Climate change is a daily presence in the work of farmers, ranchers and farmworkers. In 2018, primary agricultural production (and forestry) accounted for about 10.5% of all U.S. greenhouse gas emissions (GHGs) and offset about 11.6% of all U.S. GHGs in carbon sinks (from forestry and managing crops to increase carbon in soil). However, the agricultural GHG composition was 36.2% methane with a global warming potential at least 28 times that of carbon dioxide and 51.5% nitrous oxide, about 300 times more potent than carbon dioxide. Agricultural scientists and many farmers, ranchers and farmworkers know the good agricultural practices to not only reduce GHGs, but also to adapt to climate change, as U.S. agriculture must.
At present, taxpayers pay far more to finance subsidies for private crop insurance, livestock forage disaster assistance, livestock loss indemnification and ad hoc disaster relief for increasingly frequent and severe extreme weather events exacerbated by climate change than to support good agricultural practices, such as climate adaptive cover cropping, multi-crop rotation and sustainable grazing. This situation is fiscally, economically and environmentally unsustainable over the medium to long term.
Some policies changes can be accomplished under existing regulations, e.g., making crop insurance climate resilient within the Farm Bill. However, to coordinate climate-resilient terms in public and private agricultural credit, and to avoid placing one form of credit or bond issuance at a competitive disadvantage, it is likely that Congress will have to pass new legislation.
On September 9, the Commodity Futures Trading Commission (CFTC) published a much-anticipated advisory report, Managing Climate Risk in the U.S. Financial System.The report makes dozens of recommendations that U.S. financial regulators could implement under existing legislative authorities, plus a few that probably will require new legislation. As IATP anticipated in our new report, the recommendations do not specifically apply to agricultural commodities. Nor did the report’s 34 authors undertake an analysis of climate risk in U.S. federal and private agricultural finance. However, the recommendations of this path-breaking report, if implemented, will create an enabling environment for reforms to make U.S. agricultural finance and U.S. agriculture more climate resilient.
Agribusiness does not report its climate-related financial risks, such as those related to its GHG emissions, as readers of IATP’s Milking the Planetand Emissions Impossible will know. Proposed U.S. legislation would require disclosure of climate-related financial risks to the Securities and Exchange Commission in a clear, comprehensive, comparable and standardized format in both yearly reports and quarterly updates. IATP suggested amending the legislation to also cover private equity companies that outnumber SEC registered companies by at least 2-to-1.
It is urgent that U.S. agriculture financial policies and practices change comprehensively to help U.S. agriculture and agribusiness reduce GHGs and adapt to climate change. To be most effective, reforms must be coordinated among the different segments of U.S. agricultural finance. This new report attempts to make the case for systemic reform.