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This study examines implications of a cap and trade program with agricultural offset provisions for US agricultural water use and pollution. Cap and trade provisions (such as those in the proposed American Clean Energy and Security Act) would significantly raise fertilizer, irrigation pumping, and other energy-related costs. By 2030, this could reduce U.S. irrigation water use by >11% and fertilizer use by >18%. Offsets create incentives for farmers to plant trees on cropland to sequester carbon, reducing agricultural production and raising prices. By reducing fertilizer use and dramatically altering land use patterns in the Mississippi Basin, these may provide unexpected benefits by addressing hypoxia problems in the Gulf of Mexico. Yet, while national use of irrigation water, fertilizers, and agricultural chemicals all decline, use per acre in some regions may increase. This means that along with unintended environmental benefits, there could also be unintended negative effects in some watersheds.
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George Frisvold is an investigator with the Institute of the Environment's Climate Assessment for the Southwest project (CLIMAS). He joined the faculty at the University of Arizona in 1997. He has been a visiting scholar at India's National Institute of Rural Development, a lecturer at Johns Hopkins University, and chief of the Resource and Environmental Policy Branch of USDA's Economic Research Service. In 1995-96, Dr. Frisvold served on the Senior staff of the President's Council of Economic Advisers with responsibility for agricultural, natural resource, and international trade issues. His research interests include the economics of climate change adaptation and mitigation, water resources, renewable energy, agricultural R&D, technology adoption, and agricultural biotechnology. He has co-edited two collected volumes: Global Environmental Change and Agriculture (with Betsey Kuhn) and Adaptation and Resilience: The Economics of Climate-Water-Energy Challenges in the Arid Southwest (with Bonnie Colby).