Mr. Chairman and members of the Committee, I welcome the opportunity to discuss the implications of global climate change and the Kyoto Protocol for U.S. agriculture and forests.   I would like to begin with a discussion of how global climate change will likely affect U.S. agriculture and forests.  I will then discuss the Kyoto Protocol's implications for agriculture and forests and the potential flexibility offered through carbon sequestration of forests and soils.  I will also describe the Administration's FY 1999 budget proposal for climate change, with emphasis on the so-called biomass initiative.   Finally, I will outline the Department's recent organizational actions to address climate change issues in the future.

The Impacts of Climate Change on U.S. Agriculture and Forests

 Climate is a major determinant of agricultural productivity, defining to a large extent where crops are grown.  Weather aberrations, floods, and droughts cause significant losses in agriculture and can place a heavy burden on natural resources and the environment.  Federal  agricultural programs fund research to develop and assess new practices and technologies, develop programs and know-how to reduce soil loss and erosion.  Part of the Federal response is to offer crop insurance as a means to cope with financial losses when practices and technology fail to prevent physical losses.  USDA and the National Weather Service (NWS) have also been intensely interested in ensuring availability of meteorological data, providing better monitoring and forecasts of short-term weather events.  The NWS is attempting to develop the ability to provide useful forecasts in the 6-18 month range.

 There are contradictory views about how long-term climate change may affect agriculture in the United States and around the world.  One view is that the expected changes in temperature, as estimated by the Intergovernmental Panel on Climate Change, are small relative to what farmers see from day-to-day and season-to-season.  Further, the change will occur slowly so choices among new farming practices and crop varieties will adjust to gradually changing climate with minimal disruption.  The other view is, given that almost all of agriculture is sensitive to weather and climate and locally tuned to the long-term climatic average, any change in climate will necessarily be disruptive and costly.

 While studies differ on the severity of impacts, the consensus is that climate change impacts are not likely to seriously disrupt the overall ability of the U.S. to be a major agricultural producer.  However, some regional effects could be quite severe with dislocations in rural communities and relocation of production to other areas.  There are likely to be winners and losers, but at this point we cannot identify who they might be.  The risk of climate variability and extreme weather events are a potential threat to agriculture and efforts to mitigate greenhouse gas emissions can be seen as insurance for agriculture against these risks.
 There is a connection between climate and forests as well.  Climate defines forest and range systems in the long run.  As climate changes, forest components change in response.  Climate is known to have changed in the past with resultant changes in forest cover, type and location.  All current climate model projections will result in significant migration of forests.

 The greatest economic impacts on forest management result from weather occurrences grouped over periods of time, from days to weeks to months to years.  For example, the severity and cost of forest fires are mainly determined by weather and fuel conditions.  Vegetation desiccated by drought and weather bringing low humidities and high winds combine to cause our most costly, severe and dangerous forest fires.  Almost every aspect of forest management is heavily affected by climate variability and change.

 Climate variability increases forest disturbances.  After disturbances occur, forests may not return to their previous condition if the climate has changed or if invasive species gain a foothold and out-compete native vegetation.  Regional variability in climate and resultant forest impacts will determine the environmental, social, and economic impacts, which may be positive in the long run but negative during rapid climate change.  Unlike agricultural systems, forests grow over much longer time periods and are not amenable to year-to-year changes in species.  Moreover, the economics of forest management prohibits some of the safeguards available to agriculture, such as irrigation.

 A key determinant for the future of our forests will be the importance of growth and carbon sequestration enhancement from elevated carbon dioxide levels relative to negative impacts resulting from water and other climate-related stresses.  Carbon, nitrogen, and other elements are cycled through forests and the atmosphere and are the primary indicator of forest productivity and health.   Many processes important to forest health occur below ground, where 60 percent of forest carbon is stored.  Forests and forest soils are the major terrestrial sink for actively sequestering carbon and removing carbon dioxide from the atmosphere.  Healthy, well managed forests are a key factor in mitigation of carbon dioxide increases in the atmosphere.  Conversely, negative climate change impacts on forests have the potential of limiting sequestration and increasing the release of stored carbon.

 Forests and grasslands are of great economic, environmental and social importance.  They react to many stresses and change constantly, with changes often occurring rapidly as a result of weather and climate impacts.  Although forests are global in extent, they are basically regional in their make-up, history, use and value.  We will require a regional perspective to understand the impacts of climate change in forests and to manage those impacts.

 Despite the significant research effort on agricultural and forest impacts of climate change, there are several areas of remaining uncertainty.  For example, while there is a strong consensus that human activities are affecting the global climate, scientists cannot provide a precise forecast of how climate will change at regional levels or over time.  Also, more work is needed to understand and model the complex relationships of climate and carbon dioxide effects on biological functions of plants, soil microorganisms, insect prey and predators, and pathogens, as well as effects on physical resources, such as soil structure, river flows and snow melt, coastal inundation due to sea level rise.  In addition, investigating in a comprehensive and compelling way the ability of farmers, plant breeders, water managers, forest managers and others to adapt and adjust to changing climate is an ongoing research effort.  For example, how can farmers adapt when it is difficult to determine whether weather-related events such as the floods of the Red River last spring were part of normal variability or evidence of the onset of a period of more frequent and intense floods?

   Quantitative studies have investigated the impacts of global warming based on widely available scenarios of climate change as modeled by 4 major general circulation models.  A brief summary of the basic results follows.
Aggregate Effects

 Agriculture.  World production of cereals and of agricultural goods in general change very little, assuming that farmers and markets adapt to the changing climate, although regional effects could be quite different.  The most recent work shows world cereal production to change on the order of +1 to -1 percent, without the direct effects of carbon dioxide which generally enhances crop growth.  Without adaptation, cereal production falls an estimated 18 to 29 percent.  Tropical agriculture is more severely affected than temperate agriculture, and developing countries would likely be more affected as adaptation is likely be more difficult than in developed countries.  The poorest countries, those with per capita annual incomes below $500, suffer the largest economic losses.

 Forests.   Major displacements of current forest locations are projected by all models.  Impacts will vary by region, some positive, some negative.  The biggest uncertainty is how fast climate will change and how that will shape regional impacts.  Adaptation is not as hopeful for forests as agriculture.  Forests grow over longer periods and are managed less intensively.  Unlike crops planted and harvested annually, trees planted today must adapt to climatic conditions over the next 50 to 300 years.  Temperate and boreal forests are likely to be more strongly affected than tropical forests.  Climate change will be greater at the higher latitudes and the role of fire, insect outbreaks and other disturbances will be greater in those forests.  Balancing this will be the greater potential for longer growing seasons and elevated carbon dioxide levels.

Regional Effects

 Agriculture.  At smaller scales, such as individual countries, states, or substate regions, there is not a consistent set of winners or losers across different climate scenarios, but as the scale is reduced, the effects can be much larger than indicated by more aggregate scales.   For example, crop studies show that wheat yields at some U.S. sites would essentially fail completely but could increase sharply in other areas.   So while global food availability in the world does not appear threatened, the livelihoods of some farmers and regional economies are vulnerable without alternative economic opportunities.  Moreover, adaptation would be particularly difficult in developing countries where producers would be limited in their ability to apply alternative technologies, crops and cropping systems.  For the United States, recent studies show impacts ranging between +$6 to -$11 billion per year, with southern areas tending to suffer from drier conditions while northern regions gain from longer growing seasons.

 Forests.  Regional scale forest impacts also vary widely, with changes in water regimes the primary determinant in changing forest productivity.  High elevation forests will be driven from their current habitats and will find migration difficult.  Forests of regional importance, such a Vermont sugar maples, could migrate out of their current range.

Additional Effects
 Agriculture and forests.  Increasing carbon dioxide in the atmosphere directly benefits plant growth, but there is much scientific uncertainty about how large this gain will be under commercial production conditions.  At doubled carbon dioxide levels, many crops register a 30- percent increase in yields under controlled conditions where there are no nutrient limitations.  The realized productivity gain may be more on the order of 5 to 12 percent.  We can also expect many physical changes but research has not quantified them or their economic impact.  Insect pests and diseases may increase, water resources for irrigation will decline in some areas even as demand for water is increasing, flooding and severe weather may increase, intensity of droughts may increase, soil erosion may increase due to more intense rainfall, coastal inundation or saltwater intrusion due to sea level rise may endanger production near coastal areas.

 The above results reflect the best attempt to describe impacts quantitatively.  Because of the uncertainties in the climate scenarios and the complex ways in which climate affects agricultural and forest production capacity--from effects on pests and soils to water resources and direct effects on plant growth--the quantitative impacts are illustrative of what could happen rather than forecasts of likely impacts.

Likely Effects of the Kyoto Protocol on Agriculture

 USDA has not conducted an analysis of the effects of the Kyoto Protocol on U.S. agriculture.  Based on the Administration's illustrative estimates of an energy price effect of 3 to 5 percent, which excludes the positive effects of electricity deregulation, the likely impacts on U.S. agriculture will be modest.  Direct expenses on fuel and electricity account for about 5 percent of total farm production costs, while adding in indirect energy costs in fertilizers and chemicals raises energy costs to roughly 10 percent of total farm production costs.   American farmers have become more energy efficient as new technologies and farming methods are developed.  Since 1975, the amount of agricultural output produced by a unit of energy input has increased by more than 50 percent.  Farmers use less fuel than they did 20 years ago because they use farming methods like no-till to reduce machinery use, and because farm equipment is more fuel efficient.

 Forests are a prominent factor in the Kyoto protocol as an offset to carbon emissions.  When trees and other biomass are removed from forests and new trees take their place, the net benefit for carbon sequestration depends on how much carbon is emitted by removal procedures, how long the carbon in the removed fiber remains out of the atmosphere, and how long the regrown forest is left intact to sequester carbon.  Forests become a source when carbon is rapidly lost to the atmosphere through fires and when forests are converted to other uses that are less effective at carbon sequestration.  Forests are also a significant potential factor in both the joint implementation, Clean Development Mechanism and emissions trading arenas.  Because forests are a key factor in overall carbon sequestration, opportunities to maintain or increase sequestration by forests are many.

Opportunities to Mitigate Greenhouse Gas Emissions

 The Kyoto Protocol allows for a number of methods to lower the costs of achieving the targeted levels of greenhouse gas emissions.  These include flexibility in what gasses are reduced, credit for certain actions that sequester carbon, international trading of emissions, joint implementation and the Clean Development Mechanism.  Costs can also be reduced with meaningful developing country participation, electric power deregulation, and various actions that improve technology and conserve energy.  I would like to illustrate some of the types of opportunities for U.S. agriculture that are likely to be generated by actions to reduce greenhouse gas emissions, notably carbon sequestration and the production of biomass as a substitute for fossil fuels.

 Carbon Sequestration—Forests.  Under the Kyoto agreement, certain forestry-related activities--afforestation, reforestation and deforestation--will be used to offset emissions targets.  By way of perspective on the scope of the opportunity, increases in biomass and organic matter on U.S. forest lands over the past 40 years have stored the equivalent of 25 percent of U.S. carbon emissions during the period.  Reforestation of harvested acres continues the sequestration process.  Not only do forests sequester carbon while growing, many timber products continue to sequester carbon.  Of the carbon harvested in trees, most has been burned for energy or emitted to the atmosphere without producing energy for consumption, but an estimated 25 percent has remained in products and landfills.

 The area of forest land has stabilized and there is every expectation that our forest resource will continue to be a net sink for carbon.  We expect that future sequestration by U.S. forests will be substantial, but forest cover can also be increased and altered through forest management and thereby increase the role of forests in achieving the targeted reduction in emissions.

 An obvious way of increasing carbon sequestration by forests is to increase tree planting.  For example, converting 22 million acres of marginal cropland and pasture land in the South to forest would increase carbon accumulation by about 32 million metric tons per year--enough to offset about 3 percent of U.S. emissions of carbon dioxide.  Other management practices that would contribute to carbon sequestration include:
   Replanting in order to fully stock poorly stocked forest land.
   Applying intermediate stand treatments to improve stand growth rates.
   Managing for longer rotation lengths.

 Carbon Sequestration--Soils.   Consensus has not been reached on the role of carbon sequestration in soils for the first reporting period under the Kyoto agreement.  For agriculture, sequestration in soils is an important issue that needs more work because soil is a key storehouse for carbon.  The principal strategy for increasing the use of soil as a carbon sink is to enhance and maintain high soil quality.  Increases in soil carbon, commonly referred to as organic carbon, improve soil quality.

 Soil conservation practices increase the soil organic matter content.  Principal conservation strategies which sequester carbon include converting marginal lands to compatible land use systems, restoring degraded soils, adopting best management practices.  For example, removing agriculturally marginal land from production and adopting an ecologically compatible land use, such as wildlife habitat, can lead to increases in total biomass production and an increase in carbon content in the soil.

 USDA programs such as the Conservation Reserve Program (CRP), the Wetland Reserve Program (WRP) and the Secretary's conservation buffer strip initiative all help to improve soil quality and decrease atmospheric carbon.  More importantly, though, are the advances in agricultural technologies for sustainable management of the soil, such as (1) conservation tillage, (2) management of crop residue and other organic materials, (3) soil fertility enhancements through site-specific management and nutrient cycling techniques, (4) elimination of summer fallow, (5) use of winter cover crops, and (6) other techniques that improve crop yields.  The carbon sequestration potential of these practices in the United States is substantial.

 USDA's conservation programs and many conservation practices available to and being used by farmers today represent a multifaceted opportunity in light of climate change.  Adoption of appropriate conservation strategies lead to (1) carbon sequestration in soil, helping to mitigate greenhouse gas emissions, (2) improvement in soil quality, raising agronomic productivity and contributing to sustainable land use, and (3) enhancement of overall environmental quality, providing benefits of improved wildlife habitat, water quality and erosion reduction.

 The President's Climate Change Budget Initiative--USDA's Role.  The President's Climate Change Initiative is a $6.3 billion dollar program of tax cuts and research and development activities.  Farmers will be able to benefit from the $3.6 billion in tax reductions for purchases that reduce energy use and utilize renewable energy sources.  In addition, USDA's climate change research program will identify a range of new opportunities for farmers and rural areas.  Current annual spending for climate change research is $58 million.  This supports a variety of research initiatives across many program areas, including the Forest Service, the Natural Resources Conservation Service, the Agricultural Research Service, the Cooperative State Research, Education, and Extension Service and the Economic Research Service.  USDA's FY 1999 budget proposal requests an additional $10 million for climate change research, of which $6 million is for biomass research.  While USDA has done work over the years on biomass, much of it has been financed by the Department of Energy's (DOE) ambitious program.  The focus of USDA's initiative, developed in partnership with DOE, will be on improving the productivity of biomass crops such as herbaceous grasses and fast growing trees, harvest and processing systems, and conversion of cellulosic material to fuels.

 Biomass crops are being promoted as feedstocks for the production of electric power, liquid fuels, and other bioproducts, such as chemicals.  Biomass feedstocks have environmental advantages compared with fossil fuels.  For example, they would not add greenhouse gasses to the atmosphere during their life cycle.  These crops might be grown on fragile lands and could perform other environmental tasks such as the filtration of fertilizer and pesticide runoff.  Research suggests that yields of biomass crops such as poplar, willow, and switchgrass could be increased significantly.  If new generation efficient gasification systems and turbines were developed for power production and cellulosic conversion technologies to make ethanol, biomass might become competitive with fossil fuels as an energy source.  Such a development would benefit farmers by adding energy crops to traditional food and fiber production.  Rural communities would benefit from jobs created by biomass production and utilization.

 Initial feasibility work by DOE, USDA, and the Environmental Protection Agency examined the long-run domestic prospects for the use of commercial biomass energy crops in electricity generation, using a unique set of optimization models of the agriculture, forestry, and electricity utility sectors.  In the most optimistic scenario, it was assumed that, through research and development, energy crop yields could be dramatically improved and biomass-fired electricity generation technologies could be engineered to compete favorably against fossil technologies, and that fossil fuel prices rise modestly over the next 25 years.  Under these assumptions, it was estimated that biomass grown on some 40 million acres could account for some 10 percent of all fuel used in electricity generation, displacing about 90 million metric tons of carbon emissions annually by 2025.  A domestic biomass industry of this magnitude could provide roughly 20 percent of the cumulative reductions needed to stabilize emissions at 1990 levels over the entire 2000-2025 period.

 Some low-cost biomass production and biomass wastes, such as wood, make a niche biomass power industry possible now.  Successful biomass research programs, rising fossil fuel prices, or biomass incentive policies could expand the biomass industry.  However, our optimistic U.S. biomass analysis assumes that improved production, harvesting, delivery, and utilization systems are in place.  Much hard engineering, organizational, and research work will be required to demonstrate the workability of these systems.  Future biomass farmers and processors need to see practical and successful demonstration projects on the ground before they begin to participate on a large scale.  That is why the Department is cooperating with DOE on "Biomass Power for Rural Development" projects in Iowa, Minnesota, and New York to do just that.

 One agriculturally based renewable fuel already contributing to the environment today is ethanol, which reduces greenhouse gasses relative to petroleum use.   The Administration supports extension of the ethanol tax exemption to 2007.  Extension would foster development of biomass ethanol technology, helping to increase the emission reduction benefits of ethanol.

Global Climate Change Program Office

 The enormous risks posed by climate change and the substantial challenge presented by Kyoto make it clear that USDA must escalate its level of activity in the area of global climate change.  Consequently, the Department will soon advise the House and Senate Appropriations Committees that we will be reorganizing our Global Change Program Office.  The new Office will be located under the Office of the Chief Economist which reports directly to the Secretary and me.  The new Director of the office will be Dr. Margot Anderson, a prominent natural resource economist.  The Office will be responsible for coordinating the wide range of climate change activities across the Department, supporting the activities of the executive branch and working with the agricultural and rural communities to help them address the challenges of climate change and realize the opportunities that Kyoto will present.

 Our goal is to ensure U.S. agriculture is well represented in climate change activities both within and outside of government.  Our new office plans to work closely with you and your staff. That completes my testimony, and I would be pleased to respond to questions.