Financial Help for Climate-Friendly Farmers, Ranchers

Investing News

The Inflation Reduction Act has historic climate provisions, including tax credits, rebates, and subsidies for clean power and electric vehicles. The bill also includes $5 billion in grants to protect forests and more than $20 billion to support climate-smart agriculture practices. These practices are meant to reduce greenhouse gas emissions, increase the storage of carbon in soils and trees, and make farming and ranching operations more productive and resilient.  

According to a statement from the White House, the legislation “recognizes the critical role that America’s farmers, ranchers, and forest landowners play in addressing the climate crisis.” The bill expands or introduces numerous initiatives to support farmers, ranchers, and forest landowners and make rural lands more resilient in the face of climate change. Though scaled down from previous proposals, when President Biden signed the act into law on Aug. 16, 2022, it still marked “the single largest investment in climate and energy in American history.”

Key Takeaways

  • President Biden signed the Inflation Reduction Act into law on Aug. 16, 2022. 
  • The inflation bill marks the single largest investment in climate and energy in U.S. history.
  • More than $25 billion is earmarked to expand and protect forests and promote climate-friendly farming and ranching practices. 
  • The bill provides $3.1 billion to distressed borrowers and another $2.2 billion to farmers who have experienced discrimination from the USDA, although it removes race as a condition for eligibility. 

Agricultural Conservation

The Inflation Reduction Act increases funding for existing farm bill conservation programs, providing financial and technical assistance to private landowners to voluntarily adopt eco-friendly practices on agricultural land. These programs include:

  • The Environmental Quality Incentives Program (EQIP), which provides financial and technical assistance to agricultural producers to conserve natural resources and improve agricultural operations – $8.45 billion
  • The Regional Conservation Partnership Program (RCPP), which helps producers install and maintain conservation activities such as cover cropping and nutrient management – $4.95 billion 
  • The Conservation Stewardship Program (CSP), which helps farmers defray costs of adopting practices such as cover crops and improved wildlife habitat conditions – $3.25 billion
  • The Agricultural Conservation Easement Program (ACEP), which helps private and tribal landowners and other entities safeguard croplands and grasslands on working farms and ranches by using conservation easements to reduce nonagricultural land use – $1.40 billion 

Agricultural Credit

The Inflation Reduction Act also provides help to distressed farm borrowers and underserved farmers and ranchers. According to the Congressional Research Service, the provisions replace similar provisions in the American Rescue Plan that were controversially blocked by the courts because “the relief was found to be race-based and not narrowly tailored to meet a compelling state interest.” Instead, the bill provides $3.1 billion to distressed borrowers and another $2.2 billion to farmers who have experienced discrimination from the USDA, although it removes race as a condition for eligibility. The new debt relief program also provides funds for:

  • Underserved farmers, ranchers, and forest landowners – nearly $2.9 billion
  • Technical assistance, outreach, and mediation – $125 million
  • Land loss assistance – $250 million
  • Agricultural education emphasizing career development and scholarships at historically Black, tribal, and Hispanic colleges – $250 million
  • Equity commissions at USDA – $10 million

While the Inflation Reduction Act provides financial assistance to farmers, it repeals and rewrites sections of the American Rescue Plan meant to help BIPOC farmers facing ongoing impacts of discrimination by the U.S. Department of Agriculture (USDA). The inflation bill significantly reduces the pool of funds allocated to farmers for debt relief and removes wording that specifically gave funding to Black farmers to erase USDA loan debt, according to a report from The New York Times.

Renewable Energy

The bill provides financial incentives to encourage consumers and businesses to adopt climate-friendly practices. It also includes grants and loans to support renewable energy initiatives in farming areas, including money for:

  • The Rural Electrification Act, intended to advance clean energy projects, energy efficiency improvements, zero-emission systems, and more – $1 billion 
  • The Rural Energy for America Program (REAP), intended to support clean energy and energy efficiency projects for more than 41,500 farms and small businesses – $1.7 billion 
  • Grants and loans for underutilized renewable energy technology – $304 million
  • Grants to promote commodity-based fuels – $500 million
  • Financial assistance (e.g., loans) for the “long-term resiliency, reliability, and affordability” of rural electric systems – $9.7 billion

Forestry

Also included in the Inflation Reduction Act is funding for forest management, planning, and restoration activities. The funding goes to:

  • The National Forest System (administered by the U.S. Forest Service), including money to support fire-resilient forests and protect old-growth and mature forests – $2.15 billion
  • Nonfederal forest management in the form of support grants and other financial assistance, including funding for urban and community forestry programs – $2.75 billion

According to the Congressional Research Service, the federal government managed 238 million acres—or 31%—of U.S. forests as of 2017 (the most current data available). The remaining forest land was under nonfederal (private, state, or local) ownership.

What Is the Inflation Reduction Act?

According to the White House, the Inflation Reduction Act, H.R. 5376, is America’s single biggest investment in climate and energy ever. The legislation is designed to:

  • Expand Medicare benefits
  • Lower healthcare costs
  • Lower energy bills
  • Reduce carbon emissions by about 40% by 2030
  • Create clean manufacturing jobs
  • Invest in disadvantaged communities
  • Close tax loopholes used by the wealthy

What Is a Tax Credit?

A tax credit is an amount of money you subtract directly from the taxes you owe. For example, if you owe $1,000 in taxes and claim a $100 tax credit, your tax bill would drop to $900. Tax credits can reduce the amount of tax you owe, increase your tax refund, or give you a refund even if you don’t owe any tax.

What Is the U.S. Department of Agriculture?

The U.S. Department of Agriculture (USDA) is the federal executive department that develops and implements policies related to food, agriculture, economic development, science, natural resource conservation, and related issues. President Abraham Lincoln signed legislation to establish the USDA in 1862.

The Bottom Line

The Inflation Reduction Act aims to lower consumer energy costs, increase energy security, and substantially reduce greenhouse gas emissions. According to estimates, the bill “would put the U.S. on a path to roughly 40% emissions reduction by 2030.” Numerous initiatives in the bill invest in farmers, ranchers, and forestland owners to help them adopt climate-smart practices and adapt to a changing climate.

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