Senator John ThuneFrom the very beginning, it has been clear that any so-called "cap and trade" program aimed at cutting greenhouse gasses would have a much bigger impact on rural states like South Dakota. This is in part due to reliance on coal-generated electricity, but also because of the higher input costs that will effectively punish rural agricultural producers and increase costs for all consumers. Unfortunately, the U.S. Department of Agriculture (USDA) and the Environmental Protection Agency (EPA) seem to be obscuring the true cost of the cap and trade bill that was approved by the House of Representatives.
The USDA recently released a report on the economic impact on farmers of the cap and trade bill passed by the House of Representatives. Rather than conducting their own research or relying on independent experts, the USDA report relies heavily on calculations and assumptions from the EPA, which are rosy at best.
Agriculture relies heavily on energy. Last summer's spike in fuel prices put a severe burden on South Dakota farmers and ranchers, but that was only a preview for what would happen if Congress enacts a cap and trade scheme. Cap and trade will inevitably lead to higher fuel, electricity, and fertilizer prices across the board and that certainly would get passed along to individuals and families for just about everything they purchase.
In calculating the impact of cap and trade on farmers, the USDA relies on the EPA's assumption that carbon capture technology would be readily available and commercially practical by 2014. Most experts, however, agree that capturing the carbon emissions from power plants will not be economically viable until 2020 or beyond. Similarly in the report, the EPA assumes nuclear power generation will double by 2035. This goal also seems unlikely, particularly when Congressional Democrats are blocking efforts to expand nuclear power generation.
Another less-discussed threat to agricultural producers is increased fertilizer costs as a result of cap and trade. Fertilizer production is an energy-intensive industry, which means that increased energy costs will result in increased fertilizer costs. The USDA report claims that fertilizer producers would be eligible for "free allowances" to offset increased energy costs, but it is likely that those offsets would instead go to larger energy-intensive industries, such as steel, glass, and chemical production. Also, a study by the University of Missouri found that the overall average farm costs would increase by over $11,000 in 2015 and over $30,000 in 2050.
Farmers and ranchers are the backbone of our state's rural economy. Producers would be forced to bear increased costs as a result of cap and trade legislation, and the effects of that would be felt throughout South Dakota. As the Senate prepares to consider this issue this fall, I will continue working to protect South Dakota farmers and ranchers from the unfair, punitive results of the cap and trade bill passed by the House of Representatives.