Carbon tax and American Agriculture

by Stephen Shafer on December 14, 2017

Keeling Curve since 1960The Keeling Curve:   Atmospheric CO2 at Mauna Loa Observatory,  annual peak and  trough by year 1960 to now  Source Scripps Institute

This is the fourth of a series of essays about American agriculture and climate change.  The first three, in order of appearance are these:

  1.   what-is-a-carbon-footprint

2.    comparing-carbon-footprints-of-world-and-american-agriculture

3.   Fossil fuels in the carbon footprint of American agriculture

 Abstract: American farmers and ranchers generally oppose a “carbon tax/fee,”   even a revenue neutral proposal  like  carbon fee and dividend (CFD).  CFD  today  does not grasp the situation of agriculturalists.  Most of us would like very much to reduce the carbon footprints of our own operations,  to help lessen “weather volatility” by using our farm and ranch lands to pull CO2 from  air into  long-term storage in soil and by these actions to make our farming future more secure.  A carbon tax is meant to impel these desirable –indeed necessary–steps.  Yet, going into them costs money up front that most of us can’t afford without taking more debt.  Committing  a portion of the revenues expected from a carbon fee to direct monetary support of “carbon farming” would get ranchers and  farmers  to support the crucial  objectives of  CFD in droves.  

          American Farmers and ranchers almost all oppose a “carbon tax” like that  proposed by Citizens’ Climate Lobby even though under carbon fee and dividend (CFD)  one hand gives back to most households more than the other took .   [How CFD works is explained in Appendix 1 after the click here to read more break below. ]  This  essay gives the views of a health scientist and farmer  on why American agriculturalists  don’t want a carbon tax, even one as truly populist as CFD,  and on what could be a remedy.    

            The financial security of the typical  American farmer or rancher (used interchangeably)  is threatened.  [For background see Appendix 2 ]  The average farmer owes  money to the bank and/or to dealer(s).  He  has to buy every year seed, fertilizer, pesticides, fuel etc if  he wants to bring in a crop.  The  average  American farm is losing money, though the household that owns and operates it  may be doing all right with  off-the-farm jobs   Few Americans farm  to make a big profit; we  have other motivations such as love of land and animals, of producing good food.  In this situation, an additional tax looks  a terrible imposition.       

            Regardless of  how  the  net revenue from the “fee” or “tax” would be distributed,   farmers and ranchers would be hurt more  than any  other occupational sector so vital to national well-being.  Three reasons: ranchers and farmers are usually (1) self-employed as regards the farm  (2) have a mechanized operation that relies heavily on fossil fuels  (3) have little control over the prices our produce brings.

      Whether a subway conductor  comes out ahead or behind on the carbon fee dividend depends on how much her household laid out  in carbon fees, not how much her employer did.   By contrast, nearly all farmers are self-employed,  even if they also work off the farm. Profit from the farm is profit to the family; loss on the farm is  loss to the family.  Thus when carbon surcharges paid by his farm business exceed the household dividend,  the farmer is  penalized as if his  household is careless  with carbon.  It might be average or better than average for its  income stratum  if farm business is not counted. 

      The outcome of   a carbon tax/fee that looms largest   to most Americans would be price increases at filling stations.   Ranchers and farmers are in the same boat.  In the USA nearly all rely heavily on fossil-fueled machinery that is  expensive,  long-lived,  hard  to substitute for and  hard  to share, since everyone tends to need it at the same time.    

       A householder can relatively easily replace a six-year old gas guzzler with a fuel-sipper.  For a farmer, however,  the capital cost of replacing certain pieces of equipment can be much greater,  digging into an already thin (or negative) profit margin. In many vehicular enterprises it is routine to pass a fuel surcharge to customers, who grumble but endure.   The food grower, however,  is rarely secure that her new production costs will be assumed  by the middleman then  relayed  to the retail customer. Even if the middleman does pick up  the  producer’s extra costs,  to pass to end-users,  there’s still the risk that rising prices in the store aisle will decrease future demand,  and with it, future gross income to the farm.

            American farmers feel punished by carbon-tax proposals, as if  held  directly and solely responsible for the  big carbon footprint of a food production system that has gone geophysically and nutritionally off course in the last two hundred years.

            Advocates of a carbon fee and dividend certainly do not expect production agriculturalists to absorb 100% of the carbon fee that came to them, nor to pass on 100%; rather, to find a middle ground.  They picture that farming and ranching would react to a carbon fee by (among other things) by using less fossil fuel over time.  There are two divergent ways to “less:”         

  • Reduce through  management  changes  the “carbon foodprint” of each foodstuff  without affecting   its quality or  place in the national mix.  The  foodprint of all foods summed  goes down without compromising quantity and quality for the population. 
  • Maintain the current carbon foodprint of each foodstuff  but selectively thin the most carbon-intensive components.  The summated foodprint declines,  with a  falloff  in quantity and quality that is unthinkable in the eyes of some (e.g. meat-eaters) and highly desirable in others’ (e,g, vegans)..     

             A compromise between the two paths is preferable to either extreme.

            Adjusting to the  shocks of  a rising  carbon tax  would require rapid changing of practices in cropland and livestock management and a re-alignment of consumer priorities.  These changes are required for global health.  Also  required is fiscal help early on to compensate ranchers and farmers  for the costs of transition to those new practices. 

          Thoughtful  advocates of CFD   hold  that  moving to practices like “regenerative farming”  to lower the carbon footprint of U.S. agriculture will recompense all the costs of transition in a few years while improving the soil and the atmosphere.  I can’t agree. The proposed dividend to households  cushions the hit of a carbon tax/fee on most households making a good-faith effort to lower their carbon footprints year by year.  This is no such cushion  to households in a farm business  that cannot quickly at no cost reduce direct or indirect greenhouse gas emissions.

       In my opinion there needs to be an adjustment to whatever carbon tax arrangement is proposed in Congress that will build in help to agriculture.  A slowly-sunsetting flow of some   of  the net fee revenues would be practical.  Besides that,   there should be federal and state policy to  monetarily reward movement toward farming that is much less GHG-intensive than today’s mode.  This could be tax credits for  carbon sequestration practices.

      Carbon tax advocates must push for such policy at the state and the federal level.  We must not  pretend,  though,  that even a generous and easily- administered tax credit for carbon sequestration in soil  will spare all farmers and ranchers from short-term fiscal harm.   It won’t.  The grim reality is that without help some will get plowed under .  The  help to prevent that misery  could come from revenues of CFD.

      A map to carbon footprint  reduction in food production unfolds in  the  fifth essay of this series,  “Carbon Foodprint.”   

Appendices below this break

The Keeling Curve as a banner to this essay highlights the trajectory of rising CO2.  This is an emergency.


Appendix 1 In CFD,  all the net revenue from the “carbon fees”   is distributed directly to all U.S. households by  household size (maximum of three shares each) without regard to means or location.  The 2016  Household Impact Study  from  the International Institute for Applied Systems Analysis  concluded that households in the lower seven deciles  of income would on average get back more per month from the dividend than they had laid out in  surcharges on “carbon,” which here means fossil fuels.  Even in the highest  two  deciles,  57 % of households would see a net benefit or a small loss (less than 0.2%  of income).  Why, then,  wouldn’t  farm households,  hardly  over-represented in the top two deciles of  income,  show interest in CFD ? 

Appendix 2.

       First, some background on American farms, mostly from the last Census of Agriculture,  which compared 2012 to 2007.   No distinction  is made between “farm”  and “ranch.”  A farm generated, or expected to generate,  > $1000 of agricultural products in a given year.  In the year 2012,

  • The United States had 2.1 million farms – down 4.3 percent from the last agricultural Census in 2007. This continues a long-term trend of fewer farms.
  • The  amount of land in farms in the United States had declined  from 922 million acres in 2007 to  to 915 million acres. This decline of less than one percent was the third smallest decline between Censuses since 1950.
  • The  average farm size was 434 acres. This was a 3.8 percent increase over 2007, when the average farm was 418 acres.  Middle-sized farms declined in number between 2007 and 2012. The number of large (1,000 plus acres) and very small (1 to 9 acres) farms did not change significantly in that time.  55% of farms in 2012 were less than 100 acres.  Graph 1  (made by me) shows distribution of farm sizes by acreage.  In 2002 the median (distinct from “average” or mean) was 80 acres.

Graph 4.1.  Distribution of farm sizes in acres, USA 2012  among total  of 2,109,000 farms.  Data re-compiled from Full Report  Census of Agriculture 2012.


  • The  average age of principal farm operators was 58.3 years, up 1.2 years since 2007, and continuing a 30-year trend of steady increase.
  •  U.S. farms sold nearly $395 billion in agricultural products in 2012. This was 33 percent – $97.4 billion– more than agricultural sales in 2007.
  • In 2012   75.5% of American farms had a gross sales income under $50,000/yr.  For  57%,   gross sales  were less than  $10,000/yr.     Only 46%  had net positive cash flow.

       In 2017,  the 8% of American farms with  gross sales value  more than $500,000/year had 83% of the net cash income,  while the 80.6% of farms with gross annual sales value  < $100,000/yr averaged  a slightly negative net cash income, as they had in seven of the previous eight years.

       In 2017 US farm expenses totaled $310 billion; interest payments ($18.7 billion) exceeded outlays for pesticides ($15.2 billion), which outstripped those  for fuel and oil ($13.8 billion).  Note  that “Fertilizer and lime” accounted for $21.8 billion of farm expenses.

Two excellent articles from a few years ago by Tom Philpott about the financial stress of being a farmer or rancher.  Read this one first





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