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SIOUX CENTER, Iowa, US, August 16, 2006
(Refocus Weekly)
There is potential for “unintended adverse
environmental impacts” if the United Sates increases production of
biofuels without adoption of “appropriate conservation practices,”
according to an analysis released by the federal secretary of
agriculture.
“Corn production may expand into environmentally sensitive areas
and the excess removal of biomass for cellulosic ethanol production
may adversely affect soil quality,” warns an analysis prepared by
USDA and released by secretary Mike Johanns. The analysis of the
department's renewable energy programs is the fourth in a series of
subject areas that received a comprehensive examination by USDA.
During a series of national consultations last year (Farm Bill
Forums), “we heard real enthusiasm from producers about the
potential for agriculture to unleash new sources of energy and
income,” says Johanns. “We have seen ethanol production more than
double in four years. USDA is committed to encouraging the
entrepreneurial innovation of America's farmers and ranchers to help
build a new energy economy.”
The paper looks at all potential sources of energy from agriculture,
ranging from farm fields to pasture and forest lands, and tracks the
results of USDA's renewable energy programs and suggests
enhancements which are suggested for public discussion. In March,
Johanns announced the release of 41 papers summarizing the 4,000
comments received during 52 sessions, and the first three theme
papers covered risk management, conservation & the environment, and
rural development.
A number of possible expansions of direct market intervention are
suggested in the report, including an increase in the level of the
Renewable Fuel Standard because biofuel production currently exceeds
the renewable fuels required under the RFS, and the standard is not
expected to be binding and provides little incentive to produce
additional biofuels. The RFS could be raised to provide a greater
production incentive, or the cellulosic requirement under the RFS
could be expanded and accelerated to begin before 2012, it suggests.
Another suggestion is to extend renewable energy tax credits to 2015
or later, to reduce investment uncertainty created by the current
expiration dates of 2008 and 2010. Biofuel tax credits could be
reduced when they are not effective in increasing biofuel supply or
are not needed, and this change would avoid excessive use of credits
and save federal budget resources by making credits variable.
The government could provide accelerated depreciation on renewable
energy equipment and facility investment, and this preferential tax
treatment could spur new investment in specialized production,
handling and processing facilities for biofuels. It could also
provide a depreciation allowance on lands where wind, solar or
geothermal generation development occurs, similar to the depletion
allowance for the oil industry.
Another suggestion is to use more land enrolled in the CRP for
biomass harvesting and wind energy. CRP land was used for pilot
programs in the 1990s when farmers were allowed to harvest biomass
for energy use with a reduced rental rate, it explains, and the 2002
Farm Bill allows USDA to permit the managed harvesting of biomass
and the installation of wind turbines, consistent with the
conservation of soil, water, water quality, and wildlife habitat.
“Agriculture is a major user of energy, with direct energy
consumption and indirect energy use through production inputs, such
as fertilizer, accounting 15% of total farm cash production
expenses,” the report explains. “Agriculture has the potential to
become an increasingly important source of renewable energy and
provide significant economic opportunities for farmers and
ranchers.”
“Renewable energy production stimulates the agricultural and rural
economy, improves the environment, and enhances national energy
security,” it continues. “The most effective government policies
that have expanded renewable energy production are non-agricultural
policies and the paper discusses recent trends in energy use in
agriculture, renewable energy production opportunities, policies
that have helped foster those opportunities, and the prospects for
renewable energy markets.
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