Local farm organizations are keeping close tabs on congressional efforts to create a cap-and-trade system for greenhouse gas emissions.

The system is intended to limit carbon dioxide and other greenhouse gas emissions, helping reduce global warming and minimize human impacts on the environment. Some farmers say this market-based approach to pollution control is preferable to outright regulation, but others think it could have a devastating effect on agricultural production costs.

Either way, "this is probably the most significant environmental bill since the Clean Air Act of 1990," said Travis Jones, executive director of the Idaho Grain Producers Association.

The House of Representatives narrowly approved a climate change bill in June. Among other items, the measure called for a cap-and-trade system that would initially cap and then gradually reduce industrial emissions. Power plants, refineries and other greenhouse gas emitters could either make permanent technological improvements to meet the new requirements, or they could purchase "offsets" from farmers, timberland owners and other sources.

These offsets represent farm and forestry practices that increase the amount of carbon captured in the soil and trees. Tilling, for example, releases carbon dioxide to the atmosphere. Switching to no-till methods could sequester an extra quarter-ton or more of carbon per acre - thereby improving soil quality while simultaneously producing offsets that could be sold in a cap-and-trade system.

By some estimates, capping industrial emissions could create an offset market worth upward of $2.7 billion within five years. However, even though the House bill specifically excludes agricultural producers from the emissions cap, they would face higher costs for fuel, fertilizer and other agricultural inputs, because the manufacturers of those goods would have to buy offsets to mitigate their emissions.

Farmers therefore face the possibility of increased revenues on one side, with higher production costs on the other. The net effect is highly uncertain at this point. Depending on who's providing the estimate, it could range from a negative $5 billion to a positive $1 billion per year by 2020, and go up or down from there - and under either scenario, the impact on individual farmers is even more variable.

"We would support the legislation if we were convinced it offered a net benefit to Idaho growers, but we haven't seen anything that convinces us," Jones said. "There are more questions than answers. What the majority of Idaho grain producers could get out of it would probably be peanuts. The best they could hope for would be a small bump in their already slim profit margins."

Richard Wittman, a no-till farmer and rancher from Culdesac who is actively involved in the carbon sequestration issue, said finding reliable economic impact studies is difficult.

"There's a lot of fear-mongering going on," he said. "Some say fuel prices could triple, which is baloney. But would they increase 5 (percent) or 10 percent? We don't know. It's hard to say (what the net effect would be) for individual producers."

Nevertheless, he noted the cap-and-trade model was used successfully to reduce sulfur dioxide emissions and resolve the acid rain problem in the Northeast. The program cost consumers and utilities less than $2 billion per year, according to the Environmental Protection Agency, or about a quarter the initial projections.

"It solved the problem and didn't end up being as painful as everyone thought," Wittman said.

Given the 2007 U.S. Supreme Court decision regarding greenhouse gas emissions - in which the court ordered the federal government to reconsider its historic refusal to regulate vehicle emissions - cap-and-trade may be the least-intrusive method to address that issue.

"It's really pay now or pay more later," Wittman said. "Society has decided it's going to be concerned about climate change. So would you rather have a market-based solution that has cost implications, or a strict regulatory approach that has no revenue potential? Those are the options we're facing. If you think cap-and-trade has an impact, it's nothing compared to the devil we could see under a regulatory system."

Until more details are available, however, Idaho and Washington grain associations are opposed to the House proposal.

"Before I buy off on a system, I need to know what the costs and potential returns are, and right now there are no hard numbers out there," said Asotin farmer Brit Ausman, president of the Washington Association of Grain Growers.

At this point, it's unclear who would even qualify to sell offsets, he said, meaning some farmers or farm regions might be left with higher input costs and no revenue potential. No-till farmers, for example, could benefit from the system, but that's not an option everywhere. The amount of carbon sequestered on each farm depends on a number of factors, including rainfall and soil conditions, so some farmers could have substantial offsets to sell, while others would have nothing.

"I think each producer should have the opportunity to do what works best on their farm," Ausman said. "My concern is that there will be losers in a cap-and-trade system, and a lot of them will be Pacific Northwest farmers."

Winchester farmer Eric Hasselstrom, president of the Idaho Association of Grain Producers, said the specific rules and regulations governing cap-and-trade won't be written until after the bill passes, so "right now it's all maybes."

"There's too much smoke and mirrors," he said. "Nobody can tell if it will be a benefit to them, because nobody knows. Common sense tells me that when you add costs to somebody's business, they're going to pass it on if they're able. But we don't set our prices. Even though our expenses would go up, it doesn't mean we'd get paid more. Buyers would be able to go to other countries that don't have a carbon tax, so they can sell cheaper. When we regulate ourselves out of the market, it seems wrong. Until everyone agrees to do this, I don't know why the U.S. should."

The Senate has yet to draft its version of the climate change bill. It could take up the issue this fall, although it might be postponed due to the debate over health care reform.

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Spence may be contacted at bspence@lmtribune.com or (208) 848-2274.