OMAHA (DTN) -- In the latest round of studies looking at the impact of climate legislation on agriculture, a report conducted for the agricultural renewable energy group 25x'25 finds a properly crafted cap-and-trade program could boost agricultural income $209 billion by 2025.

This map shows a sliding scale of income changes that would occur under an environment in which farmers and livestock producers have multiple carbon offsets or income options from climate legislation. Areas in green to blue show positive income impacts. Areas from white, orange and red show no positive gains or net income losses to agricultural producers. (Map courtesy of Bio-Based Energy Analysis Group, University of Tennessee)

According to the study, net returns for farmers and landowners are positive, generating up to $13 billion in annual additional revenue for agriculture and forestry.

A program that would provide farmers and livestock producers with multiple opportunities for carbon offsets and bioenergy crops would also generate $364 billion more in net returns for agriculture than a policy in which the Environmental Protection Agency continues to establish greenhouse-gas emission controls without offset benefits, the report states.

Leaders from 25x'25 had the study conducted by the Bio-Based Energy Analysis Group at the University of Tennessee. According to researchers, the report released Wednesday was just one of four parts that will be released by the group examining agriculture, forestry, national and state economies under different regulatory controls over climate.

"The study projects how meeting selected energy and climate change policies might impact the agricultural sector," stated Burton English, a University of Tennessee professor of agricultural economics and coauthor of the study. "Scenarios analyzed include alternative agricultural offset treatments and evaluates their potential impacts on the U.S. agricultural sector."

Further, the report concludes that "income from offsets and market revenues is higher than any potential increase in input cost, including energy and fertilizer." The cost of input prices has been a major sticking point for farmers who fear that a rush to natural gas by energy companies will drive up costs.

"Energy prices will very likely go up under any cap-and-trade scenario," stated Ohio farmer Fred Yoder, past president of the National Corn Growers Association. "But with a properly constructed system that maximizes the contributions agriculture can make to stemming climate change, farm revenues will grow as well, increasing by $13 billion per year."

Addressing one of the major concerns by other studies, the University of Tennessee report concluded that at carbon prices of up to $27 a ton, there would be little shift from cropland to forestry.

The report is released as the U.S. Senate is gridlocked on climate legislation, divided by both party and region of the country, even after the House passed a bill in late June. Congress won't have legislation completed before a United Nations summit in mid-December, and the U.S. is already drawing criticism for its lack of comprehensive policy.

Commodity groups also largely oppose the climate legislation because of what they see as a lack of incentives or benefits for farmers and livestock producers. The American Farm Bureau Federation opposes the climate bills while the National Farmers Union backs a cap-and-trade policy.

The analysis forecasts that demand for bioenergy crops will cause "significant shifts to hay and dedicated energy crop acreage" that will come from pasture. The analysis shows that regardless of the regulatory scenario, acres for corn, wheat and soybeans would show relatively little shift over time, a range of about 5.3 million total acres. Any major shifts in acreage would come from shifts in hay, pasture or dedicated energy crops based on the benefits, the report concludes.

If greenhouse-gas regulation is left up to EPA without carbon offset legislation, energy and fertilizer prices would increase and the carbon price, without a lid, could reach $160 a ton. If that scenario occurs, there would be potentially 60 million acres shift from crop production to forestry, the study projected.

Still, the higher the carbon price, the more likely there is a shift from crop production to forestry with "significant shifts of cropland to forest beginning to occur at $80 (per ton)."

The carbon prices of $27 per ton come from an EPA analysis of the House climate bill, the American Clean Energy and Security Act. The $160-per-ton figure comes from an EPA estimate of the price of carbon if there are no domestic carbon offsets created.

The study determined that eight of nine crops studied would exceed the baseline projections

Researchers looked at five different scenarios on potential offsets and regulatory environments. The study showed that scenarios offering multiple offset options generally had positive net income for agriculture. But a scenario under EPA regulations with no corresponding carbon offset program would lead to projected negative revenue outcomes for most crops.

For researchers, one of the biggest problems may come from the fact that the one crop showing a net decline return in their scenarios is rice, a key crop in the home state of Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., who has criticized some of the possible effects of climate legislation on agriculture. According to the analysis, rice would suffer a net return of roughly $2 million less than the baseline revenue, or a one-tenth of 1 percent decline.

Dairy and hog producers would benefit from methane capture. Net returns for dairy operations with methane capture would reach $208 million annually by 2025, and the benefits for hog producers would reach $120 million by 2025.

Looking at the beef sector, the report states that prices for beef would not be disrupted; however, beef herd inventory would drop 14.1 percent, or an overall production decline of 8.4 percent, the report states.

The 25x'25 - University of Tennessee study can be added to the growing list of reports and models about climate change legislation that have been released in recent months:

-- Duke University led a study that concluded farmers would gain more markets from climate legislation, leading to higher prices for commodities as a result. Like the University of Tennessee study, the Duke report concludes there would be more crops grown for biomass and energy production as well.

http://www.nicholas.duke.edu/…

-- Texas A&M's Agriculture & Food Policy Center examined how 98 different farms and ranches from across the country would perform under climate legislation from 2012 through 2016. In that study, in which carbon ranged in prices from $8.97 per ton to $13.37 per ton, 71 out of 98 farms would have lower ending cash reserves under the House climate bill relative to a baseline set for net income.

http://www.afpc.tamu.edu/…

-- The Center for Agricultural and Rural Development at Iowa State University and the Food and Agricultural Policy Research Institute at the University of Missouri each released reports in July examining higher costs for farmers from the climate bill.

-- The FAPRI report projects a typical Missouri farm would see a 3.2 percent increase in production costs by 2020. The CARD projection forecasts a 1.49 percent increase in production costs for Iowa corn and soybean growers by 2020.

http://www.card.iastate.edu/…

-- A USDA study released in July showed net farm income would decline less than 1 percent between 2012 and 2018 under the provisions in the House bill. Total farm expenses from 2012 to 2018 would increase $700 million annually.

Chris Clayton can be reached at chris.clayton@dtn.com

(AG/KM)

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