Mar 30, 2012
It is a scientific fact that energy never "dies," it just changes form. Now think about political issues as a form of energy.
This week, the U.S. Environmental Protection Agency (EPA) announced new rules for regulating greenhouse gas emissions from power plants for the first time. As the March 26, 2012 Wall Street Journal noted:
"The new rules will essentially make it unviable to build new coal-fired power plants, unless they are fitted with yet-to-be-commercialized carbon-capture technology. The rules would limit the permissible emissions of carbon dioxide and other greenhouse gases to a little more than half of what a typical coal plant emits today, administration officials have said."
Natural-gas fired power plants will meet the new regulations.
Under the Lieberman-Warner climate change market-based bill that was being debated in Congress – and even more so in the Stabenow ag offsets bill expected to be included until the climate change debate fell apart in the Senate, there would have been a way for coal plants to continue operating by purchasing greenhouse gas reductions, or offsets, from the uncapped and exempt agricultural sector. Utilities could have purchased offset credits from farmers undertaking approved activities like soil carbon sequestration, methane capture from manure and nitrous oxide reductions from precision application and management of fertilizers.
There were several news stories about the new regulations, but the world did not end as many had feared/predicted it would. This is partly because things have shifted in ways that could not have been foreseen during the heyday of the climate debates in Congress. First, and foremost, significant new amounts of natural gas have been found – bringing the cost of natural gas to record low levels. In fact, there aren’t many coal-fired power plants that are being planned right now anyway both because of the highly competitive position of natural gas and of the uncertain regulatory outlook for coal-fired plants both on the GHG issue and having to do with the further restricting of conventional pollutants.
Still, proponents of the coal industry point out that this could all change again if natural gas prices swing back up suddenly – as they have done before. This could leave the U.S. power sector with fewer fuel choices and potentially higher costs down the road – since there is no climate law in place outlining an offsets purchase alternative.
So what does this have to do with the agricultural industry? This example serves as a powerful anecdote of why it is critical for the ag sector to jump in and set its own course on sustainability.
In working on legislative issues for more than a decade now, I have seen many controversial policies and issues ebb and flow – but rarely do issues of magnitude simply "go away."
Usually what happens is an issue will be addressed by a particular policy proposal – a legislative bill or agency regulation. If that particular way of handling the issue is too unpopular, a specific bill may fail. That does not, however, mean that the underlying issue is gone – but rather, that the energy of that issue has gone somewhere else. Some people who were deeply engaged in the fight over the particular bill might then gleefully declare the entire issue to be "dead." But this is often confusing the end of a particular incarnation of a policy with the larger forces driving an issue.
In this case, the end of the climate change bill in the U.S. Senate, has not at all been the end of the climate change issue – or policies to address it. They have simply morphed into agency regulations using existing laws and into private "corporate sustainability policies."
I argue that in many ways, the way that climate change is being addressed now – without a defined legislative outline and without an offsets market, could be worse for the agricultural sector than if a bill like Lieberman-Warner containing a robust offsets title had passed.
First, under that bill, as I mentioned before, there would have been the ability for farmers to get paid in exchange for choosing to quantify, measure and sell some of the environmental benefits they can provide through good stewardship of their land. Without that bill, farmers are left being pushed in this direction by multiple and often disagreeing elements of the private market – except they will likely not be paid for it. Instead, measuring and improving sustainability will likely, in the long run, become the price for doing business.
Second, although our legislative process can be messy, it is well-defined, understood and provides input opportunity in a forum (the Senate) that protects minority interests. Since climate change was not able to be addressed there, it is now being addressed in the much more difficult arenas of agency regulation (for example, these latest EPA rules on power plants) and in the private marketplace. Here, agriculture makes up about 2% of the population and there is no Senate to hold special the rights of that small number.
Third, the offsets market would have provided a new agricultural "eco-market" solution for a major environmental problem at a time when the consumer-farmer trust gap has been a growing. It would be tougher for urban "elite" foodies to make the claims they do about conventional agriculture if the industry was playing a major part in solving the climate change issue these folks care so much about.
As Shakespeare said, "What’s past is prologue."
Looking out at the evolving sustainability discussions, debates and policies, it seems clear to me that there is another messy opportunity before the industry. I know many will say "Agriculture is engaging in sustainability!" Yes, there is more involvement in this topic every day. Still, there is a great difference between re-stating what you think, only louder, and recognizing the need to roll up your sleeves to do the tough business of compromise.
Certainly, there are elements within ag that are working hard and smart on this. And, just like any other market force – there will be those who understand and get ahead of this issue to their own market advantage. The question is whether the broader industry positions itself well on this issue. Much of that will depend on which lessons industry leaders take away from examples like the one we have talked about today.