Farmers, ranchers and forestland owners would stand to gain significant and widespread economic benefits if a properly constructed Renewable Electricity Standard is implemented on top of the Renewable Fuels Standard set by federal energy legislation in 2007.
The findings come in a University of Tennessee Bio-based Energy Analysis Group study commissioned by 25x’25 and released at the National Association of Farm Broadcasting convention in Kansas City, Mo.
The authors of the study, Burton C. English, Daniel G. De La Torre Ugarte, Chad Hellwinckel, Kimberly L. Jensen and Christopher D. Clark, are professors and Jamey Menard is a research associate in the Department of Agricultural and Resource Economics at the University of Tennessee. Co-author Tristram O. West is an ecosystem scientist at the Joint Global Change Research Institute in College Park, Md.
The study, “Implications of Energy and Carbon Policies for Agriculture and Forestry Sectors,” found that a Renewable Electricity Standard could generate $14 billion in accumulated additional revenues for agriculture and forestry, increasing the demand for and production of dedicated energy crops for biomass feedstocks. And while that would cause shifts to move intensely managed pasture land, University of Tennessee researchers predict that forest residues, thinnings and tree harvest will play a significant role in meeting those feedstock demands. There would be no significant changes to commodity cropland use, or crop and livestock prices. Since both prices and production increase over time for beef, pork and poultry, gross returns will also increase.
The study goes on to show that a Renewable Electricity Standard could create an additional $215 billion of additional economic activity, more than 700,000 jobs and $84 billion to the nation’s gross domestic product.
Standard to be met by 2025
The study evaluates a 25 percent Renewable Electricity Standard to be met by 2025. However with exceptions for small power retailers, hydropower sales, municipal solid waste sales and energy efficiency credits, the effective Renewable Electricity Standard is 17 percent by 2025. Issues of grid access and infrastructure needs were not addressed in the study.
Burton English, professor at the University of Tennessee, says that “positive benefits occur if a carbon payment mechanism is added to the Renewable Fuels Standard and Renewable Electricity Standard. This policy component would see revenues generated by practices that reduce greenhouse gases, such as conservation-tillage, bioenergy crop production, afforestation, grassland management and methane capture.”
Income from payments for reducing greenhouse gas emissions and market revenues would be higher than the potential increase in the cost of inputs. Under this scenario, English says that, “the net returns to agriculture climb to $57 billion more than the Renewable Fuels Standard alone. The national impact is equally significant, adding $226 billion in economic activity, 800,000 jobs and $87 billion to the nation’s gross domestic product.”
“This study provides good information in preparation for what is expected to be the next round of state and national energy legislation,” says Bart Ruth, past president of the American Soybean Association and 25x’25 policy chair. “It’s the kind of information that can be used by policymakers in developing what is an absolute priority for a clean energy future — a carefully constructed energy strategy, complete with long-term incentives and programs. A comprehensive and stable energy policy is necessary to get the most out of what America’s farms, ranches and forestlands have to offer to a clean and economically viable energy future. A properly constructed Renewable Electricity Standard could be an integral component of such a strategy.”
To read the report, go to BEAG.ag.utk.edu.
EDITOR’S NOTE — The economic policy analysts who contributed to this report work in the Department of Agricultural and Resource Economics and Agricultural Policy Analysis Center at the University of Tennessee Institute of Agriculture. They and their colleagues track and forecast policy and commodity trends that affect U.S. and world markets. Their research is a core component of UT’s pioneering Tennessee Biofuels Initiative and the new Center for Renewable Carbon.