Buying Off the Farmers or Causing Farmers to “Buy the Farm”?

Nicolas Loris /

Farming is very energy-intensive. Farmers use a lot of electricity, a lot of diesel fuel, and a lot of natural gas-derived chemicals and fertilizers to grow crops and maintain their farm. So it shouldn’t be surprising a cap and trade program that artificially drives up the cost of energy will unfavorably affect farmers. What may be surprising is how unfavorable these effects are, causing expected farm income (or the amount left over after paying all expenses) to drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28%, 60% and 94%, respectively. And some Members of Congress believe they can convince farmers to give up this lost income for $2.1 billion in return.

To convince farmers the cap and trade energy tax is a good idea, politicians are using offsets as a revenue opportunity for farmers. Generically, offsets work like this: If a company is emitting carbon dioxide and cannot meet the reduction targets, the company can pay someone else to change their behavior to do something that may have otherwise done. That is, you can pay a logger not cut down trees or you can pay someone to grow trees. If it sounds silly and fraught with fraud, it is. It’s difficult to monitor and regulate. It’s also very easy to manipulate. A country can build a cleaner coal plant saying they were going to build a dirtier one. So the plan to save the planet that will cost Americans $4,300 on average in higher energy prices is relying heavily on counterfactuals, what-ifs and hypotheticals?