This year offers a rare historical opportunity for our nation to marry energy and agricultural policy objectives. The new 110th Congress will be revisiting the 2005 energy bill and reauthorizing the 2002 farm bill, giving congressional leaders the chance to link increased rural prosperity and energy security. Two reports released today will be useful guides.
The first report, "Local Ownership of Renewable Energy Production: The Key to Marrying Rural Prosperity and Energy Security," argues that Congress must recognize the dramatic benefits of clean, renewable energy on rural communities and then ensure that federal agricultural policies work to maximize local ownership of the rapidly expanding biofuels and wind energy industries.
Historically, policy makers have approached renewable energy as an energy security or environmental issue, with agricultural implications. Yet today, with goals of displacing significant portions of our nation’s energy with homegrown biofuels and renewable electricity, the agricultural implications become paramount. The construction of some 2,500 biorefineries throughout the nation, if predominantly locally owned, would utterly transform rural America. On the electricity side, if wind energy supplied 15 percent of the nation’s electricity, more than 100,000 new wind turbines might be required – an investment requirement exceeding $400 billion. If these wind-energy production facilities were mostly locally-owned enterprises, then even more renewable energy profits would flow back into the American heartland.
The report argues that it should be a high national priority to ensure that these positive investments in rural America are realized, and the benefits widely shared. To date, however, public policy has focused principally on simply achieving the quantitative goal of expanding renewable energy production. Qualitative goals such as maximizing economic development in rural communities through the promotion of renewable energy have largely been overlooked. Among the recommendations:
- Establish a two-tiered, indexed biofuels production payment that favors local ownership.
Congress should enact tax incentives for both absentee-owned and locally owned biorefineries, but with a higher incentive for locally owned plants. The incentive should also encourage smaller facilities.
- Redesign federal programs to encourage community-based and modestly scaled produc- tion facilities.
Smaller production systems enable local ownership. They also encourage larger numbers of facilities, creating the foundation for a more competitive marketplace and continual innovation by designers and construction companies.
- Redesign renewable energy tax and regulatory incentives to encourage smaller-scale production.
Smaller plants are criticized, justifiably, because of their higher unit cost of production. But the vast proportion of engineering economies of scale are captured at surprisingly modest scales.
- Amend production-tax-credit rules to encourage small-scale renewable energy production.
To encourage locally owned, on-site wind turbines, Congress should increase R&D expenditures directed to commercialize small wind turbines that produce between 2KW and 25 KW of power.
The second report, "Fueling A New Farm Economy: Creating Incentives for Biofuels In Agriculture and Trade Policy," outlines how biofuels can reduce global warming and global poverty while boosting our energy security and global free trade.
The paper begins with a presentation of the current state of play in the U.S. biofuels marketplace and then offers detailed legislative proposals to further boost the burgeoning alternative fuels industry. One recommendation includes encouraging farmer-owned-and-operated biorefineries.
The second section analyzes in greater detail the advantages and some of the safeguards required in order to bring dedicated energy crops such as switchgrass, miscanthus, jatropha, and fast-growing poplar to the market as biofuels and bioproducts. Policy suggestions include providing new tax credits and loan guarantees to bring this next generation of biofuels to commercial scale production quickly.
The paper then turns to the complex state of current international trade negotiations. This section offers clear suggestions of ways to create flexibility in entrenched positions as a means to jumpstart the stalled Doha Round of multilateral trade negotiations.
The final section draws upon the analysis and recommendations for a global agricultural economy that is fully engaged in alternative energy production. This section walks readers through the role of biofuels in reducing and combating climate change in the developing world (and the U.S.) and then details how this effort can result from farm policy reforms and a successful conclusion to the Doha Round.
- Local Ownership of Renewable Energy Production: The Key to Marrying Rural Prosperity and Energy Security – David Morris, Institute for Local Self-Reliance, January 2007
- Fueling A New Farm Economy: Creating Incentives for Biofuels In Agriculture and Trade Policy – Jake Caldwell, Center for American Progress, January2007