Washington Insider-- Friday

More Metrics for Environmental Regulations

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Peru Looking Beyond TPP, Seeks APEC-Wide Free-Trade Area

Peru will continue to increase trade ties with the Asia-Pacific region regardless of the fate of the Trans-Pacific Partnership (TPP) trade deal, recently installed Trade Minister Eduardo Ferreyros told Bloomberg BNA Aug. 9.

Ferreyros, who began his second stint as trade minister July 28, said that he expects the Peruvian Congress to approve TPP. He noted TPP sets the groundwork for more regional economic integration in the future.

"I believe in the TPP. I believe that it is an important project for integration that will be the foundation for a free-trade area of APEC (Asia-Pacific Economic Cooperation)," Ferreyros said.

APEC joins together 21 economies, including China, Japan, Russia and the US. A leaders' summit will be held in Lima, Peru, in November. President Barack Obama has already confirmed his participation.

Ferreyros said that while he hopes the U.S. presidential elections will not derail progress on TPP, Peru would continue to prioritize bilateral agreements in the Asia-Pacific region. The minister said he would be meeting on Aug. 11 with Australia's ambassador in Peru to talk about trade relations, including TPP.

"We are going to push the TPP, but at the same time continue to work on other agreements," said Ferreyros, who was also trade minister in 2010-11, when the initial TPP negotiations were held.

Peru already has bilateral free trade agreements with six TPP countries.

Use of Crop Insurance by U.S. Farms Continues to Grow

Use of crop insurance by farmers has increased dramatically over the past two decades, as changes in the types of insurance available have boosted participation in the programs, according to the Economic Research Service (ERS).

The share of U.S. cropland insured has increased from less than 30% in the early 1990s to nearly 90%, or 299 million acres, in 2015. Passage of the Federal Crop Insurance Reform Act (FCIRA) in 1994 led to a spike in the use of crop insurance, reflecting the introduction of low-coverage, fully subsidized Catastrophic Risk Protection Endorsement (CAT) insurance and a temporary requirement that producers obtain insurance coverage to be eligible for other commodity support programs.

CAT insurance pays only 55% of the price of the commodity on crop losses in excess of 50%, and farmers have increasingly opted to purchase insurance with higher coverage levels—known as "buy-up" insurance—for greater protection against risk.

Premiums for buy-up policies are also subsidized, and these subsidies were increased in the 1994 Act and under the Agricultural Risk Protection Act (ARPA) of 2000. Buy-up policies are not fully subsidized like CAT insurance. In 2015 producers paid, on average, 38% of the total cost of buy-up policies. By 2015, buy-up policies covered 95% of insured cropland.

Washington Insider: More Metrics for Environmental Regulations

Opponents of "intrusive" environmental regulations often argue that any given proposed rule is arbitrary since "measures" of environmental impacts depend heavily on "assumptions" and are both highly complex and controversial. However, The Hill is reporting this week that a federal appeals court in Chicago is upholding the Obama administration's accounting of the social costs of greenhouse gas emissions as applied to a Department of Energy regulation. The court's unanimous decision rejected an industry-backed request to overturn a 2014 rule that set energy efficiency standards for commercial refrigerators.

In this case, the court specifically backed the administrations use of an estimate of the social cost of carbon, or SCC. The administration had submitted its administration-wide estimate of costs per metric ton of carbon dioxide emitted into the atmosphere, which is currently pegged at $36.

The Department of Energy (DOE) had used the cost estimate in its cost-benefit analysis submitted in the case justifying the efficiency rule in part because of the amount of climate change regulators estimate it would avoid.

It was the first time a court has considered the legality of carbon accounting, according to the Institute for Policy Integrity at New York University, which supports the policy and filed a brief backing the DOE in the case. Congressional Republicans, business interests and energy companies frequently criticize the accounting as bad math and improper forecasts.

However, the court said use of the cost estimate is entirely within the DOE's discretion.

"To determine whether an energy conservation measure is appropriate under a cost�benefit analysis, the expected reduction in environmental costs needs to be taken into account," the judges wrote. "We have no doubt that Congress intended that DOE have the authority under the [Energy Policy and Conservation Act] to consider the reduction in SCC."

They went on the say that the industry challengers were incorrect in stating that the carbon cost is "irredeemably flawed," concluding instead that "DOE's determination of SCC was neither arbitrary nor capricious."

The Institute for Policy Integrity said the ruling is significant for including climate change in cost-benefit analyses.

"This ruling provides significant support for use of the social cost of carbon as a regulatory policy tool," Denise Grab, a senior attorney with the institute, told the press. "The judges rejected a host of arguments that are often used to challenge rules that reduce emissions. As a result of this ruling, other federal agencies will likely be more confident in using the social cost of carbon going forward."

The Air-Conditioning, Heating and Refrigeration Institute, which led the industry litigation, said it was "disappointed" with the ruling.

While the estimated social cost of carbon emissions certainly will continue to controversial, its acceptance in this case is likely to add momentum to overall "metrics-based environmental criteria" such as the Total Maximum Daily Load concept for clean water programs that has been used in the Chesapeake Bay cleanup effort and elsewhere and which is widely opposed by many groups. Thus, while the fight over environmental regulations continues, this decision appears to be quite important with the potential for significant impacts on future battles, Washington Insider believes.

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