Agricultural Provisions of the Inflation Reduction Act
On August 16, President Biden signed into law the Inflation Reduction Act of 2022, a bill which provides some $369 billion in tax or other incentives to encourage greater adoption of clean energy technology in transportation, energy generation, require reduction of methane emissions from industrial sources, as well as incentives to increase carbon sequestration and reduce GHG emissions in the U.S. agricultural sector. Several analyses suggest that the climate provisions in the bill will reduce U.S. GHG emissions by about 40 percent by 2030 compared to 2005 levels.
The bill was passed under Congressional budget reconciliation rules, which allows the Senate to take up the legislation without being subject to filibuster efforts. It passed both the House and Senate on strictly party line votes. It also include provisions which will allow the U.S. government to negotiate prescription drug prices for Medicare recipients on a limited list of drugs for the first time, cap annual drug expenditures at no more than $2,000 for Medicare recipients, and impose a corporate minimum tax of 15 percent on all U.S. corporations with annual earnings greater than $1 billion. It is also expected to reduce the federal budget deficit by about $300 billion over the next decade.
Programs operated by the U.S. Department of Agriculture will receive $38 billion under this legislation to address climate change, bolstering resources for adoption of more conservation practices, use of renewable energy in rural areas, and to mitigate GHG emissions in the forestry sector.
Conservation Programs
The Act provides new funding over four years for four key USDA voluntary conservation programs—
• Environmental Quality Incentives Program (EQIP)--$8.45 billion
• Regional Conservation Partnership Program (RCPP)--$4.95 billion
• Conservation Stewardship Program (CSP)--$3.25 billion
• Agricultural Conservation Easement Program (ACEP)-$1.4 billion
The additional funds are to be reserved for farmers and ranchers adopting new practices deemed by USDA to be ‘climate-smart’ practices—those that the “the Secretary determines directly improve soil carbon, reduce nitrogen losses, or reduce, capture, avoid, or sequester carbon dioxide, methane, or nitrous oxide emissions, associated with agricultural production”. This website lists the categories of conservation practices that USDA’s Natural Resources Conservation Service (NRCS) deem to be ‘climate-smart.’
In addition, $1.3 billion will go to fund Conservation Technical Assistance (CTA), $1 billion to directly fund technical assistance to farmers adopting these new practices, and $300 million to carry out a program to quantify carbon sequestration and carbon dioxide, methane, and nitrous oxide emissions from agriculture.
All of the programs mentioned above are extended through 2031 in the legislation, clearly an effort to add this funding to the CBO farm program baseline. Currently, USDA spends about $4 billion annually on voluntary conservation programs other than the Conservation Reserve Program (CRP), so this amount will more than double the available funding for these programs. These funds for conservation account for just about half of money provided to USDA under this bill, at $19.3 billion.
Rural Development and Agricultural Credit
The second tranche of funding for agriculture will provide incentives for farmers, agribusinesses, and other rural residents to adopt renewable energy technology or improve energy efficiency in their operations and/or households.
The bill provides $1 billion in additional funding for loans for installing renewable energy capacity in rural areas, 50 percent of which are forgivable under terms and conditions to be established by the Secretary.
An additional $1 billion is designated for the Rural Energy for America Program (REAP), established in the 2008 farm bill, which provides financial assistance to agriculture producers and rural small businesses to purchase, install, and construct renewable energy systems or energy efficiency improvements. The program currently receives about $50 million annually.
It also contains a boost for the U.S. biofuel sector, with $500 million in grants for biofuels infrastructure and agricultural market expansion, for which the federal share cannot exceed 75 percent of the project’s cost.
The biggest component of this tranche is $9.7 billion in USDA Assistance to rural electrification cooperatives. No single entity can receive more than 10 percent of available funds, and the grant can cover no more than 25 percent of the project’s total cost.
Forestry
The bill provides $4.9 billion in additional funding for forestry activities, including for hazardous fuel reduction and vegetation management on National Forests land, to protect old-growth forests, as well as grants for climate mitigation by underserved forest landowners and for wood innovation grant programs.
Additional provisions
The final section is not related to climate change, but revises the language of the minority farm debt relief provisions that were in the American Rescue Plan of 2021, implementation of which have been blocked by federal court injunctions due to lawsuits filed by white farmers who claimed it constituted unfair treatment. The new provision includes the following:
• $125 million for outreach, technical assistance, extension, and other forms of assistance to underserved farmers, including military veterans who are farming, limited resource farmers, beginning farmers, and farmers operating in high poverty areas.
• $200 million to help farmers resolve or clarify land title issues
• $250 million to fund research, extension, and education for minority farmers through 1890 land grant institutions
• $2.2 billion to provide discrimination financial assistance to any farmer, rancher or forest landowner determined to have experienced discrimination prior to January 1, 2021 from a USDA farm lending program
• $10 million to fund establishment of an equity commission
Funding to administer these provisions
The various USDA agencies in charge of implementing each part of this agriculture title will also receive funds to administer the new funding for their respective USDA programs, totaling $324 million. With the bill providing these resources to hire new personnel plus the fact that most of the money will be distributed through existing programs, USDA should be able to start getting this funding out the door relatively quickly.
