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:





       Farmers and ranchers almost all oppose a “carbon tax” like those proposed by Citizens’ Climate Lobby or the Climate Leadership Council or,  in Congress,  the American Opportunity Carbon Fee Act. The  first-listed variation,  “carbon fee and dividend”(CFD),   would seem the most appealing to working people, but does not sit well with agriculture.  Most ranchers and farmers  see all forms of  a carbon tax as anathema even though under CFD one hand gives back to most households more than the other took from them.    In CFD,  all the net revenue 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 ?   This  essay gives my opinions,  the views of a health scientist who has owned and operated   a small livestock farm for thirty-five years,   on why American agriculturalists  reject the concept of a carbon tax, even one as truly populist as CFD. 

       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 product 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.

Graph 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.

       In brief,   the financial security of the typical  American farmer  is is threatened by her or his farm.   The average farmer  owes  money to the bank and/or the equipment dealer.  He  has to buy every year seed, fertilizer, pesticides, fuel etc if  he wants to even have a shot at bringing 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.  The average American farmer is getting older.  No farmer knows what blessings or ( more likely)  curses climate will visit upon her next year.    It’s obvious that very few American farmers farm  to make a big profit; we  have other motivations such as love of land and animals, of producing good food, of upholding  the farm ethic as a way of life.  In this situation, an additional tax looks like a terrible imposition.  The compensation offered by CFD is simply not enough.

       In 2016,  70% of American  households had an annual income of  $90,564 or less.  I can’t find statistics on income  of  households that are on a farm or ranch, because in the majority (52% in 2012)  at least one person has an occupation other than farming from which he or she gets income.   Thus I can’t say what proportion of  farm  households are in the lower seven deciles and thereby  on average   should benefit by the CFD  dividend.  No matter.  Regardless of  how  the  net revenue from the “fee” or “tax” would be distributed under any of the several  proposals,   farmers and ranchers would be hurt more  than any  other occupational sector so important 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 manufactured materials  (3) have little control over the prices our produce brings.

       Many businesses are very carbon-intensive (e.g. public transportation, motor freight, fuel oil distribution). So are many industries (e.g. electricity generation, steel).  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.   Nearly all ranchers and farmers are self-employed,  even if they have an off the farm job as well. Profit from the farm is profit to the family; loss on the farm is a loss to the family.  Thus when carbon fee surcharges  paid out  by their farm business exceed the household dividend,  ranchers and farmers are penalized as if their actual households are profligate  with carbon.  Their  households might be average or better than average among those in their income stratum  if farm business is not counted.  For family farms, however,  the farm’s balance sheet and the household’s are the same.

       For such a carbon fee or tax the sequel writ  largest  on a daily basis to most Americans would be price increases at filling stations.  Increments  in the electric bill or the heating bill would  not  be unseen, but would not hit home every day.  When ranchers and farmers hear about a carbon tax,  attention turns likewise to  motor fuel prices.  This is understandable.     Nearly all ranchers and farmers in the USA rely heavily on fossil-fueled machinery. It  is  expensive to buy,  long-lived,  hard  to substitute for and  hard  to share with neighbors since everyone tends to need it at the same time.    

       A householder or half-ton pickup owner can relatively easily replace a six-year old gas guzzler with a lighter fuel-sipper.  For an agriculturalist, however,  the capital cost of replacing certain pieces of equipment can be much greater,  digging into an already thin (if any) profit margin. In many vehicular enterprises it is routine  to pass a fuel surcharge to customers, who grumble but endure rather than seek out (say) a new plumber.   The food grower, however,  is rarely secure that carbon-tax related markups in her or his production costs will be assumed  by the middleman then  sent on to the retail customer.  The price of milk is a good example.  Even if the middleman sportingly absorbs the  producer’s extra costs  to be relayed 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 (and the middleman).

       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.    Ranchers and farmers feel that we are being asked either to buffer end-consumers against the costs of the carbon tax by rapidly reducing our exposure to it or else to lower production in the face of a growing population.  Either tactic means more farms on tight margins going out of  business.   Agriculture has always been a high-risk  low-financial-reward venture for most persons involved.  It has survived, sometimes thrived, because of satisfactions that go beyond  financial such as health (human and animal), land stewardship and the challenge of feeding other people.   Consumers used to  unblemished  fruit, out-of-season vegetables and relatively low prices for quality meat and dairy are equally part of the problem.

       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.  I myself think these changes are long overdue.  It also requires a fiscal boost early on to compensate for the costs of transition to those new practices.  There is no doubt that  American farmers and ranchers can   become much more thrifty with fossil fuels.   Most now see many theoretical ways to get there.   Some some are practicing those ways  and seeing benefit already to their bottom line.  Problem: starting the change costs the agriculturalist (too many of whom are already in debt)  money that many not be got back for years.  For someone who now spends $20,000 a year to get gross sales of  $18,500 [ netting -$1500]. the prospect of next year spending $21,000 for the same gross return is a kick in the teeth.  The idea of converting to cover crop and no-till planting or moving to “holistic grazing” may please very much; these changes could save a lot of money in the long run but some capital outlays will be needed first.  Ideally, these won’t  mean taking on more debt.

       Thoughtful  advocates of CFD   contend that  moving to certain practices like “carbon 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.  I will discuss those extremely attractive prospects in the next essay of this series.  They are reachable,  but   only at some short term cost  to America’s farmers and ranchers.  The proposed dividend to households is a great idea to cushion the hit of a carbon tax/fee on most households that make a good-faith effort to lower their carbon footprints year by year.  This is no benefit  to households involved in a farm or ranch business  that  cannot quickly 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.  An exemption for motor fuels (like dyed diesel) will not be enough.  An annual  rebate slowly sunsetting would be practical.  [A rebate is proposed in CFD for certain materials like steel  to be exported to countries that do not have a carbon tax.]  Independent of a rebate   there should be new policy that will monetarily reward movement toward farming and ranching that is much less GHG-intensive than today’s mode.  Sad to say, I’m not sure either of these possible fixes is practical.   A rebate to farmers and ranchers is eyed askance because “then everybody else would want one too.”  I suppose other sectors of business might ask for one, but none could make such a strong case as agriculture for needing such relief. 

       Policy to reward adoption of beneficial practices like  carbon sequestration in soil makes sense, but is very hard to implement because of measurement uncertainties and regional variations in applicability.  Moreover, such policy delays remuneration at least several years from when the agriculturalist first incurs the unavoidable costs of  transition.   Carbon tax advocates must push for such policy at the state and the federal level without pretending that even a munificent and easily- administered tax credit for carbon sequestration in soil  will spare all farmers and ranchers from short-term fiscal harm.   It won’t.  Some are going to get plowed under.

       In these four essays  I have said little  about how American farming and ranching could become less -GHG-intensive.   Such a shift could be  forced  by a carbon tax.  Absent that tax, the move could be  motivated just by enlightened self-interest,  aware that  reducing the carbon footprint of our enterprise can improve soil; make our food system healthier while  able to feed more people;  be a concrete step to reverse   climate change; and save money in the long run for ranchers and farmers.   Choices among the paths  to make that necessary and beneficial reduction  can be guided by either or both of alternative  ways to break down “the carbon footprint of American agriculture.”  The outlines  of a  process-oriented trail map  are in the third essay of this series, “Fossil Fuels in the Carbon Footprint of American Agriculture“   An outcome-oriented method is the subject of my  next essay,  “Carbon FOODprint.”  


Fossil Fuels in the Carbon Footprint of American Ag

by Stephen Shafer on December 6, 2017

 1948 McCormick Deering Farmall farm tractor

                                                                                                                                                                                                                        photo from Free Farm Images


         This  the third essay in a series about  how farmers and ranchers can be part of a solution to climate change  by improving the health of agricultural soils.   The first  is “What is a Carbon Footprint.”    The second essay of this series (“Comparing Carbon Footprints of World and American Agriculture”)  reported   that  in U.S. agriculture  the best-known greenhouse gas,  CO2, makes up just 11% of total releases , with methane and nitrous oxide combined at 89%.  Those proportions do  not exactly match those from chapter 5 of the 2017 EPA  inventory .   That chapter did not include fossil fuel combustion in field equipment on the farm, a quantity inserted by me to make graph 3.1  below,   reproduced from the second essay. 

Aside, with apologies for poor technique in case the hyperlinks falter:  url for first essay    “What is a Carbon Footprint.” is

url for no. 2  “Comparing Carbon Footprints” is


Graph 3.1   CO2 soil is from urea decomposition and liming.  CO2  FFC  is that from fossil fuel combustion in mobile farm equipment.    CH4 and  N2O  totals from Chap 5 of EPA 2017 Inventory


              CO2  (9 M mt /511 M mt)  is just  1.8% of the  total  if  one counts only GHG emissions not due to fossil fuel combustion in agriculture,  as defined thus by EPA in the inventory:

“Agricultural activities contribute directly to emissions of greenhouse gases through a variety of processes. This chapter [Chap 5] provides an assessment of methane (CH4) and nitrous oxide (N2O) emissions from the following source categories: enteric fermentation in domestic livestock, livestock manure management, rice cultivation, agricultural soil management, and field burning of agricultural residues, as well as CO2 emissions from liming and urea fertilization (see Figure 5-1). Additional CO2 emissions and removals from agriculture-related land-use and management activities, such as cultivation of cropland and conversion of grassland to cropland, are presented in the Land Use, Land-Use Change, and Forestry chapter. Carbon dioxide emissions from on-farm energy use are reported in the Energy chapter.  [Emphasis added]“


            With a broader scope for  “agricultural activity,”  though, CO2 emerges as an important marker of energy conversion and hence an important part of the carbon footprint.  Several categories of emissions of  actual  CO2  not usually counted as “agricultural”   must be considered when thinking about the impact of a “carbon tax” on ranching and farming households.  They include, but are limited to,  fossil fuel combustion as follows:

  • in mobile machinery on-farm (direct, and measurable)
  • in vehicles using public roads on farm business  (direct, but hard to measure from national statistics)
  • in generating electricity used on farms  (indirect)

Another important category of indirect emissions comes from fossil fuel combustion to make  synthetic fertilizers, pesticides and herbicides (for which fossil fuels  are often also  the  feed stocks).  These are  logged under “industrial.”

            Post farm-gate processing of farm and ranch produce also leads to emissions, largely of actual CO2.  I think personally these should not be attached to agriculture,  but they are in some life cycle assessments.  Should “agriculture”  be charged with the emissions related to chilling and trucking sweet corn from Georgia to Massachusetts or does that onus fall on “the food system” of which agriculture is a part?  An unresolved question.

            In any case, when a carbon tax is on the horizon, everyone in production agriculture  should  assess her or his exposure to the expected  increase in price of fossil fuels.  One way to make that assessment is to see where he or she is directly or indirectly generating CO2 emissions by doing a comprehensive carbon footprint.   As I wrote in the first essay of this series, a personal or small business carbon footprint helps to assess fiscal risks of a carbon tax.  That’s not all.  More  important, it helps to see to see where the footprint can be made smaller in a cost- effective way to save money and protect the environment.  The carbon footprint of “agriculture” as EPA would do it is so  thin on  CO2 from fossil fuels it says little to  the individual farmer.

            I try below to outline   the carbon footprint of a farm or ranch more fully than chapter 5 of the EPA inventory document allows when it sets aside  fossil fuels.   Everything to be added on or reshaped  is familiar to any farmer or rancher,  but  not  necessarily to every food-eater. 

            For the first of these three uncharted items (fossil fuel use in mobile farm machinery) I found a figure (51.7 M mt CO2 –e/yr  for 2014)  in a subcategory of transportation called “non-transportation mobile.”   Most people think of  this one right away.

            The second uncharted item is fossil fuel combustion in vehicles doing farm business off the farm.  This does not come to mind as fast as images of combines and tractors.  For  the earlier essay “Comparing Carbon Footprints”  I had guesstimated 70 M mt CO2-e/yr.  [Method:  In  2014, CO2-e emissions from light duty trucks were 338 M mt.  See page two of  this reference.  I assumed that about 1/5 of these were doing farm or ranch work The 70 M mt is a place-holder,   probably an over-estimate.        

            The third item not considered by EPA in Chapter 5 -- electricity generation -- I had overlooked until it loomed large in our own farm’s carbon footprint.  Unable to find any recent numbers, I roughed out the figure 16 M mt CO2-e for national farming and ranching for the year 2015.  The arithmetic is in a short appendix.  Readers are urged to check and criticize.      

            Graph 3.2  shows nine ways  that  the  three major GHGs  are emitted from agricultural activities in the USA circa 2014-2015 . Of the  642 M mt CO2-e,   actual  CO2  is 147 M mt  (23%).


 Graph 3.2  Selected GHG releases in American agriculture ca. 2014-2015 by gas and release type, in million metric tons CO2-e/yr.  CO2 soil is from urea and liming; CO2 FFC on fm is from combustion in mobile farm machinery on farm; CO2 FFC off  fm is from combustion in road vehicles doing farm business; CH4 EF methane from enteric fermentation;  CH4 man  from manure mgmt; CH4 rice is paddy rice; N2O soil direct is to air from soil where applied;  N2O soil indir is emitted after runoff. Data sources various; see text.  Most are in Chapter 5 of 2017 EPA Inventory.  

            Even omitting the small output from urea and liming, agriculture seems not so strongly linked to fossil fuel combustion with resultant CO2 emissions as is (say) the nation; the carbon footprint of the USA as a whole, by gas,  in CO2-e is 82%  CO2 as shown in graph 3.3  below.                         

                  Graph 3.3           

        In the carbon footprint of US agriculture, CO2 has a much smaller slice (23%)  of the pie.

Graph 3.4  The  data of  graph 3.2 re-ordered.  Sources are the same.

         Does the distance  between  23%  and  82%  mean  that agriculture would be hit less hard by a carbon tax than other sectors of the economy?   No.   For one thing, there would be carbon tax  hidden in the delivered price of agricultural chemicals such as synthetic fertilizers, pesticides and minerals.  For another, farmers and ranchers are often more dependent directly or indirectly on fossil fuels for daily operations than most households and businesses. Most farms  rely on expensive long-lived machinery.  A rancher who four  years ago bought a small new diesel tractor for $50,000  will not find it easy to trade it in for an electric equivalent (should one become available in the USA)  with an even higher sticker price.   The farmer  who’s used  an older tractor for twenty years and would like to replace it with a more fuel-efficient one may not have the capital to do so.  By contrast, a repair business with four vans  expects to replace them frequently,  if only to look up-to -date.    

            So far I have concentrated on carbon dioxide emissions as both markers of environmental impact and of potential carbon tax impact.    Now let’s move beyond them to the GHGs that dominate the carbon footprint of American agriculture.  These are, as already mentioned,  methane (CH4)   and   nitrous oxide (N2O).  Should these have a global warming deterrent tax or fee imposed also, a la carbon fee or tax? Cold reasoning says yes; to leave them as the unacknowledged elephant undermines  the  push to  cut  CO2 emissions.  Practical wisdom says to leave them alone for now,  then circle back.   American agriculture is addicted to synthetic nitrogen fertilizers.  This must be broken. Yet the tactic cannot be to suddenly notch up the farmer's costs of producing food without being sure that consumers will pay the difference.  Regenerative agriculture  offers a a long-term solution that could be tied, thank the Creator, to reviving old modes of enriching  soil that  sequester carbon, reduce the need for synthetic fertilizers and make soil more resilient.  I will return to that theme in a later essay.

 Elephant in the parlor

Elephant in the parlor


            Another  disadvantage of a carbon tax to farmers and ranchers compared to other  businesses is that we cannot smoothly pass the increased cost of  production to middlemen to pass in their turn to retail customers.  Loyal direct market customers may accept a markup  at the farmers’ market or the farmstand, but wholesalers to big chain foodstores  need  not.  Most farmers do not do direct marketing; so,  cannot set prices.  A  plumbing business can surcharge customers for motor fuel costs without alienating them.  It’s standard for the gas station to raise prices at the pump.  Yet a  livestock  raiser sending lambs to market at New Holland cannot expect the bids to go up because it cost him more to grow the lambs and get them there.  Dairy farmers or corn growers can’t count on getting paid more either.  

         Some American farmers and ranchers   export to other countries. Many fear that if the USA had a carbon tax that upped the asking price of  exports from this country, US growers would suffer in competition with exports from countries that do not.  They are right.  Carbon tax advocates recognize that all countries must commit to make a global success.

         People who advocate  “putting a price on carbon” to lower GHG emissions  recognize that  such a  tax or fee,  no matter what is done with the revenues, is regressive on lower-income households,  which typically spend  a higher proportion of annual income for “energy”   than do more affluent ones.   Thus increases in price of “energy”  burden them exceptionally.  A compelling variation on the carbon tax theme  called “carbon fee and dividend” (CFD)  proposes to  redress the unfairness by distributing  the net revenues of the fee  as a periodic dividend    to every  household in the country based on a this formula: one adult no children 1 share; two adults no children 2 shares;  more than two adults no children 2 shares; one or more children 1 additional share; maximum of 3 shares per household.

         Imagine that  the dividend is  (hypothetically) $50/month/household.  In a household that has had to pay $60/month in carbon taxes atop what it used to, the tax means  a net loss of $10/month.  If that household reduces its direct (e.g. gasoline, heating oil) and indirect (e.g.  electricity generation) use of fossil fuels so that the surcharge is only $40/month, it nets $10.  This gives incentive to decrease fossil fuel use.  The smaller the household’s carbon footprint becomes, the more net return from the dividend.  The net  can be spent on immediate needs or saved up to invest in further energy savings (e.g. a wrap for the water heater).

            Unfortunately, carbon fee and dividend offers farm and ranch households  far  less  chance  of  benefit  than other households in the same income stratum enjoy.    The fourth essay in this series shows why,  then discusses  how we can get past  that disadvantage and in so doing    boost the prosperity of American agriculture and combat climate change.  The key is  restoring carbon to our  soils. 

Appendix to “Where Fossil Fuels Fit”  : estimating how much from the grid electricity is used on farms 

  [click to continue…]

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