By KEVIN WALKER
Michigan Correspondent

COLUMBIA, Mo. — Another report, this one issued out of the University of Missouri-Columbia, examines the possible effects of climate change legislation on the agricultural sector, even as the future of any legislation remains as cloudy as ever.

The report, an economic analysis by professor Patrick Westhoff, examines different scenarios and how each might affect the business of producing food, fuel and fiber to meet the country’s and world’s growing needs. These include the scenarios’ possible effects on farmers’ incomes.

The report, dated July 2010, is called Impacts of Climate Change Legislation on U.S. Agricultural Markets: Sources of Uncertainty. It was sponsored by the Office of the Chief Economist at the USDA.

When Westhoff discusses climate change legislation, he means the American Clean Energy and Security Act passed last year by the U.S. House of Representatives. It’s also referred to as Waxman-Markey, after the bill’s primary sponsors. It would establish regulations designed to reduce greenhouse gas (GHG) emissions.

Westhoff identifies three different “impact” areas: these are production cost impacts, biofuel sector impacts and land use impacts.

“Energy analysts have developed widely varied estimates of how climate change legislation would affect costs faced by users of fossil fuels, ...” the report states. “Under some scenarios, annual farm production expenses increase by several billion dollars.”

The report also states consumers would end up paying more for gasoline and diesel fuel under the scenarios and this, it says, could provide an additional incentive for biofuel production. “Under some scenarios, the impacts are quite large, increasing crop receipts and feed costs by billions of dollars,” the report states.

As far as land use impacts are concerned, the report cites research out of Texas A&M University and the University of Tennessee that estimate climate change legislation would cause “significant shifts in land use patterns, as farmers plant more trees or energy crops to sequester carbon and earn offset income.” Because of those effects, there would be less land available for traditional crop and forage production, which would result in higher crop prices, higher feed costs and increased land rental costs.

The report summarizes the effect of climate change legislation on net U.S. farm income as a whole by stating it depends on the “magnitude of these various impacts.”

Thus, while higher production costs reduce net farm income, the biofuel effects coupled with land use shifts, as well as income from the sale of offsets, should push farm income higher.

The report also states consumers are likely to face higher food prices, because of higher farm commodity prices and because the transportation and processing of food becomes more expensive when energy costs rise.

If Waxman-Markey fails to pass this year as seems likely, however, what does any of this really matter? Further, if the U.S. Environmental Protection Agency (EPA) is going to regulate GHG emissions as seems increasingly likely, isn’t Waxman-Markey moot anyhow?

In a follow-up interview, Westhoff addressed these issues. “What will happen with climate change legislation this year remains unclear,” he said.

“The Senate could pass a bill that focuses on energy issues rather than climate change, it could propose a limited cap-and-trade system for the utility sector or it could fail to pass any legislation at all. Probably the least likely option is that it would approve a bill similar in size and scope to the House passed bill we looked at in our analysis.”

He went on to say his analysis is more relevant in some of these scenarios than others. Regarding the EPA’s role, he said the situation is also unclear, as it’s not clear how EPA regulations would work in practice, although it is certain they would work differently than the legislation. For example, he said the ability of farmers to earn offsets under the regulations would be different than under the legislation.

He also said that just because the EPA is moving toward regulating GHGs doesn’t necessarily mean it will be able to implement its plans.

“Appropriations bills and other legislation may provide opponents of the regulation further opportunities to stop or redirect the regulations and the (Obama) administration itself could choose to change the path it’s on,” he said.