Cap-and-Tax Will Cost Farmers

June 18, 2009

Cap-and-Tax Will Cost Farmers

Sensenbrenner: "EPA Offset Regulation Will Expand Agency’s Power”

Washington, D.C.– U.S. Rep. Jim Sensenbrenner, R-Wis., ranking Republican on the House Select Committee on Energy Independence and Global Warming, made the following statement during today’s hearing titled,  “Global Warming’s Growing Concerns: Impacts on Agriculture and Forestry:”

“Today’s hearing gives the Select Committee the opportunity to explore the impacts that proposed climate legislation will have on the agriculture industry and the effect that that will have on consumers.
“The House Democratic leadership has spent the last two months rushing to pass a carbon emissions reduction scheme that I call cap-and-tax. I call it cap-and-tax because the legislation is a hidden energy tax that will increase the price of nearly every staple in American life, including electricity, goods and services, and gasoline. 
“Today’s hearing will allow us to explore how this flawed policy will hurt American farmers. Cap-and-tax will reduce the security of America’s food supply.  If the government mandates a cap on fossil fuel emissions, many utilities will switch from coal to natural gas to generate electricity because natural gas produces fewer carbon dioxide emissions.
“As demand for natural gas rises, the price will rise as well. But natural gas isn’t used solely for electricity.  As Ford West, President of the Fertilizer Institute, says in his written testimony, there is no substitute for natural gas in nitrogen production. 
“The U.S. domestic nitrogen fertilizer industry supplied around 85 percent of America’s nitrogen in the 1990s, but the high cost of natural gas has moved much of this production, and its jobs, overseas. Today, just 55 percent of this vital farming resource is made in the U.S. Much of the imported nitrogen is made in places that offer cheap natural gas, like the Middle East, China, Russia, and Venezuela. These countries have no restrictive climate polices like cap-and-tax, and their energy efficiency is generally lower than in the U.S.
“Mr. West cites a study by the Doane Advisory Services that shows that a cap-and-tax scheme would add $6 - $12 billion in additional costs for farmers by 2020.
“A recent study by the Heritage Foundation on the Democrat’s cap-and-tax proposal also shows the devastating effects this scheme will have on agriculture. Farmers will be forced to pay more, and those costs will be reflected in the price of nearly every agricultural product. The Heritage study shows that increases in costs are expected to reduce farmers’ incomes by $8 billion in 2012 and by more than $50 billion in 2035. The average net income lost between 2010 and 2035 is projected to be $23 billion.
“With numbers like these, it isn’t surprising that 37 food and agriculture groups have opposed the cap-and-tax legislation.
“In addition to expanding taxes, cap-and-tax will expand the government, especially the Environmental Protection Agency.  Because enforcement of a true carbon cap would debilitate the U.S. economy, the legislative proposal currently before the House of Representatives allows covered entities to make substantial portions of their reductions outside the cap, through what are called offsets. 
“The bill allows 2 billion tons of offsets per year, a billion of which must come from domestic sources.  The value of these billion offsets will easily reach into the tens of billions.  Because the cap is so broad, agriculture and forestry are virtually the only areas where offsets can be applied. 

“The result will be tens of billions of tax dollars flowing into the farm industry.  As the financial and auto industries have learned, Federal money doesn’t come without strings.  Under the current bill, the Environmental Protection Agency will be in charge of pulling these strings, and EPA has no useful experience regulating agriculture.
“We’ve already gotten a whiff of what could happen if the EPA tries to regulate greenhouse gases. The American Farm Bureau Federation said that if the EPA were to apply the Clean Air Act to greenhouse gases, nearly every dairy, cattle and swine farm would fall under the regulations, resulting in, literally, a cow tax. The EPA has sworn that this isn’t their plan, but to exclude these farms from regulations, EPA would have to take steps to exempt them, steps that could be challenged in court. This kind of absurd regulation is exactly the kind of policy we could see if the EPA becomes too involved in regulating greenhouse gases in agricultural production.
“Republicans believe that any climate legislation must meet four simple principles. It must: 1) protect jobs and the economy; 2) produce tangible improvements to the environment; 3) advance technological progress; and 4) feature international participation, including China and India.
“If we keep those principles in mind, we can address climate change without threatening American farmers or our economic health.”
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Select Committee on Energy Independence and Global Warming - Republicans
H2-344 Ford House Office Building
Washington, D.C. 20515
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