Feeding the world and preventing the planet from burning are quintessential positive externalities. Therefore, we will have to start paying farmers to adopt technologies that can help them do both.
Back in college, I thought positive economic externalities – i.e., when the benefit of a transaction or economic opportunity spilled over to people not otherwise involved – were mostly confined to graphs in textbooks and the occasional vaccination campaign. Companies, after all, are pretty adept at squeezing all the value they can out of any transaction.
Yet positive externalities exist, and America’s farms are home to the most important example. Farmers will drive two essential efforts in the coming years. First, they must produce enough food to feed 10 billion people by 2050. Second, if they are going to help with climate change mitigation, they will need to lower their greenhouse gas emissions dramatically.
Feeding the world and preventing the planet from burning are quintessential positive externalities. Therefore, we will have to start paying farmers to adopt technologies that can help them do both. It is, quite literally, textbook economics.
Farmers themselves may need to be more comfortable with this. For one thing, Democrats have traditionally supported subsidies for positive externalities, while farmers skew very Republican. According to a Farm Journal poll, 85% of farmers supported President Trump in 2020. Externalities also, by definition, require government intervention, which most farmers do not care for, to put it mildly. They mostly dislike government regulation. Idealized notions of farm life helped build modern conservatism.
currently-available technologies could minimize emissions in the near future
Nonetheless, people around the world need farmers to play ball. Agriculture is responsible for 11% of greenhouse gas emissions in the U.S. alone, but currently-available technologies could minimize emissions in the near future. Examples include no-till farming that dramatically reduces fuel use, electric tractors driven by renewable energy, and feed additives that reduce methane emissions from livestock. Widespread use of crushed basalt to sequester carbon on farms could remove as much carbon as taking one car off the road for every man, woman, and child in Omaha, Nebraska.
These techniques and technologies are game-changers, but they’re not cheap. New tractors, electric or otherwise, can cost north of $120,000. Anaerobic digesters, which converts methane-emitting manure into renewable natural gas, can cost over $4 million. When farmers are already dealing with razor-thin profit margins, it’s absurd to expect them to eat costs of this magnitude, even on an amortized basis.
Yet, when farmers adopt these technologies, everyone on the planet benefits. The only reasonable response is to pay farmers to adopt them.
The same is true of maximizing food per acre. That is the only way we will be able to feed 10 billion people; after all, even with just eight billion people, 10% of the world population still goes hungry. As climate change shrinks the world’s arable land and alternative food sources (like fish), meeting the world’s food needs will require we get 70% more food per acre of farmland.
technology necessary to maximize yield without creating greater emissions already exists
The technology necessary to maximize yield without creating greater emissions already exists. Farmers can leverage big data to pinpoint exactly when to till, plant, water, and harvest. They can use data and predictive analytics to understand exactly how much fertilizer to use. Biological compounds can bind fertilizer to plants, ensuring plants fully benefit from the nutrients and less goes to waste.
These technologies will, if anything, reduce carbon emissions – fertilizer is carbon-intensive to produce (though low-carbon fertilizers do exist). Yet again, they are not cheap. Sophisticated data analytics regimes, for instance, can cost tens of thousands of dollars a year, and are time-consuming to keep up-to-date. Similarly, building climate resilience through initiatives like planting cover crops to protect from extreme heat and using less water is a necessary but expensive defense against catastrophic crop loss.
Of course, many economists argue that climate change is a negative externality and should be addressed by taxing emissions, particularly on farms. Again, that is the textbook “answer.” But it ignores the impact such a tax would have on farms and, by extension, on us. Even in the best-case scenario, such a tax would raise the price of food worldwide, which, as people facing food insecurity from India to Indianacan tell you, would threaten their abilities to make ends meet or even survive. In the worst-case scenario, higher taxes would make many farms financially unsustainable, making it even more difficult to feed 10 billion people by 2050.
Farmers and traditional small-government Republicans may find the idea of paying people to do what is right anathema. Given their opposition, it is incredible that a bill like the Inflation Reduction Act, which makes money available to farmers to pursue emissions-reducing initiatives, could pass at all. And yet, paying farmers is the textbook response to twin existential threats. And textbooks exist for a reason.
Neal Urwitz is a vice president at Antenna Group, a public relations firm working with companies combating the climate crisis.
private good, a product or service produced by a privately owned business and purchased to increase the utility, or satisfaction, of the buyer. The majority of the goods and services consumed in a market economy are private goods, and their prices are determined to some degree by the market forces of supply and demand. Pure private goods are both excludable and rivalrous, where excludability means that producers can prevent some people from consuming the good or service based on their ability or willingness to pay and rivalrous indicates that one person’s consumption of a product reduces the amount available for consumption by another. In practice, private goods exist along a continuum of excludability and rivalry and can even exhibit only one of these characteristics.
The absence of excludability and rivalry introduces market failures that ensure that some goods and services cannot be efficiently provided by markets. Public goods, such as streetlights or national defense, exhibit nonexcludable and nonrivalrous characteristics. In a private market economy, such goods lead to a free-rider problem, in which consumers enjoy the benefits of the good or service without paying for it. These goods are thus unprofitable and inefficient to produce in a private market and must be provided by the government.
Inefficiency in the production and consumption of private goods can also arise when there are spillover effects, or externalities. A positive externality exists if the production and consumption of a good or service benefits a third party not directly involved in the market transaction. For example, education directly benefits the individual and also provides benefits to society as a whole through the provision of more informed and productive citizens. Private markets will underproduce in the presence of such positive externalities because the costs of production for the firm are overstated and the profits are understated. A negative externality exists when the production or consumption of a product results in a cost to a third party. Air and noise pollution are commonly cited examples of negative externalities. When negative externalities are present, private markets will overproduce because the costs of production for the firm are understated and profits are overstated.
A number of fairness and justice issues arise with respect to private goods. As excludability implies that consumers will get different amounts of goods and services, a complete reliance on private markets is unacceptable for basic necessities, such as food and safe drinking water, especially when there is wide disparity in income distribution. Similarly, although health care may be provided more efficiently as a private good, the poor and those without health insurance may be unable to afford it. Many argue that access to health care is a human right and that it should thus be provided by the government as a public good. Issues such as these illustrate the trade-off between efficiency and equity and highlight the need for public policy to determine which private goods should be public goods.
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