September 16, 2019

Climate Legislation; Regulatory Issues (EPA, DOJ); CFTC Issues; Biofuels; and Africa & Agriculture- New U.S. Perspectives

Climate Legislation

Lisa Lerer reported yesterday at that, “With the fight over health care reform absorbing all the bandwidth on Capitol Hill, Democrats fear a major climate change bill may be left on the cutting-room floor this year.

“A handful of key senators on climate change are almost guaranteed to be tied up well into the fall on health care. Democrats from the Midwest and the South are resistant to a cap-and-trade proposal. And few if any Republicans are jumping in to help push a global warming and energy initiative.”

Yesterday’s article added that, “As a result, many Democrats fear the lack of political will and the congressional calendar will conspire to punt climate change into next year.

“‘The reality is [the health reform bill] is going to happen before cap and trade,’ said House Agriculture Committee Chairman Rep. Collin Peterson, who’s been working with farm-state senators on the climate legislation. ‘Who knows if it will ever come out of the Senate?’”

Ms. Lerer explained that, “Democrats also have a diplomatic reason to make a push in the Senate: They’d like to pass legislation before the Copenhagen international climate negotiations in December. Unless the U.S. takes public steps to lower its greenhouse gas emissions, it will be hard to persuade China, India and other developing countries to make significant reductions, according to international climate change experts.”

The article pointed out that, “Agriculture Committee Chairman Tom Harkin (D-Iowa), meanwhile, is also tied up in health care negotiations, but his Agriculture panel will be a critical part of any climate change debate, because the proposals will have a significant impact on farmers.”

In addition, Ms. Lerer indicated that, “‘I think the whole spending issue in Washington will affect climate change and health care more than one will affect the other,’ said Nebraska Sen. Ben Nelson, one of the Senate’s most conservative Democrats. ‘Stop the spending.’”

A separate Politico article from yesterday (“Group pushes ‘clean coal’ in ad blitz”) included this perspective from Nebraska’s senior Senator, “Sen. Ben Nelson (D-Neb.) said that his primary concern with the [climate] bill is the impact it would have on consumers. In 2006, Nebraska got roughly two-thirds of its fuel from coal, according to data from the Energy Department.

“‘The cost-benefit analysis of what it does to business, what it does to agriculture, what it does to private residents at a time when the economy is already in turmoil — those are questions you’ve got to get answered,’ Nelson said.”

Meanwhile, with respect to the issue of carbon offsets and climate legislation, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “One of the main advantages of a cap and trade regulatory system compared with a straight carbon tax is its flexibility. While the required cuts in emissions and the cost of emissions allowances tend to increase the cost of many products, the ‘trade’ part lets emitters buy offset — cuts in emissions somewhere else. Now the Congressional Budget Office says the trade in offsets will make the whole policy much less costly.

In a new report this week, CBO focused on the cost of ensuring that an offset actually helps to permanently reduce greenhouse gas concentrations. Since they represent emissions cuts achieved through projects not included in the central GHG reduction program, offsets can be cheaper to purchase than emissions allowances or the technology to reduce emissions in regulated sectors.

For an offset project to be traded, it must produce greenhouse gas reductions that would not have occurred without it, CBO says. In addition, the reductions must be quantifiable, permanent (rather than emission delays) and must include assurances that the project is not indirectly causing emissions somewhere else.”

The DTN analysis explained that, “CBO reports that without the use of offsets, allowances would cost perhaps $138 per ton, generating $474 billion in auction revenue, which presumably would be passed on to consumers in the form of higher costs. With offsets, allowances would be $40 per ton and would generate $136 billion in auction revenue.

“CBO also focused on the cost of verifying that offset projects really meet the requirements that allow them to be packaged and sold. A variety of factors, including the location and complexity of the offset-generating project, can make it difficult to evaluate. It says offsets likely would be verified by third-parties, a process CBO thinks might cost perhaps $5 a ton, with smaller offset projects facing higher costs.”

In summary, the DTN piece observed that, “So, the CBO report would seem to be useful in the coming Senate debate, but it also would seem to spell more trouble for Agriculture Secretary Tom Vilsack as he attempts to convince Congress that climate change bills really represent an opportunity for agriculture — and, that the benefits could outweigh the costs. On the one hand, CBO says the costs will be lower than some thought, and that will help. At the same time, the suggestion that relatively simple changes in agricultural practices as defined by USDA might qualify as an offset seems to be retreating rapidly.

Increasingly, it is clear that tough rules will be used to define offsets, and that these may be difficult to follow — and, that there will be a messy political fight about what constitutes a salable offset. And, CBO says the verification costs will be relatively high, while the value of the offsets themselves will be lower than initially expected. Thus, it is almost certain this new CBO report will add questions to Secretary Vilsack’s morning mail for at least the next few weeks, and probably longer, Washington Insider believes.”

In a Washington Post blog update yesterday, Stephen Stromberg strongly criticized agriculture’s role in the Congressional climate debate, noting in part that, “There are plenty of reasons to be skeptical of Waxman-Markey. But many of them are the direct results of the sorts of payoffs these very rural voters are demanding of their congressmen. [House Agriculture Committee Chairman Collin Peterson] brought consideration of the bill to a stand-still in the House until its authors agreed to some massive concessions to the farm lobby, which include giving the farmer-friendly Agriculture Department (USDA) power to distribute valuable pollution ‘offsets’ to American planters. In other words, legislative gravy at odds with the stated purpose of the bill. USDA now projects that farmers will actually make money off of Waxman-Markey.”

From a domestic political perspective, DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “The American Farm Bureau Federation is making a major push to defeat climate-change legislation in the U.S. Senate by urging AFBF members to participate in a letter-writing campaign.

“In a Farm Bureau action alert, the group wrote that, ‘Your senators need to hear from you to stop this huge increase in regulations, energy and farm input costs.’ Farm Bureau is rolling out the action alert as the Senate prepares to break for a recess from Washington until after Labor Day.”

Internationally, Michael Wines reported in today’s New York Times that, “China’s envoy to global negotiations on climate change expressed optimism on Wednesday that a new agreement to reduce greenhouse gases would be reached this year, and he said that his nation’s efforts to curb carbon pollution already had produced results that he called ‘second to none.’

But the envoy, Yu Qingtai, also underscored China’s opposition to placing a ceiling on its emissions of greenhouse gases, a step that some experts have called crucial to efforts to slow global warming.”

And an AP article from yesterday reported that, “The officials, who are expected to lead the African bloc at the negotiations, met to discuss strategy ahead of the December climate change talks in Copenhagen.

They said at least 1 percent of global GDP should be set aside by rich nations. That money would help developing countries conduct research, improve flood control, protect their coastlines, create seed banks and take other steps to cope with the severe storms and droughts linked to climate change.

“The money also could help poor countries obtain technology to reduce their carbon emissions.

Alf Wills, a top South African environmental official, sums up the position going into Copenhagen: ‘No money, no deal.’”

Regulatory Issues: EPA Water Regulation- Permit Concerns

Back in April, outlined several issues associated with litigation regarding the Clean Water Act, the executive branch and the Sixth Circuit Appellate Court.

An update on this issue, which was posted yesterday at The United States Agricultural & Food Law and Policy Blog indicated that, “On August 3, 2009, the 6th Circuit Court of Appeals denied a request by various agricultural organizations and stakeholders for a rehearing of the 6th Circuit’s previous decision in the National Cotton Council v. EPA case.

“The agriculture organizations had wanted the entire 6th Circuit panel to review a decision previously reached by a three judge panel of the court this past January. In January, the court ruled that ‘pesticide residuals’ and ‘biological pesticides’ were pollutants covered under the Clean Water Act. According to the Common Dreams organization’s website, Monday’s decision essentially upholds that finding.

The result of the January ruling requires individuals to get a National Pollution Discharge Eliminations Systems (NPDES) permit before applying pesticides ‘to, over or near water’ sources. The NPDES permits allow local citizens to submit public comments about the potential pesticide applications. The permits also require certain regulatory agencies to evaluate the potential environmental impact of the pesticide application to the flora and fauna of the area, and to evaluate how much of the pesticides being applied will stay in the waterways and what the long-term effects will be on aquatic life.”

Regulatory Issues: USDA, DOJ and Ag Competition

Bloomberg writer Justin Blum reported yesterday that, “The U.S. Justice Department plans to conduct the first-ever joint workshops with the Agriculture Department to discuss antitrust and regulatory enforcement in the agriculture industry.

“The meetings will cover competition and the ability of buyers to control prices, according to a Justice Department statement today.”

Recall that Monday’s update pointed to a recent Government Accountability Office (GAO) report relating to this issue.

In part, the GAO report stated that, “The empirical economic literature has not established that concentration in the processing segment of the beef, pork, or dairy sectors or the retail sector overall has adversely affected commodity or food prices. Most of the studies that we reviewed either found no evidence of market power or found efficiency effects that were larger than the market power effects of concentration. While a few studies found some evidence of market power, it is unclear whether this market power was caused by concentration or some other factor. All of the experts we spoke with said that concentration probably did not cause the 2008 increase in commodity and food prices, which were more likely due to factors such as higher energy costs and growing global demand for grains.”

CFTC Issues

Reuters writers Tom Doggett and Ayesha Rascoe reported yesterday that, “Funds that invest heavily in energy commodities told the U.S. futures market regulator on Wednesday that they were not responsible for wild swings in crude oil and natural gas prices.

“The Commodity Futures Trading Commission, which oversees regulated futures exchanges, held its third and final hearing into whether it should limit how many futures contracts hedge funds, investment banks and other speculators can control, to help limit big movements in energy prices.

“CFTC Chairman Gary Gensler reiterated his view that the commission should ‘seriously consider’ speculative position limits in energy futures trading. He said the agency would likely publish any proposed rules in the fall.”

Meanwhile, in more general analysis regarding agricultural commodity prices, the USDA’s Economic Research Service (ERS) issued a report yesterday entitled, “Issues and Prospects in Corn, Soybeans, and Wheat Futures Markets: New Entrants, Price Volatility, and Market Performance Implications.”

An ERS summary of the report noted in part that, “The past 5 years have seen large increases in trading of corn, soybean, and wheat futures contracts by nontraditional traders, a trend that coincided with historic price increases for these commodities. These events have raised questions about whether changes in the composition of traders participating have contributed to movements in commodity prices beyond the effects of market fundamentals…[T]he report also discusses the implications for market performance and the regulatory response of the Commodity Futures Trading Commission.”


Philip Brasher reported yesterday at The Des Moines Register Online that, “The Obama administration is under pressure from some in Congress to allow a higher amount of corn ethanol in gasoline, a move that would provide a jolt to ethanol producers.

“But raising the ethanol limit from the current 10 percent to 15 percent, as the Environmental Protection Agency is considering, will not be enough to get the higher-proof fuel in motorists’ tanks across the nation.”

Mr. Brasher noted that, “The EPA says there are a number of potential roadblocks ahead for the higher-ethanol fuel, known as E15. The hurdles include federal rules for underground storage tanks as well as state regulations on gasoline specifications and safety rules for pumps, the agency said in a recent analysis of federal biofuel mandates.

“Ethanol industry officials know about those roadblocks and have been working to get states to remove as many of them as possible ahead of the EPA’s decision on the ethanol limit. The agency is due to announce a decision by Dec. 1.”

For more on the biofuels blending level issue, see this concise report entitled, “Issues in raising allowable ethanol-gasoline blends to e-15 or higher for conventional vehicles,” which was written recently by Iowa State University Agricultural Economist Robert Wisner.

An update posted yesterday at The SugarCane Blog stated that, “Senate Agriculture Committee Chairman Tom Harkin (D-IA) is weighing modifications to the greenhouse gas (GHG) provisions in EPA’s Renewable Fuel Standard (RFS) to allow corn ethanol to qualify as an advanced biofuel, a move that could help bolster ethanol amid resistance in Congress to raising the RFS cap on corn ethanol while allowing for increased supply of the fuel, sources say.”

Much like the Washington Post editorial board did yesterday, The Wall Street Journal editorial board weighed in today on ethanol tariff issues and recent activity on that subject by Iowa GOP Senator Charles Grassley.

Today’s Journal opinion piece stated that, “Washington runs on political leverage, and at the current moment few people have more of it than Chuck Grassley. President Obama is desperate to have the Iowa Republican sign on to some version of ObamaCare to give cover to jittery Democrats. So in a remarkable noncoincidence, the Obama Administration decided to roll over last week on one of Mr. Grassley’s major concerns: ethanol.

“Mr. Obama’s nominee to be Ambassador to Brazil, Thomas Shannon, had made the political mistake of saying at his nomination hearing that it would be ‘beneficial’ for the U.S. to lift the 54-cent-gallon U.S. tariff on ethanol from Brazil…[H]owever, the tariff is sacred policy to Mr. Grassley, who promptly put a hold on Mr. Shannon’s nomination until he got a pledge that no such repeal would be sought. He got his promise last week in a letter from Secretary of State Hillary Clinton and Trade Representative Ron Kirk, and he promptly lifted his hold on Mr. Shannon.”

The Journal opined that, “Trade protections and government mandates for ethanol leave American consumers holding the bill in terms of higher food prices—up to 10-15% higher, according to a Congressional Budget Office report. In a year, three billion bushels of corn and millions of acres of farmland are diverted to ethanol from food production.”

Africa & Agriculture- New U.S. Perspectives

An AFP article from yesterday reported that, “US Secretary of State Hillary Clinton called Wednesday for a new approach to food aid, saying one that aims to boost agriculture is a key part of the new US administration’s foreign policy.”

The AFP article added that, “Deploring that some one billion people around the world suffer from hunger, Clinton said rich nations for too long have shipped emergency food rather than helping poor nations improve their crop yields.”

Later, the AFP article pointed out that, “Despite the initiative, rich and developing nations remain deeply at odds over agriculture — a topic that has brought the so-called Doha negotiations at the World Trade Organization on a global free trade accord to the brink of collapse.

“The developing countries accuse the United States, Europe, Japan and other rich economies of distorting markets through their agricultural subsidies, ultimately contributing to hunger.

US Agriculture Secretary Tom Vilsack, appearing alongside Clinton, said the United States ‘is prepared to talk about subsidies’ in the Doha round.”

Prepared remarks from yesterday by Secretary of State Hillary Rodham Clinton and Secretary of Agriculture Tom Vilsack can be viewed here and here.

In part, Sec. of State Clinton noted that, “While our past assistance has yielded gains, we have spent too many dollars and too many decades on efforts that have not delivered the desired long-term results. Too much money, for example, has stayed in America, paid salaries to Americans, furnished overhead to the contractors that were used. Too little has reached the intended target or contributed to lasting progress… We will focus on country-driven solutions that give responsible governments more information, capacity, and control as they tailor strategies to meet their needs.”

In part, Sec. Vilsack stated that, “We need a comprehensive approach focused on sustainability. We must address not only increasing availability of food by helping people and countries produce what they need, we must make food accessible to those who need it, and teach people to utilize it properly so that they make the most of it.”

Mary Beth Sheridan and Stephanie McCrummen reported in today’s Washington Post that, “Clinton’s trip comes just three weeks after President Obama visited Ghana and laid out his emerging policy toward Africa. Like Obama, whose father was Kenyan, Clinton is emphasizing good governance and touting a $20 billion U.S.-led program to provide poor countries in Africa and elsewhere with agricultural aid aimed at small farmers.”

Keith Good

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