Center for American Progress

Getting the Farm Bill Right: Congress Can Ensure Renewable Energy Boosts Rural Incomes

Getting the Farm Bill Right: Congress Can Ensure Renewable Energy Boosts Rural Incomes

Biofuels are key to fueling a new farm economy, says Jake Caldwell, which is why they must take center stage in forthcoming farm legislation.

Two key budget battles and two congressional hearings this week on Capitol Hill will likely set the tone of the debate over reauthorization of our nation’s Farm Bill. That’s why it is so important for Congress and especially agricultural committee members in the House of Representatives and the Senate to fully discern the links between rural income growth, energy independence, climate change, and the current Doha Round of international trade negotiations.

The budget decisions and the hearings this week are just the places to make those links and then explain them to the public. As a first step, the full House should approve the $4.3 billion in agricultural disaster aid and drought relief included in the supplemental spending bill for fiscal year 2007, which ends on October 31, 2007. Second, Congress should follow the lead of Senator Kent Conrad (D-ND), the chairman of the Senate Budget Committee, who wants to ensure the fiscal year 2008 Congressional Budget Resolution includes $15 billion in additional funding and other increases for agriculture spending to support biofuels research and development, conservation, and other initiatives between 2008 and 2012.

With these two overarching budget requests settled, the House and Senate agriculture committees can get down to work on the specifics, beginning this week. On March 21, the Senate Agriculture Committee holds a hearing on agricultural trade and food aid and how it relates to the 2007 farm bill. That same day on the other side of Capitol Hill, The House Agriculture Specialty Crops Subcommittee will hold a hearing to review U.S. Department of Agriculture’s rural development programs and the agency’s rural development proposal for the 2007 Farm Bill.

Congress needs to seize this moment to zero in on the connection between the promise of farm-based renewable energy development in the United States and abroad to break current stalemates over the Farm Bill budget and international trade negotiations. The reason: Targeted reforms of our own agricultural support programs in tandem with specific incentives to boost renewable energy production around the globe could break new ground in the current Doha Round of international trade negotiations and in congressional debates over the budget.

First the U.S. side of the equation. The congressional budget resolution is set to be debated in both the House and Senate this week. Within the budget resolution, Congress must decide how much money to set aside for, among other things, farm disaster assistance, rural development programs, and renewable energy incentives. Farmers at home and our trading partners around the world will be watching to see how much money is spent in these programs so as to ensure more farmers earn more income in a manner that opens markets and provides for free and fair trade.

Here’s how Congress can answer our critics abroad while buttressing our own rural economy without busting the spending restraints imposed on the American people by the Bush administration’s runaway government spending these past six years. In order to rapidly and deliberately develop the next generation of advanced cellulosic biofuels, Congress should:

  • Target “green payments” to farmers for performing environmental services on their working lands, including growing dedicated energy crops, while decreasing our reliance on commodity-based direct payment subsidies.
  • Reward farmers for agricultural practices that combat climate change.
  • Increase funds in the new farm bill for existing renewable energy programs.
  • Encourage farmer-owned-and-operated biorefineries and local-owned biofuel plant cooperatives.

By taking these steps, Congress can show the world it is serious about reinvesting trade-distorting farm subsidies and combating climate change. Additional measures Congress should take in this arena—steps that reduce greenhouse gas emissions, generate $700 billion of new economic activity in our rural communities, and earn farmers $180 billion in new net income within two decades—include:

  • Providing new tax credits and loan guarantees to bring this next generation of biofuels to commercial scale production now.
  • Boosting the Renewable Fuel Standard while including adequate sustainability and greenhouse gas emission reduction safeguards, to ensure demand for new sustainably produced biofuels keeps pace with production capacity.
  • Lowering the current import tariff on foreign biofuels to further broaden the market for these new renewable fuels.
  • Reforming current federal support for biofuels to be more market responsive with a countercyclical federal subsidy that ensures that as oil prices rise, federal support for biofuels decreases, and vice versa.
  • Extending current Renewable Energy Tax Credits for wind and biofuel production to encourage new investment.
  • Creating new tax and production incentives for private sector investments in biofuel production infrastructure and clean energy marketplaces.

Both House and Senate agriculture committee members should zoom in on these specific recommendations to ensure that the new Farm Bill supports increases in prudent agricultural spending, doesn’t bust the national budget, contributes to our energy independence, and helps combat global warming. But panel members must also remember to keep a firm eye on how this plays out in the international arena.

U.S. farm trade and aid is critical to our economic growth, but so too are all forms of foreign trade and investment. That’s why it is so important that key reforms in our agricultural sector are linked directly to helping ensure the Doha Round of trade talks are revived. Congress, wielding the Farm Bill, can do just that by:

  • Rewarding all U.S. farmers for environmental stewardship on their working lands, including growing dedicated energy crops, by implementing a WTO-compatible “green payment” program and encouraging modest reinvestment of current commodity-based subsidies. Other WTO member nations must make similar farm tariff and subsidy reductions in their agricultural sectors.
  • Reducing gradually the current 54-cent-per-gallon U.S. tariff on imported biofuels to grow the global market in biofuels and take steps towards meeting the Doha Round’s overarching trade and development goals.
  • Supporting “development-friendly” agricultural support for the world’s poorest nations with specific capacity-building and “Aid for Trade” programs involving infrastructure, energy, and other sectors.

Other congressional committees also need to step up to the plate to ensure that renewable energy in the United States is given the lift it needs to become a truly viable energy sector in our economy. Without immediate legislative action by Congress to deliver biofuels to consumers, the overwhelming promise of renewable energy production will take decades longer to bear fruit, and in the process probably bypass the rural communities most in need of a fresh start. That’s why Congress needs to help:

  • Create a nationwide network of service stations selling E85 fuel, a blend of 85 percent ethanol and 15 percent gasoline.
  • Promote the sale of Flexible Fuel Vehicles that run on E85 fuel.
  • Encourage public awareness of biofuel alternatives in the marketplace through a federal biofuels certification and labeling program.
  • Boost research and development in advanced biofuels and biobased technologies through a variety of legislative funding avenues.

If all or most of the policy recommendations presented are acted upon by Congress and matched by our trading partners abroad, then it is not hard at all to envision, three decades from now, a far wealthier global agricultural sector contributing strongly to a far cleaner global environment and a far more innovative and diversified energy future. It is a vision that transcends political parties and national boundaries. It is a vision that is within reach.

For more information on the Center’s policy prescriptions in this critical arena, please see two recent reports, “Fueling a New Farm Economy” and “Energizing Rural America.”

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