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New Energy Economics: Can Ranch Productivity Reduce Greenhouse Gas Concerns?

October 16, 2009

[Source: Cole Gustafson, Biofuels Economist, NDSU Extension Service]

On Sept. 26, I spoke at the North Dakota Stockmen’s Association convention and outlined both the opportunities and risks cattlemen face with impending climate change legislation aimed at reducing greenhouse gas (GHG) emissions.

Cattlemen need to inform others what they have done and explain that their financial interests and goals of protecting the environment are similar.

The most immediate opportunity for cattlemen, if climate change legislation passes, is to sell carbon offsets to regulated industries, such as coal-fired electric utilities because they have difficulty reducing their GHG emissions. Cattlemen can market these offsets through the Chicago Climate Exchange. For each acre on which ranchers improve their range management practices, they can claim 0.12 metric ton of carbon saved, but only as long as prescribed actions are followed. Unfortunately, the current value of carbon has fallen to less than 25 cents per metric ton. Passage of climate change legislation would no doubt raise these values considerably. Just a year ago, carbon was trading at more than $7 per metric ton.

The risks cattlemen face are far greater. The Environmental Protection Agency (EPA) has indicated that the top three targets for reducing GHG are energy generation (especially coal-fired energy plants), transportation and livestock.

Livestock are a concern because of the methane gases they produce. Last April, the EPA published a proposal for regulating livestock emissions. Initially, the EPA would target the largest concentrated animal feeding units of dairy cattle (5,000 head or larger), hogs (73,000 head or larger) and cattle (89,000 head or larger). Nationwide, 44 farms and ranches would fall under this regulation. Combined, they emit 2.6 percent of all manure emissions.

While North Dakota cattlemen may sigh because they don’t directly fall under these regulations, they most likely would be affected when selling feeder cattle. To the extent large feedlots face additional regulation and compliance costs, these additional expenses would be passed on to North Dakota ranchers in the form of reduced bid prices.

During deliberations of the Waxman-Markey climate legislation in the U.S. House of Representatives last summer, the EPA agreed to exempt livestock for the time being. However, it is unknown when the EPA would become more active again.

While cow-calf operators, the corn ethanol industry and feedlot cattle buyers don’t agree on all topics, all three have common interests in climate legislation. Most corn ethanol that is produced doesn’t meet proposed EPA guidelines due to “indirect land use.”

Both corn and dairy commodity groups have taken very proactive steps to inform policymakers and the general public about their efforts to reduce GHG. The groups argue that increased productivity from higher yields per acre or milk per cow reduces GHG emissions because less land is required to produce the same volume of output. Hence, GHG emissions are reduced because less Amazon rainforest has to be converted into food production to feed an increasing world population.

North Dakota cow-calf operators can make the same claim. Improved genetics, higher conversion rates, rotational grazing, reduced diseases and lower death losses have combined to increase production per acre of land. In most instances, operators have adopted these practices because they make money. Cattlemen need to inform others what they have done and explain that their financial interests and goals of protecting the environment are similar.

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