Is It Time for Ag and Energy Policy to Merge?

The agriculture committees of Congress might want to look at what is happening on the tax-incentive side of the scale regarding climate-smart practices.

The Inflation Reduction Act is supercharging the race to decarbonize the transportation sector. Farmers might soon have a way to be paid for greenhouse-gas (GHG) reductions by passing their crops through low-carbon biofuels plants. The U.S. Department of the Treasury’s rules determining how GHG-saving practices on the farm might count toward further decarbonizing renewable fuels could have a greater impact on land use than all the previous farm bills put together—or not, depending on the details.

Carbon pipelines have become a political lightning rod dampening the possibilities for zero-carbon biofuels. Creatively implemented, the IRA could incentivize regenerative agricultural practices that have the potential to reduce as much GHGs as the sequestration pipelines. And, as a bonus, once a farmer retools for regenerative practices on a portion of their farm, they will likely flip the whole farming operation. Thus, there is a 3-to-1 acreage gain driven by the portion of crops going to biofuels.

Farm programs administered by USDA as part of the farm bill attempt to influence farmer behavior, but those programs are commodity by commodity—different programs for different crops on the same farms and a myriad of underfunded conservation programs.

Every once in a while, Congress enacts momentous farm-policy changes. One was in 1985, when it approved Sodbuster, Swampbuster and Conservation Compliance for Highly Erodible Land rules as reasonable restrictions on what farmers could do with their land in exchange for price and income support (as well as subsidized crop insurance in 2014).

Today, there are more stakeholders involved in farm-bill debates. These new players are searching for ways to make the farm bill more environmentally oriented. There has traditionally been a red line for the farm lobby, however, when it comes to the big money in the commodity and crop-insurance titles of the legislation. Nobody dares cross that line.

Change on a large scale requires that the line be crossed though. There is not enough money in the discretionary conservation title to compete with the mandatory commodity and crop-insurance titles that drive farmer behavior.

Congress may want to look to the 1985 and 2014 farm bills when the red line between the commodity titles and conservation goals were crossed. Farmers were required to comply with environmental rules to get payments. While those rules leaked over time, there is a new urgency to do what we can where we are now. The greatest beneficiaries will be the rural communities that support farmers and their families.

Farmed soils have enormous capacity to reabsorb carbon lost over the past couple of centuries. We know that regenerative practices build soil carbon, but it is a slow and complex process that takes time and can be reversed if those practices are abandoned. Voluntary carbon markets to compensate farmers for changing practices are still in their infant stages.

Farmers know that yields pay and so they push the land as hard as possible. Fifty percent of land is short-term rental so there is little incentive to make long-term changes. Corn-yield contests show that 600 bushels per acre are possible but national yield averages are only around 170 bushels per acre. The difference is “seed and feed.” More seed, more fertilizer and more water. Farmers have done an excellent job of reducing the amount of fertilizer per bushel but total fertilizer use is still high.

The biggest environmental culprits are nitrogen and phosphates. In the case of nitrogen, only 50 percent applied is used by plants. The rest is lost to the air and water. Avoiding nitrogen waste has an almost immediate GHG benefit far larger than sequestered carbon. As a GHG, nitrous oxide is 300 times more potent than carbon. Unused phosphates end up fouling waterways and lakes and eventually fueling the dead zone in the Gulf of Mexico. Nutrient management might be the most important and immediate environmental need.

Recoupling commodity payments and crop insurance to regenerative and climate-smart practices could broaden support for a food system that is under growing scrutiny. Making payments for doing good on all farms—not just small tracts of highly erodible land—seems like a commonsense evolution of commodity and crop-insurance subsidies.

Ironically, the IRA could be the first step to truly reward farmers for climate-smart practices through biofuel programs. The agriculture committees of Congress might want to look at what is happening over on the tax-incentive side of the scale and begin to funnel some of the mandatory commodity-program money toward better environmental outcomes like the IRA regardless of the end use for those crops.

Author: John Campbell

Managing Director, Ocean Park

402-680-7111

jcampbell@oceanpk.com

Editor’s Note: John Campbell is a former agribusiness executive, U.S. deputy undersecretary of agriculture, and U.S. Senate agriculture committee staff member. Campbell also served on the bipartisan Commission on 21st Century Production Agriculture.