Environmental Issues and the Carrot or Stick Dilemma – Discussion – AgFax
The scale of the New Mexico wildfires and the reduced availability of water for domestic and agricultural uses in the Colorado River Basin and California’s Central Valley provide clear examples of a level of environmental risk which would have been unthinkable a few decades ago when we started writing this article. column.
At that time, many in the farming community were skeptical of man’s role in the increase in the average annual global temperature, preferring to believe that the temperature change was due to natural causes. The skepticism of many was underpinned by fears that talk of a human-induced rise in temperature was just a pretext for more regulations to be enacted on how they carried out their farming and farming activities. ‘breeding.
As we eagerly await the development of the 2023 Farm Bill, there is no doubt that environmental issues and global climate change will be front and center. Over the past 70 years, about 50 percent of America’s acres have been devoted to cropland, pasture, and grazing. As a result, the direct and indirect effects of global warming will be directly felt by American farmers and ranchers.
If for no other reason than the potential magnitude of the impact of climate change on livestock and agriculture, environmental issues will be at the center of discussions on agricultural laws.
At this point in the Farm Bill process, our interest is less in the details of the various policy objectives than in the mechanisms that might be used to implement those policies. In considering potential incentives that could be used to achieve desired environmental policy goals, are we using the carrot (payments) or the stick (regulation) or a combination of both?
We’re sure most farmers would prefer payments to settlements, so let’s look at that option.
For our illustration, suppose the policy objective is to reduce the net carbon equivalent (CO2E) emissions of a farm and the government makes payments for a given unit of net reductions. This reduction can be achieved by reducing direct CO2E emissions from farms, increasing carbon sequestration in the soil, or a combination of both.
Further, assume two farmers.
Farmer A inherited his farm from his mother who operated the farm after the death of her husband. In both generations, the farm’s goal has been to maximize profits, with little regard for the CO2E footprint needed to achieve that goal.
Farmer B inherited her farm from her father and followed in his footsteps. His father was one of the first farmers in his county to implement a wide range of conservation practices that reduced the farm’s CO2E footprint over a 30-year period while providing a modest, but livable income. . She continued her father’s practices while introducing new ones.
If to achieve and maintain a given level of CO2E reduction, the proposed agricultural environmental policy is designed to provide a given level of payment (a carrot) for each unit of reduction. Since Farm A is larger than Farm B, it is clear that Farm A is eligible for a larger set of payments than Farm B.
But more than that, because farm A has done little in the past, its CO2E footprint per unit of production is larger than that of farm B and therefore has the potential to claim larger payments due to its past practices.
Are we paying Farmer A to make the first easy cuts that Farmer B and his father have already made? Do we credit Farmer B for reductions made in the past even if they do not represent a net reduction in the present?
Are we establishing environmental regulations and practices (a stick) that Farmer B already follows, but which will weigh heavily on Farmer A’s operation?
The answer to this dilemma is not obvious, but it is clear that if we are to address environmental issues, including climate change, we are going to have to struggle to find the right combination of carrots and sticks.