Because energy costs are a small share of production expenses, the magnitude of price changes expected under the Kyoto Protocol would reduce net cash returns by less than one percent. In fact, with the right domestic policy setting, overall net cash returns could be positive for agriculture. Principal findings There are four key findings that are significant to the discussion surrounding the implementation of the Kyoto Protocol and any related domestic policies. Implementation of the Kyoto Protocol will not be an economic disaster for U.S. agriculture. Even with emission commitments from 2008-2012 limited to the developed economies of the world, the levels of carbon permit prices most likely to result from Kyoto implementation would affect farm income by a few percent at worst.
Farmers have opportunities to adjust production systems to avoid paying higher energy bills.
From 1974 and 1994 farmers cut their fuel use by 28 percent. It is simply wrong to assert that the Kyoto Protocol is an assault on American agriculture. Trading in carbon sequestration could be an opportunity, but a small one. For all the interest in soil carbon trading, and the extraordinarily high estimates of the potential for carbon sequestration in agricultural soils, the economics do not appear to be particularly favorable for a large amount of offsets. It may be true that soils could potentially be a reservoir for many gigatons of carbon.