AGEC 429: AGRICULTURAL POLICY LECTURE 26: U.S. AGRICULTURAL RESOURCE AND ENVIRONMENTAL POLICY

AGEC 429: AGRICULTURAL POLICY LECTURE 26: U.S. AGRICULTURAL RESOURCE AND ENVIRONMENTAL POLICY

AGEC 429 Lecture #26 U.S. AGRICULTURAL RESOURCE AND ENVIRONMENTAL POLICY Basic Premise of Resource and Environmental Regulation: Markets do not allocate resources in a manner that is in the best long run interest of. Market Failure The Main Reason for Government Policies Related to Resource and Environmental Policies: Market failure occurs when markets do not allocate resources in a manner that serves society as a whole and/or when certain segments of society are excluded from realizing market benefits that other segments enjoy.

U.S. Agricultural Resource Policy Public Goods: Problem for Agricultural Resources Goods provided or protected by government for society in the interest of the common welfare of society. - Public goods are available to everyone. - One person s consumption of a public good does not affect another s consumption. - The argument is that the private sector will not provide or protect public goods either because a profit cannot be earned by providing such goods or because private firms earn less profit by protecting such goods than by exploiting them. Basic Resource Use Policy Issues Should the societal benefits from the use of all or particular resources be treated as, that is, protected from the effects of profit-driven decisions through government programs? If so, which goods and what form should any such programs take?

Four Basic Agricultural Resources of Concern for Policy Farmland Water Energy Endangered Species and Biodiversity

Farmland Increasingly treated as a Key Policy Questions Regarding Farmland (1) Are there conditions under which farming should be treated and regulated as a public good? (2) Which specific attributes of farmland should be treated as public goods to be protected and regulated? (3) What specific measures should be used for protecting these public goods? (4) Are such public goods issues federal, state, or local issues?

Farmland Three Primary Motivations That Drive Farmland Policy Our ability to meet U.S. and global food needs - Malthusian concerns - Biotechnology - Farmland competition for water resources. Preserving fragile lands Preserving amenities associated with farmland - Open spaces and scenic views particularly in areas close to urban centers.

Farmland Three Primary Motivations That Drive Farmland Policy Our ability to meet U.S. and global food needs - Malthusian concerns - Biotechnology - Farmland competition for water resources. Preserving fragile lands Reverend Malthus predicted that overpopulation would inevitably lead to starvation, pestilence, and war: "Human population grows exponentially, like compound interest in a bank account, but farm output rises at a slower, arithmetic rate; the result, human population will inevitably and repeatedly outstrip its food supply." Reverend Robert Preserving Malthusamenities associated with On the Principle of Population, 1798. farmland Malthus - Open did not spaces foresee and the scenic or views particularly in areas close to urban centers. the as countries develop and incomes grow.

Farmland Policy Options for Farmland Use Allow Free Market to Determine Farmland Use and Value Zoning Laws Right to Farm Laws Purchase Development Rights Preferential Property Tax Appraisal Agricultural Land Retirement Programs Cross-compliance

Water is single largest user of water: 80% of all water consumed in U.S. About 75% of all irrigated cropland is. Areas of Greatest Conflict over Water and Water Policy Irrigated fruits and vegetables (mostly in the west) Irrigated farming regions of the arid Southwest

Water Agriculture is single largest user of water: 80% of all water consumed in U.S.

Water Three Key Questions Motivating Water Policy Debate (1) Should water for or be given preference over water for agriculture? (2) Should farmer-owners of water rights be allowed to sell those water rights even if it threatens the agriculture of the region? (3) What role should federal government play in development of water policy relating to water supply and demand? Two Sources of Most Water Problems Laws that give owners of water rights the right to use water however they want as inefficiently as they want. When water is a free good, there is no limit on its use nor any protection against pollution or misuse/overuse

Water Policy Options for Water Issues Allow the Market (supply and demand) to Determine Water Use and Value Reasonable Use Requirements Increasing Supply of Surface Water Water Allocation Policies

Energy Renewable energy (bioenergy derived from plants) is one of the most rapidly growing sources of new energy. Rising fossil fuel prices and the Energy Policy Act (EPAct) of 2005 have created demand for new energy sources. The Renewable Fuels Standard program, created under EPAct 2005 established the first renewable fuel volume mandate in the United States. - The original RFS program (RFS1) required 7.5 billion gallons of renewable-fuel to be blended into gasoline by 2012. - The RFS was expanded under the Energy Independence and Security Act (EISA) of 2007 (RFS2) to include diesel fuel and to increase the volume of renewable fuel required to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022. - RFS2 is intended to (1), (2), and (3).

Energy The growing use of corn for ethanol highlights 2 key issues: (1) Ethanol production from corn is small compared to size of U.S. gasoline demand. To meet RFS2 requirement, other sources of renewable energy must be developed and used. (2) Law of Unintended Consequences: - Rapid increase in subsidized, grain-based ethanol production affects agricultural markets, local communities, consumer prices, and environmental quality in various ways. - For example, what have been the implications of increasing use of corn for ethanol production for the production of agricultural commodities?

Energy Farm Bills and Energy Policy Farm Security and Rural Investment Act of 2002 first farm bill to include an energy title - Title IX created range of programs to promote bioenergy and bioproduct production and consumption (that is, subsidies to produce biofuels and to reduce the cost of biofuels to consumers) Food, Conservation, and Energy Act of 2008 and the Agricultural Act of 2014 both included an energy title - 2008 Farm Bill provides additional subsidies for biomass production, particularly for advanced biofuels, including biodiesel and cellulosic biofuels. - 2014 Farm Bill basically extends the renewable energy provisions of the 2008 Farm Bill and adds additional funding to subsidize biofuel production

Endangered Species and Biodiversity Biodiversity is concerned with. - Biodiversity is simply the variety of all life, the different plants, animals, micro-organisms, their genes, and the ecosystems they form. - Loss of biodiversity is considered a serious environmental problem with severe losses occurring in agricultural areas. Rate of extinction is accelerating to. Policy issues and options relate to the preservation of genetic diversity: - : Focused on slowing the loss of plant and animal species and the ecosystems on which they depend (rivers, wetland, etc.) due to human activity such as pesticide use. - All government agencies (including USDA) required to ensure that their activities do not jeopardize either the lives or habitat of the 700 endangered species in the U.S.

ENVIRONMENTAL POLICY AND AGRICULTURE Creation of Environmental Protection Agency (EPA) in 1972 marked beginning of. Two Types of Pollution: Point-source and Nonpoint-source - Point-source pollution can be identified as to source whereas nonpoint-source pollution cannot. - is usually point-source pollution because the source can usually be identified - is a nonpoint source of pollution because there are few well-defined points of pollutant discharge. Who Develops and Implements Environmental Policy? - Federal, state, and local governments ALL involved in development and implementation of environmental policy affecting agriculture - USDA s primary role: Helping farmers understand and adjust to all environmental regulations affecting their operations.

Environmental Policy and Agriculture Environmental Policies Affect 5 Areas Related to Agriculture Soil Conservation Water Quality Pesticides Air Quality Global Warming

Soil Conservation Soil conservation became policy concern during the years of the 1930s Main policy approaches to soil conservation (1) education through USDA Soil Conservation Districts; (2) payments to farmers as incentives to adopt soil conservation practices and technologies; (3) requiring soil conservation practices as a condition for receiving farm program benefits (cross compliance) EPA has emphasized to make changes that improve water quality, particularly related to animal waste management.

Water Quality 1972 Clean Water Act (CWA) - Mandated system of to reduce waste discharge as a requirement to obtain discharge permits. - Important implications for confined animal feeding operations. What do clean water policies target in agriculture? - Animal waste: contributes to biochemical oxygen demand which deprives fish of oxygen. - Pesticides, bacteria, and fecal coliform runoff: creates human health hazards. - Nitrogen and phosphorus runoff from fertilizers: fosters rapid growth of water grasses, algae, etc.

Pesticides CWA of 1972 increased pressure on both state and federal environmental regulators to find ways to control non-point sources of pollution like pesticide runoff. set maximum contaminant levels for drinking water. Air Quality Bigger concern for than for. - Strict emission standards for grain elevators and cotton gins - Biggest area of conflict: proposals for regulation of particulate matter, sulfur dioxide, nitrous oxide, and methane emissions from confined animal feeding operations.

Global Warming Controversy on whether global warming is occurring and, if so, what its effects are. Policy concerns over : - Warnings of rising ocean levels due to glacier meltdown and the potential effects on weather patterns. - Concern that agriculture becoming more productive in northern climates (developed countries) and less so in already warm climates (less developed countries). Kyoto Protocol (2005) - Specifies by how much developed countries must reduce. - No requirements on developing countries due to high cost of compliance. - U.S. refused to sign because of disagreements over how to deal with global warming. Post Kyoto Protocol Negotiations on Greenhouse Gas Emissions - Annual United Nations Conference on Climate Change - Mostly failure to come up with a new, internationally-binding deal on climate change. - Latest negotiations in Bonn, Germany in November 2017 - Still defining issues. Few accomplishments.

Global Warming Controversy on whether global warming is occurring and, if so, what its effects are. Policy concerns over global warming: - Warnings of rising ocean levels due to glacier meltdown and the potential effects on weather patterns. - Concern that agriculture becoming more productive in northern climates (developed countries) and less so in already warm climates (less developed countries). Kyoto Protocol (2005) - Specifies by how much developed countries must reduce greenhouse gas emissions. - No requirements on developing countries due to high cost of compliance. - U.S. refused to sign because of disagreements over how to deal with global warming. Post Kyoto Protocol Negotiations on Greenhouse Gas Emissions - Annual United Nations Conference on Climate Change - Mostly failure to come up with a new, internationally-binding deal on climate change. - Latest effort in Doha, Qatar in December 2012 reached an agreement to extend the life of the Kyoto Protocol (due to expire at end of 2012) until 2020.

Regulations Environmental Policy Options (1) Common law (class action suits) (2) Prohibit practices found to adversely affect the environment (EPA) (3) Require adoption and use of certain pollution-reducing practices or technologies (EPA) (4) Set standards for pollution reduction instead of requiring adoption of specific practices or technology (5) Provide cost sharing for adoption of better environmental practices and technology ( Carrot approach) (Example: EQIP) (6) Cross-compliance to deny program benefits to farmers if they don t employ specific conservation practices ( Stick approach) (Conservation Compliance) (7) Impose pollution taxes ( green taxes ) (carbon tax) (8) Pass right to farm laws (protection against nuisance lawsuits)