This January 2007 paper by David Morris was originally published by the Center for American Progress. This report argues that Congress must recognize the dramatic benefits of clean, renewable energy on rural communities and then ensure that the federal farm bill policies work to maximize local ownership of the rapidly expanding biofuels and wind energy industries. Numerous policy options are recommended.
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. The key ingredient in such a strategy: 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. This year, Congress needs to recognize the dramatic benefits of clean, renewable energy on rural communities and then ensure these benefits inform and guide our energy and agricultural policies. Displacing a quarter of our nation’s vehicular transportation energy with biofuels — a key national security imperative — would require the cultivation and harvesting of substantial amounts of plant matter, massively benefiting American farmers. It would also require the construction of some 2,500 biorefineries throughout the nation, which, if predominantly locally owned, would utterly transform rural America. If wind energy then 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 local-owned enterprises, then even more renewable energy profits would flow back into the American heartland.
Ensuring that these positive investments in rural America are realized, and the benefits widely shared, should be a high national priority. 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. One reason may be that policy makers assume a rising tide of renewable energy will lift all agricultural boats, but a century of empirical evidence reveals that farmers gain modestly, and in most cases, only temporarily from an increased demand for their crops.
Until the end of 2006, no statistically significant correlation could be found between the increased demand for ethanol and the price of corn. The current frenzy of investment in ethanol plants clearly is affecting corn prices. But the price spike is also spurring a dramatic increase in corn acreage. This, coupled with increased yields, could dissipate the price spike in two years — unless Congress significantly boosts the level of the biofuels production mandate.
While the link between increased demand for biofuels and increased rural prosperity has been overstated, the link between local ownership and rural prosperity has been overlooked. Farmers gain handsomely and enduringly when they own a share in processing and manufacturing facilities. They may earn up to 10 times more per bushel from ethanol-related dividends than they do from the increased price of their crop resulting from the opening of an absentee-owned biorefinery.
The same correlation between ownership and rural prosperity may be seen in the harvesting of wind energy. Farmers can earn five-to-10 times more if they own a share of a wind turbine than they can from leasing their land for an absentee-owned wind turbine.
This paper will examine in detail why this link between local ownership and rural prosperity is so critical to the prosperity of America’s farming communities and then offer comprehensive policy prescriptions for Congress to consider. This progressive legislation offers a smart, pragmatic way to boost the incomes of traditional American farmers and secure our nation’s future energy needs in small communities across the heartland.