OPINION:
Denmark’s government announced in late June that it will institute the world’s first carbon dioxide tax on farmers for their livestock emissions beginning in 2030. The tax will help ensure Danes meet their legally binding target of reducing their greenhouse gas emissions by 70% from 1990 levels. Around one-quarter of Danish greenhouse gas emissions come from the agriculture sector.
The policy will tax Danish farmers 300 Danish kroner per ton of carbon dioxide emitted in 2030 and will rise to 750 kroner by 2035. (As of this writing, $1 U.S. equals 6.92 Danish kroner.) But according to CarbonBrief, thanks to the 60% income tax deduction farmers will be entitled to, the “effective cost of the tax paid by farmers will amount to 120 Danish kroner (£14/$18) per tonne of CO2-equivalent (CO2e) emitted when the tax is implemented in 2030. It will rise to 300 kroner (£34/$44) per tonne of CO2e from 2035 onwards.”
The Financial Times puts the yearly cost of the tax at around $110 per cow.
It’s easy to point and laugh at the silly Danes taxing cow farts to appease Gaia and assuage their guilty consciences. But if the institutional forces of the environmental movement — now comfortably ensconced in every large corporate boardroom of note — had their way, every Bessie and Clarabelle and Norman grazing in a field from sea to shining sea will also have their flatulence held to account.
In the U.S., investment and banking behemoths such as Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo have signed on to international agreements such as the United Nations-led Glasgow Financial Alliance for Net Zero, or GFANZ, a global coalition dedicated to climate change mitigation.
GFANZ comprises about 450 banks, investors and insurance companies, whose members control $130 trillion in assets. Through GFANZ and its industry subgroups, such as the Net-Zero Asset Managers Initiative and the Net-Zero Banking Alliance — which control 41% of global banking assets — the world’s biggest investors and banks have agreed to set U.N.-approved emissions targets for their agricultural customers by 2024.
They can push to meet these targets without using any government mechanism, instead targeting farmers and ranchers through environmental, social and governance scores.
ESG scores are essentially a risk assessment mechanism increasingly used by investment firms and financial institutions that force companies and the agriculture sector to focus on politically motivated goals that typically run counter to their financial interests and those of their customers. Companies, farmers and ranchers are graded on these commitments to promote, for example, climate or social justice objectives. Those who score poorly are punished by divestment and reduced access to credit and capital.
Many ESG metrics, primarily those related to imposing environmental controls, are directly linked to the agricultural industry and food production. Examples include “Paris-aligned GHG emissions targets,” “impact of greenhouse gas emissions,” “land use and ecological sensitivity,” “impact of air pollution,” “impact of freshwater consumption and withdrawal,” “impact of solid waste disposal” and “nutrients” — which, despite its innocuous-sounding name, is a metric that forces companies to estimate the “metric tonnes of nitrogen, phosphorus, and potassium in fertilizer consumed.”
Farmers and food producers use chemical fertilizers and pesticides for crop growth, producing waste byproducts, consuming substantial quantities of water, using vast areas of land and releasing carbon dioxide emissions. Farmers will soon be under enormous pressure to undertake these “voluntary” changes and reduce their emissions or risk being frozen out of financing.
This could be a particularly heavy burden for the American agriculture sector, which is a debt-financed industry. Farmers in particular lack the capital reserves necessary to finance season-long operations prior to harvest.
A report released by Ohio’s Buckeye Institute this past February has found that operating expenses for farmers under an ESG reporting system would increase by 34%, leading to pricier groceries. Prices for items such as cheese (79%), beef (70%), strawberries (47%) and chicken (39%) would increase significantly. Overall, the report estimates a 15% total increase in household grocery bills if ESG scoring is implemented.
Fortunately, pushback to the attack on American agriculture via ESG is already taking place. Model legislation known as the Farmer Protection Act has been developed that would prohibit banks from restricting services to farmers “based, in whole or in part, upon the farmer’s greenhouse gas emissions, use of fossil-fuel derived fertilizer, or use of fossil-fuel powered machinery.”
The measure would also empower state agriculture commissioners and attorneys general to investigate and penalize violations and set penalties for those violations. Further, “if a financial institution has made any ESG commitment related to agriculture, there shall be a rebuttable presumption that the institution’s denial or restriction of a financial service to a farmer violates” the terms of the FPA. A bank may overcome the rebuttable presumption only by “demonstrating that its denial or restriction of a financial service was based solely on documented financial considerations, and not on any ESG commitment.”
These are commonsense provisions that will help protect American farmers from discrimination while also protecting the wallets and pocketbooks of all Americans. State legislatures nationwide should pass their own versions of the FPA and protect their farmers from this encroaching green radicalism.
A popular advertisement about 20 years ago claimed that happy milk comes from happy cows. Still, happy cows do not have to worry about how the big green boot will use the molecular contents of their flatulence as an excuse to stomp on their owners’ faces forever. ESG is coming here, whether by that name or cloaked behind some other innocent-sounding moniker. The time to smother it in its stable is now.
• Tim Benson (tbenson@heartland.org) is a senior policy analyst with the Heartland Institute.
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