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Wednesday, November 04, 2009

Dueling economists at same school offer differing views of climate legislation's effect on farmers

Two economists at the same university have come to different conclusions about the effect of climate legislation on farmers. Bruce McCarl, Texas A & M economist and one of a team of analysts who shared the 2007 Nobel Prize for climate-change work, believes the House climate bill will eventually double corn prices for farmers. Joe Outlaw, co-director of A & M's Agricultural and Food Policy Center, disagrees, saying that 71 out of 98 farm simulations would have lower ending cash reserves by 2016 under the bill compared to his study's baseline.

McCarl says farmers will likely get paid to conserve fertilizer, reduce emissions from manure and practice no-till farming, Marcia Zarley Taylor of DTN reports. He adds power companies will have a huge incentive to switch to biomass feedstock, and cellulosic ethanol will boost demand for crops over the next decade. However, Outlaw's study says only Midwest corn and soybean farmers and Great Plains wheat farmers would clearly benefit from the climate bill.

Outlaw admits forecasting economic impacts of climate change is one of the most complex tasks economists can tackle and cautions that there's much uncertainty in both forecasts. But he doesn't see an important distinction between the two studies. He says while McCarl may be correct about farm incomes being better off with climate legislation, but most of the benefits don't accrue to growers until carbon prices jump 20 or 30 years from now. He says farmers have to survive higher costs in the interim. (Read more, subscription required)

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