Potential Policy Changes and Existing Policy Issues

Potential Policy Changes and Existing Policy Issues

 

The overarching primary goal of a Biden administration is to return to a more predictable and professional management style as defined by bureaucrats around the world. On the campaign trail, Biden did not promise or commit to any specific policies but did promise to be more diplomatic and work closer with our allies.

Speculation is a Biden White House will push for a new revenue stream for landowners via carbon credits, making health care more affordable, and improving the rural infrastructure. A Republican senate would temper some of the proposed policies.

An infrastructure bill written primarily by urban Democrats will likely leans towards schools, hospitals, people transportation and away from freight transportation. Most of the Republican senators are also from urban areas. If Republicans win Georgia runoffs, the Senate Majority Leader is still from Kentucky, which in the past has proven beneficial to the barge industry.

The meat sector will be a focus on several fronts, including price transparency, alleged antitrust issues, and how meat packers dealt with Covid-19. Dairy policy may not see many changes in the next few years because in the 2018 Farm Bill.

The Affordable Care Act (ACA) expanded affordable health care coverage, but many farmers struggled to pay the premiums. Biden has made clear he wants to increase taxes for individuals making more than $400,000 annually. Biden’s tax plans include raising the corporate tax rate to 28%from its current 21% (though still below 35%, where it stood under President Obama) and the minimum tax on foreign income to 21% from 10.5%. He has also pledged to repeal the 20% deduction for wealthy individuals’ “pass-through” business income and a lower exemption level and other estate tax changes.

Biden has described his international priority as rebuilding relationships with U.S. allies, many of whom have been angered by Trump’s imposition of tariffs, the Wall Street Journal reports. Biden could start to rebuild those relationships by negotiating an end to some of the tariffs, which could also help his administration present a united front in confronting China, the article notes. Despite an accord between the U.S. and China signed in January, tariffs remain on about $370 billion in imports from China. A Biden administration is also set to inherit 25% tariffs on steel and 10% tariffs on aluminum that apply to most trading partners, including traditional economic allies like the European Union and Japan, as well as China and Russia.

Jim Wiesemeyer reports, “The election of former Vice President Biden has already spawned talk in China that the country will seek to renegotiate the Phase One trade deal with the U.S., according to the South China Morning Post. The report labeled the deal as being viewed in China as “twisted” and that they see a Biden administration as being more “rational.” A renegotiation is also in line with China’s wishes,” Shi Yinhong, an advisor to China’s State Council, said. But he also said the expectation is that a Biden administration would probably seek to extract more structural changes in any renegotiation effort. U.S. trade contacts in the article indicated it was “wishful thinking” on the part of China relative to renegotiating the trade deal and that any such effort that is seen as making the deal easier on China would validate Trump campaign statements that Biden would be soft on China. Ag interests will follow any such effort closely, especially if there is any attempt by China to reverse key components of the deal that address market access issues for U.S. ag goods. Another item traders will closely monitor is if China were to cancel previously purchased commodities or delay them.” Nasim Fussell, former Republican trade counsel at the U.S. Senate Finance Committee stated, “I’ve been told that if you close your eyes, you might not be able to tell the difference between the Biden and Trump trade agendas. Biden’s not going to be quick to unravel some of these tariffs.”

Biden’s trade policy would likely focus more on labor and environmental issues than the Trump approach. Biden says he wants to link trade policy with how countries deal with climate change promises. China’s record on labor and environmental issues is very poor. Higby Barrett believes a Biden administration will favor a multilateral approach to new trade agreements, such as the Trans-Pacific Partnership (TPP, now called CPTPP). How a Biden administration weighs economic concerns with social concerns will be of interest.

Another trade-related topic will be implementation of the USMCA. Expect a very close focus on how Mexico is following through with labor and environmental language relative to the agreement, and on Canada’s follow through on dairy policy issues.

Suburban women are the reason Biden won the election and the three big issues were politeness, climate change, and healthcare. Agriculture industries have spent a great amount of capital and time developing products with environmentally friendly traits. Agriculture industries should promote environmental initiatives, such as time released fertilizer that reduces nutrient runoff or water efficient irrigation. Being out in front with a game plan on how to solve environmental issues with government’s help is better than playing defense under a new presidential administration. Now is a good time to pitch new ideas or programs, such as “a small farmer cannot afford improved irrigation but with a special tax deduction or subsidy, the U.S. could increase food production and reduce water consumption. It is a win for everyone.” Any policy that is presented to politicians and bureaucrats should be presented with an environmental and economic slant towards helping small farmers.

Water of the U.S.

Jim Wiesemeyer reports, “Revisiting Waters of the United States (WOTUS) rule is part of coming Biden administration regulatory agenda, according to an analysis by Hogan Lovells (link). It says under the Clean Water Act, there is federal jurisdiction over “waters of the U.S.” The Obama administration had issued a revision to WOTUS in 2015, which was the subject of extensive litigation. The Trump administration issued a repeal and revision of the Obama era rule, which has also drawn litigation for removing groundwater, ephemeral and intermittent streams, and certain agricultural operations from federal oversight. “The Biden administration will likely repeal the Trump regulation but may modify the 2015 approach to stave off litigation exposure or seek a bipartisan solution in Congress,” the report says.” This has major regulatory possibilities concerning non-point pollution from water runoff from agriculture land. One way to reduce the conflict would be government incentives to invest in technologies to reduce non-point pollution.  Besides possible Covid-19/stimulus aid and fiscal year (FY) 2021 appropriations, Congress is expected to consider the conference report on a Water Resources Development Act (WRDA), as well the annual National Defense Authorization Act (NDAA).

Climate Change

Jim Wiesemeyer reports, “Robert Bonnie, who leads the Biden transition advisory team for USDA, was a Climate 21 Project member and served as undersecretary of natural resources at USDA during the Obama administration.” Although it is a long document (over 300 pages), Higby Barrett would recommend everyone read the Climate 21 Project  or at least the summary document and areas of interest. The issue of Climate Change as defined by a group of 150 Washington insiders will attempt to have a significant policy impact on all U.S. federal, state, and local agencies plus foreign governments and world organizations. The document contains aggressive language, such as describing the Department of Justice as the “tip of the spear” for climate change enforcement.

Overarching conclusions, the document details how to lever existing programs, increase regulations, and which foreign agencies to target for funding to drive towards a carbon neutral world. In addition, creating a White House National Climate Council (NCC) that is “co-equal” to the Domestic Policy Council and National Economic Council. The goal of the NCC is to ensure all government agencies receive a massive increase in funding for programs that can be levered to prevent climate change. Also help coordinate labor resources between climate change groups within the federal government and help make sure new employees climate change views are well vetted.

Must develop a climate policy at the Treasury Department that promotes carbon reductions through tax, budget, and regulatory policies. Climate 21 Project concludes the State Department and other departments should ensure the U.S. is a leader in the world climate change policy, which can be accomplished with the U.S. doling out money and encouraging attendance and participation by governments that do not view climate change as a priority.

Establishing a “carbon bank” under USDA’s Civilian Conservation Group (CCC) that could pay farmers and forest owners to store carbon in their soils and lands. Belief is the USDA has “enormous and under-appreciated discretionary financial resources and agency expertise” to address climate issues.”  Jim Wiesemeyer reported, “Biden will go all out on implementing a climate change program as much as possible administratively, including tapping USDA’s Commodity Credit Corporation (CCC). That’s according to the Washington Post, which reports that a Biden administration wants to “embed action on climate change across the breadth of the federal government, from the departments of Agriculture to Treasury to State — expanding it beyond environmental agencies” to accelerate U.S. efforts to mitigate global warming.”

The Climate 21 report states, “USDA can establish a carbon bank through administrative action by using existing authorities under the Commodity Credit Corporation (CCC), which has broad authorization to support, stabilize and protect farm income and prices and to support conservation, and which has been used in similarly innovative ways in the past.” The report indicates congressional action would come in the form of creating a national compliance market for carbon offsets, additional legislative authority will be required to allow the USDA carbon bank to sell purchased carbon credits into that market.” It also notes the following: “The intent to create a carbon bank could be announced in the first 100 days through the FY21 budget or separately. USDA should work with Office of Management and Budget (OMB) to secure approval for using the CCC to create a carbon bank.”  The key part in tapping USDA’s CCC for a carbon bank is getting congressional approval unless Biden administration lawyers see wiggle room in the CCC Charter Act. The need for congressional authority sounds like the efforts by ethanol industry supporters to use CCC to provide aid to that sector, a development that has still not occurred.

The challenge for businesses is to avoid the spear and possibly make some money. Higby Barrett will attempt to uncover some possible ways to make money. Having worked on carbon projects in the past, the key to acceptance is how the program is framed and the assumptions used in the carbon equation. For example, animal fats have an extremely low carbon score until it was assumed animal fats are a waste product. The assumption allowed the carbon from beef production to be excluded and animal fats carbon score skyrocketed. Assumptions tend to be political. For example, although palm fatty acid is a waste product, California regulators could not bring themselves to help the palm industry.

For the Department of Interior, carbon sequestration is a constant theme. It appears there will be a concerted effort to transform pasture into forest while reducing forest fires. Although not mentioned, difficult to see a path forward where public grazing of livestock is not negatively impacted. Planting that many trees will require a major effort that will require contractors and other inputs.

Department of the Interior Climate 21 Project Summary

Source: Climate 21 Project

 

Climate 21 Project states, “The Department of Energy’s core climate capabilities lie in its preeminent energy research, development, demonstration, and deployment (RDD&D) programs and capabilities. These capabilities are distributed across several DOE programs, including the Office of Energy Efficiency and Renewable Energy (EERE), the Office of Science, the Office of Nuclear Energy, the Office of Electricity, and several others. To accelerate action on climate change as part of an administration wide effort, DOE leadership will need to set a clear road map to prioritize early climate action, revitalize the research conducted by these RDD&D programs, and focus them on climate change and clean energy solutions.”

 

Department of Energy Climate 21 Project Summary

Source: Climate 21 Project

 

For the renewable fuels industry, this position could cut both ways. Electrifying cars and trucks via the Transportation Department and raising fuel standards will cut future ethanol consumption. The obvious option is to push for an ethanol content greater than 10%. Many in the environmental field who enthusiastically supported the government policy that drove the dramatic expansion of corn-based ethanol have now soured on corn-based ethanol and in some cases, now support the elimination of corn based ethanol. Lesson learn is what the government gives it can take away. Best renewable fuel policy option might be to frame the issue from a world perspective. For example, a mandate that all gasoline exported from the U.S. contain 10% ethanol as a method to lower carbon emissions in Asian countries.

Robert Bonnie has called for buying agricultural carbon credits via a reverse auction that would allow farmers, ranchers, and forest owners to bid the price at which they are willing to sell offsets. The credits would then be sold into the private market. Bonnie previously said Congress could authorize USDA to “buy, insure, and/or provide price guarantees for carbon credits.” Robert Bonnie was one of the three lead authors on the chapter for USDA.

Climate 21 Project states:

The US Department of Agriculture has enormous capacity to contribute meaningfully to an ambitious administration climate agency. Agriculture accounts for 9%  of US emissions, and US forests sequester 11-15%  of annual US fossil fuel emissions. Through actions in both sectors, agriculture and forestry can provide 10-20%  of the additional sequestration and emissions reductions needed to achieve net-zero emissions by 2050. USDA is also an important climate science agency and is at the forefront of critical climate adaptation efforts, including reducing catastrophic wildfires, enhancing food security, and bolstering crop resilience among other issues.

The incoming Secretary of Agriculture can get USDA off to a strong start by taking immediate policy actions with near-term impact and setting a solid organizational foundation for long-term impact. USDA has enormous and underappreciated discretionary financial resources and agency expertise that enable the agency to: (1) partner with farmers, ranchers and forest landowners to reduce atmospheric GHGs through carbon sequestration and emissions reductions; (2) reduce GHG emissions from rural energy cooperatives; (3) bolster the resilience of private working lands and public forests and grasslands; (4) promote sustainable bioenergy, wood products, and other bio-based materials (5) contribute to the scientific understanding of climate change; and (6) invest in climate economic development in rural communities.

Importantly, given current economic conditions, investments in climate change at USDA can support and create rural jobs in agriculture, forestry, conservation, and related businesses, thereby contributing to the economic recovery of rural America. Given climate skepticism by many in rural America, it is critical that agriculture, forestry, and other rural stakeholders view themselves as USDA’s partners to achieve climate goals. USDA initiatives should emphasize collaboration, incentives, the historic resiliency and innovation of agriculture and forestry, and the critical role that rural America can play in helping address climate change while creating jobs and economic opportunity.

Issues of diversity, inclusion, and environmental justice are important in all of USDA’s work, including climate change. Given USDA’s history of past discrimination against minorities, tribes and women in the implementation of farm and other programs, it is vital that USDA’s efforts around climate change seek input from diverse stakeholders and that policies are administered such that outreach and delivery to these communities are prioritized.

Pastureland that is not deemed environmentally essential could be transformed into forest to sequester carbon. Within the report is a carbon calculator by tree species and regions. Fast growing pine trees in the Southeastern U.S. is the best at sequestering carbon. Since planting large number of pine tree acres, the need for biodiversity for wildlife has entered a new variable into the equation. For older farmers with marginal land or absentee landowners, receiving an annual government payment for 30 years for planting trees should be very tempting.

 

Department of Agriculture Project 21 Summary

Source: Climate 21 Project

 

Nowhere is the example of framing an issue more relevant than in transportation. Climate 21 Project reports that “DOT’s authorities and programs provide significant opportunities to reduce emissions and increase resilience to climate impacts, including through vehicle efficiency standards, investments in electric vehicle charging infrastructure, support for transit systems and other low-carbon transportation options, and a “climate in all policies” approach to require consideration of climate impacts of transportation projects. DOT leadership will need to work closely with the White House and EPA to decide how to prioritize and sequence new standards for light-duty passenger vehicles and for medium- and heavy-duty vehicles. DOT can play a lead role in building and installing the charging infrastructure needed to support the electrification of vehicles, including passenger vehicles, local freight delivery vehicles, buses, port equipment, and more. Electrification presents a major opportunity for emissions reduction and could be a cornerstone of efforts to reinvigorate the U.S. economy. DOT should initiate a task force with senior-level engagement to focus on electrification policy, including investment in electric vehicle charging infrastructure along the interstate highway system.”

DOT should work to expand partnerships and relationships with state and local government to foster innovation and gather feedback on opportunities for the federal government to support and facilitate subnational leadership. Additionally, DOT should increase staffing within its Office of Public Engagement to bring in climate and environmental justice expertise to help shape and communicate DOT’s priorities.”

The carbon score of electric vehicles conveniently ignores the carbon emissions required to build a renewable power grid (construction, transportation and installation of windmills, solar panels, transmission lines and battery storage), the electric vehicles, and electric fueling stations. Of course, the economic benefits are all included. How the carbon equation is framed is often the key to achieving a great carbon score.

It should be remembered that the highly efficient U.S. transportation system’s carbon score is better than most countries. Improving the carbon score is a very important variable in improving the publics acceptance of new transportation projects. Transportation improvement projects (higher truck weights, lower wait times, deeper ports, and rivers) often lower carbon emissions.

Department of Energy Project 21 Summary

Source: Climate 21 Project

 

Food and Agriculture Climate Alliance

The website states, “The Food and Agriculture Climate Alliance (FACA) consists of organizations representing farmers, ranchers, forest owners, the food sector and environmental advocates that are working together to define and promote shared climate policy priorities.

FACA members recognize that farmers, ranchers, and foresters are both on the frontlines of climate impacts and part of climate solutions. This shared understanding has allowed members to break through historical barriers and form an unprecedented alliance.

The group first united around three simple principles:

  1. Support voluntary, market- and incentive-based policies.
  2. Advance science-based outcomes.
  3. Promote resilience and help rural economies better adapt to climate change.

With that foundation, FACA developed policy recommendations in six areas of focus: soil health, livestock and dairy, forests and wood products, energy, research, and food loss and waste.”

The following link has a complete description of the organization’s recommendations. FACA and Climate 21 Project will provide environmental information concerning agriculture policies to the Biden Administration.

Below are FACA’s four overarching goals:

1. Provide voluntary, incentive-based tools for farmers, ranchers, and forest owners to maximize the sequestration of carbon and the reduction of other greenhouse gas emissions and increase the resilience of the land. Support additional technical assistance measures to ensure producers can overcome barriers to adoption of practices that can lead to significant reduction of GHGs and improvements in soil health.

2. Establish policies that foster the development of private sector markets for GHG credits and provide the appropriate role for government in that development. The public sector should ensure that verifiable reductions occur and provide farmers and forest owners with the technical support needed to participate voluntarily.

3. Incentivize agricultural and forestry producers to prioritize climate-smart practices through an array of public and private sector tools, including transferable producer tax credits, a U.S. Department of Agriculture administered carbon bank and the enhancement of existing USDA conservation programs.

4. Incentivize farmers to reduce energy consumption, increase use of on-farm renewable energy, and make continued progress toward reducing the lifecycle GHG emissions of agriculture- and forestry-based renewable energy. Achieve these objectives by expanding and revising agriculture and forestry energy programs administered by USDA and the U.S. Department of Energy, and by updating the analysis of GHG emissions under the Renewable Fuel Standard.

The report provides a detailed outline of potential policies but the details of how the policies will be executed is not developed. If a company or organization wants to enter the process, joining FACA is one option.

 

 

 

 

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