The Impact of Renewable Energy on the U.S. Farm Policy Debate

8/8/2019 The Impact of Renewable Energy on the U.S. Farm Policy Debate

1/22

The Impact of Renewable Energy

on the U.S. Farm Policy Debate

Keith Good

FarmPolicy.com


2/22

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The Impact of Renewable Energyon the U.S. Farm Policy Debate

A Report to the German Marshall Fund of the United States

K G

P, FP., I.1

J F, G M F U S

M 2007

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1 FP. U.S. . U , ,v, U.S. EU .


4/22

he Impact o Renewable Energy

on the U.S. Farm Policy Debate1

S S 2006, k ,

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.

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2007 F B. C B

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x k

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Abstract


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6/22



B v z 1996

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k 1997 1998,

k A ,

z

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. I , M 2001, C

2002, v -

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k $73.5

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2002 F B v : 1)

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1990.3

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I A 2006 $2.15,

v $5.37. B

1 E, A B.W. U.S. F P: T F 200 Y.Economic Research Service, Agricultural Outlook, M 2000.

2 W, P; Y, C. E P, M. 2002F A: Pv I C Mk.A I B N. (AIB778), Nv 2002.

3 I.

F 2007, I j $3.86 $7.15,

v, M v

$4.0625 C

B , $1.72

10- v.4 U.S. D

A (USDA) 2006-07

k v v

$3.00 $3.40,

v v U.S.

x

$6.10 $6.50 . USDA

j x v $3.00 x 10 .

Current Market Dynamic

-, -

k v

x

. S 2004, U.S.

10

2006 .

S v j

v. S 2004, U.S.

3 2006

v v

3.18 . S A

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Ex k

v. C x

2006 (2.25 )

v 1.88 v v

x (2000-01 2005-06),

v 1979-80 (2.4 ), 1980-81 (2.39

) 1989-90 (2.37 ). N,

4 R, P. E B H H C: HF P. Bloomberg News, F 9, 2007.


7/22

he German Marshall Fund o the United States4

USDA v v 1978.5

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v 1 v v

x (2000-01 2005-06). Lk,

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x .

k

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v

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x 1990.

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O v

. I 2004, C

x V E

Ex x C (VEEC) v x

2010 x $0.51 ,

v

. I ,

U S v

2.5 $0.54 x

.

5 I.

6 Nvk, N H, J. C E P R E? he Main Street Economist. FRv Bk K C, J 2007.

O

E P A 2005,

R F S (RFS) q

U S

. RFS

v 2006

2012 4.0 7.5

.7 I S U J

23, 2007, P G W. B

q 35

v

2017 v 2012

A v v k , k

. W U.S. S

C A, N F

J 10, 2007, USDA C E

D. K C x , I 2000,

1.6

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6 2000 v. I 2006,

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, 20 2006 v.

D. C ,

USDA U.S.

250 2006, 173-

2005. F 2005-06

, 8

; 2006-07,

x 2.6

, 13

. 2.6 q

x 229 , 7 U.S.

2006.

7 Bk, A Z, Sv. E R CMk. A Wv, A 2006.


8/22



As the 2002

Farm Bill is due

to expire in

September 2007

a key concern

for policymakers

in drafting the

2007 Farm Bill is

the sustainability

of these current

market condition

S 2006. I 2004,

v

$28.74 (k J 30). B A 26,

2005, v

$58.74; J 2006, v

$65.11

(k J 30).8

k

. I J 2004, v k

O, Nk $1.40 . I A 2005, v

$2.07 . B J 2006,

k v

$3.58.9

v v

x x .

I , E P A 2005

x

v x

q. A ,

MBE v

-x x q.

M MBE v

MBE

k. E P A

2005

MBE. Hv,

MBE

q . A

, S

q v v MBE

8 E I A. A C S PFOB W E Ex V (D B) 1978 2007.

9 Nk U G E Av RkP. O Nk Gv W S.

.

[E

P A 2005] k .10 A

, MBE

1990 v q

x k MBE. B q

x M [2006],

,

x k.11

MBE

-,

, -

k k,

2006.

S, M 2006,

he New York imes , [E]

$1.30 ,

v

MBE.12

Sustainability

A 2002 F B x S

2007, k k

2007 F B

k . j

k

k

k z . Mk

x v

1996 2002 F B .

v -1990 ,

10 Kk, Dv Bjj, Vk. G S CP P Dv E C. Te New Yorkimes, A 22, 2006.

11 he Wall Street Journal. A G G I. E, M 8,2006.

12 W, M L. N R G H Dv U P. he New York imes, M 6, 2006.


9/22


Because corn-

based ethanol

may have to

compete with

unleaded gasoline

as a low-cost input

for fuel blenders,

as production

exceeds mandate,

ethanol demand

will be influenced

by the price of oil.

v 2002 .

k .

-

.

Brief Analysis of Corn-Based

Ethanol Production

D k k v. R

RFS E P

A 2005, 4.0 2006

7.5

2012.

q v ,

. Ev

E P A 2005

x , q

k .13 A

, x ,

-v . D

q,

x

MBE, v

,

v .14

Demand for ethanol. O

-

q x

. F

13 Nvk, N H, J. C E P R E? Te Main Street Economist. T FRv Bk K C, J 2007.

14 Nk U G E Av RkP. O Nk Gv W S.

U S k k - v k

q . E

x

RFS q x

v , v

-

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x

x k v.

I

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k v

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v x .

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k k .16

j

x 10

v k

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10 , 7

150

.17 R F A

5.4 . Hv, J 2007,

15 Y, B D. S, R. E B-: A, I, Mk C R Ex P. CRS R C, RL 33928,M 16, 2007.

16 I.

17 F, J. W. Forbes, F 12, 2007.


10/22



x U S

j 11.4

x .18 I

RFS MBE x

v, x v

v

j .

C,

q U S. S

, v

, . B -

v

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x ,

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k k v

.

Corn and ethanol price relationships. A

x v

v

v v . I

v

x 33

v $0.51 x

.19

E v z

x k. I

$1.69 (v k

O D

2006) $2.43 (v

k O D

18 C, K. S B U.S. S A-, N F. J 10, 2007.

19 H, C; , W D, O. E E. P Ex, D 2006.

2006), v . B

x ,

x ,

0.67 ( j) $0.51 (

x ). U , -

$1.69

$1.64 .20 I ,

x k v

.

A

. A ,

kv

. E v

k

.

v

j x

v. A ,

kv .

R F Rv Bk

K C , B

, $1.55

$2.13 $2.71

$40 $60 $80

, v. I , Nvk

H

$40 , k

$3.50, 9

.

E P Uv v

20 G, D. C: S C M S D.Uv I Ex, J 7, 2007.


11/22


If producers plant

more corn, the

price of alternative

program crops

such as soybeans

and wheat could

also increase.

, , . B

, H, , D

k

$60 ,

$3.96 kv.

Hv, v

v

x $0.25 ,

$4.82

kv

$60 .

C A R Dv

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k

$60 , kv k

$4.05 . B

v

v v ,

I S kv

$2.67

$40 $5.43

$80 .21

R W I S Uv

kv ,

E $0.10

x

$0.28 v .

2.8 .

C, v

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I USDA A Mk

21 E, A; kz, S; H, D J.; Bk,B A. H, C E. T L-R I C-B E G, O, Lvk S: AP A. CARD B P 06-BP 49. C- A R Dv, Nv 2006.

Sv (AMS). D v ,

. A

F 9, 2007, v

$1.89 v

$3.73 $2.68.

S, v $1.79

v $3.66

$2.48 F 2.

Corn supply. F

. A v, U.S. x .

v

j k .

S k

v ,

. Y k

. Av U.S.

2004 160.4

149.1 2006. A

v v 30 ,

v .

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Bz A

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U.S. .

Federal policy. A -


12/22



. C, v j -

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J 23, 2007, P G W. B

v . P

q v

v

-

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x 2009. S v

v . S

v ,

U.S. k v

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j v.

E v C

x 2009,

$0.51.22 v

k

v .

Technological change. v -

-

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v ,

k, k

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v

110 .

22 D J N Sv. Ex: C. M ED. F 23, 2007.

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84 .23

Hv, F 2007, U.S.

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F 2007, USDA , C U

S x 200910,

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2005, MBE v,

,

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USDA , L

j

v x v . Rv

v

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v v

x

.

Federal Budget Considerations

v 2007 F B

H S B C. Pj

CB O (CBO) v

23 J, Dv. T C T. National Review, F 22,2007.

24 C, D. G P P W E-. he Atlanta Journal-Constitution, F 8, 2007.


13/22


BC . CBO ,

J, M, A,

v -

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j k ,

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A x

k

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k , v v

.

B C M CBO

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1994, 1999, 2000, 2001, 2002, 2005. Hv,

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S B C,

x x

v

q

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CBO M 2007

j C C C (CCC)

x $27.5

FY2008-2016 (S F 2) CBO

M 2006. CBO

j $4.2

FY 2007, $3.9 FY 2008, $2.9

FY 2009 . I

, $15

$27.5 j CCC .

,

v

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A x

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30, 2007, USDA , Dv

, U.S. 15

2007

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1944 12.1

2006.26

k

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B G P, x

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25 Mk, J. F C P: P I C. C R Sv, RS21999, M8, 2007.

26 USDA P R. C A Ex S 2007,USDA S. M 30, 2007.


14/22



A simple extensi

of the 2002 Farm

Bill would not

only be one of

the lowest-cost

options available

to lawmakers, bu

it might also be

one of the only

ways for farm

policy to fit within

a low budget

baseline for

spending on the

2007 Farm Bill.

, 1996

8.4 11

2006. A x

12.1 , 20 2006.27

U

CCC

v .

I ,

v ,

, -

,

k . A k

, j

. G ,

.28

27 I.

28 Mk, R Aq, P.I. C S SA. B O, A 2, 2007.

Implications

R

v v

U.S.

. S v v

x . A

x 2002 F B

- v

k,

2007 F B. I ,

x 2002 F B v

-k ,

. A ,

k k v

- v

, .29

A CBO ,

z v

29 Bk, B A. F P A H P: WD W W k? Iowa Ag Review, F 2006.

Figure 2: Ethanol demand impact on commodity program costs: 2007 Baseline minus 2006 Baseline

Source: CBO March 2006 and 2007 Baselines

0

-1

-2

-3

-4

-5

-6-7

$billion

2006 2007 2008 2009 2010 2011

Fiscal year

2012 2013 2014 2015 2016

Other commodity and conservationCorn payments


15/22


.

z,

A F B F (AFBF),

2007 F B

v z 2002

F B, j. AFBF

x k

CBO , q

v .30 M,

, N A

W G (NAWG) A SA (ASA), v

x F B

k .31

O , N

C G (NCGA R), v

k v

-

v v

(NCGA). Oz C

C G A (CCGA)

A F (AF) v

v

-v

v v

k .32

O J 31, 2007, U.S. S A

USDA 2007 .

A , 65

30 A F B F (AFBF) P R.AFBF U F Nx F B 2002 Lv. D7, 2006.

31 N A W G (NAWG) P R-. NAWG B Av 2007 F B P. O- 5, 2006. A S A (ASA) P R.USDA A A W S G NB I S N 2007 F B. O 12, 2006.

32 C C G A (CCGA) R. M-z A F F P. S 27, 2006;A F (AF) R. A 2007: A NFk D U.S. F P. M 2006.

2002 ,

, ,

v .

I USDA :

Strengthendisasterreliefbyestablishinga

v- - ,

v v , k

,

;

Provide$1.6billioninnewfundingfor , v

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j

$500 -

- v, ;

Increaseconservationfundingby$7.8billion,

v

, Ev

Q Iv P R

W E P.33

M , C

R Sv R ,

A 2007

A . ,

USDA S Mk J, k

-

k q, ,

. 34

v k ,

v

33 USDA P R. J Uv 2007 F B P-. J 31, 2007.

34 J, R. F B P Lv A 110 C. C R Sv, RL 33934,M 22, 2007.


16/22



Future ethanol-

industry growth

will require

increased

investment in

technologies tha

use cellulosic

feedstocks.

. N v j I

,

F B

k PG x

.

Lk, v

, k

v v

v v ,

k q v

PG .

A

W Oz

(WO) U.S.

x

. A

C R Sv x

, P x 1990

k

,

v v

. Fx v

v ( )

( , not

v). F v

v v

v,

k v v .35

W ,

USDA , I M

2005, WO U.S.

, x ,

35 Mk, J. F C P: P I C. C R Sv, RS21999, M8, 2007.

v.36

S v v

k

.37

B WO ,

x

v ,

v 2005,

k v

.38 I , 108

C

( S C

Cv A 2004, P.L. 108-465).39

M v v ,

k v S

v v,

,

x

2007 F B . Hv, v

x

q .

S v v

k v

j v -,

36 J, D; K, B; Y, E; Hf,L; L, G B, V. E F V P R: H W Mk B

Af? USDA-ERS, Nv, 2006.37 Mk, J. F C P: P I C. C R Sv, RS21999, M8, 2007.

38 H, S J. Sz A F. he Chicagoribune, M 16, 2007.

39 R, J M. S C I 109 C.C R Sv, RL32951, O 24, 2006.


17/22


. P EvQ Iv P, Cv Rv

P, W Rv P,

Cv S P, x

2007 F B, v

, -

, z .

A j -,

-

v

v

. A ,

. A

, L

[Cv Rv]

v

,

A D

z.40 Pk

j

v

Cv Rv P.

A , vk v

-v Cv

Rv P

. S

vk , , k, k,

v

k xz v

v k v

. I ,

40 B, P. S C P F USDA BP F Cv L. Te Des MoinesRegister, M 24, 2007.

k v v,

x .

N vk v

. I

v

(x )

x k

k.

M, k k k

x 2007 F B.

S, H A C

C C P , F

- q

v

k. A

k x v

. F B

x

v

.41 S, S R L (R-IN)

, W

,

xv ,

. F

z , I

2000,

x .42 F v

k v

.

v H

Rv v

2007 F B.

41 P, U.S. R. C (D-MN). C .T H, M 13, 2007.

42 L, U.S. S. R (R-IN). E O CN F P P. T H, M 13, 2007.


18/22



Budgetary

pressures

stemming from

high market

prices, brought

on in large part

by the increased

use of renewable

fuels, will impact

the policy

direction of the

2007 Farm Bill.

Healthy Farms, Foods, and Fuels Act of 2007(H.R.1551) k j v

v A

, v, v

,

. [Act]

v

, x

.43

A , Equitable Agriculture oday for

a Healthy America Act (EA Healthy Act)

k,

,

v .44

I S Uv P B Bk

z C

. D. Bk

, A z

C k ,

x z

C .

k C :

1. D v v k

j v -v.

2. K

v .

3. C v

,

v .

43 K, R. R. R. K G, S MzI Mj F B R L. N R,M 15, 2007.

44 Cz, D R. R. Cz, P, Sz, K,L, MC I B B P SC. N R, M 20, 2007.

I , k v z

. USDA

v C-C P k

v- -

x . H,

v

U S.45

Hv, k

v U.S. x

v , k k

v ;

v k

. ,

k k

, ,

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j v k v

, ,

v , k

, v

.46

D

, k

v k

z,

v v

,

. B

k ,

,

2007 F B.

45 D, C; E, A Ck, N. T20 C U.S. A FP. USDA E R Sv, J 2005.

46 I.


19/22


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Documents

The Impact of Renewable Energy on the U.S. Farm Policy Debate