide and methane and improve water quality at the same time. "And environmental trading directly related to water quality may be a cost-effective means of implementing the existing Clean Water Act," Lugar said.

"Environmental trading can be a successful way of reducing the cost of environmental compliance," the chairman continued. The Cap and Trade System for sulfur dioxide emissions under the Acid Rain Title of the Clean Air Act Amendments of 1990 has led to eight annual auctions of sulfur dioxide credits at the Chicago Board of Trade.

The cost of compliance with the Acid Rain Title of that Act is 50% to 75% less than was estimated in 1990 and the nonpartisan organization Resources for the Future has estimated that the benefits of the Act itself outweigh its costs by a favorable ratio of 66 to 1.