Senate Passes Inflation Reduction Act: How It Impacts Agriculture

Over last weekend, the Senate pulled an all-nighter to pass the Inflation Reduction Act (IRA or the Act), narrowly getting it across the line with a 51-50 vote. If passed by the House (which may happen today), it will enact the largest U.S. investment in the fight against climate change, with some commentators saying it will “change the world” and reestablish the United States’ credibility as a climate leader. While much ink has been poured this week debating the merits of those claims and the Act itself, it is clear the Act’s impact on the agricultural sector will be significant.

Funding for Climate-Related Conservation Practices

The most predictable—that is, what you might expect to see in the Act, though the Act itself came as a surprise to many—agricultural provisions infuse money into existing USDA conservation programs. As Politico outlined at the top of the week, the Act invests $20 billion into these programs:

• $8.45 billion to the Environmental Quality Incentives Program (EQIP), which provides cost-share payments to producers with working lands to adopt approved conservation practices. Funds will be available for practices or enhancements that directly improve soil carbon, reduce nitrogen losses, or reduce, capture, avoid, or sequester carbon dioxide, methane, or nitrous oxide emission, associated with agricultural production. These funds are not subject to the 50% set aside for livestock practices that applies to EQIP’s farm bill funding.
• $3.26 billion for the Conservation Stewardship Program (CSP), a program that pays producers to implement a conservation plan that involves multiple conservation practices on their operation. Funds will be available for practices, enhancements, or bundles that directly improve soil carbon, reduce nitrogen losses, or reduce, capture, avoid, or sequester carbon dioxide, methane, or nitrous oxide emission, associated with agricultural production.
• $6.75 billion to the Regional Conservation Partnership Program (RCPP), which supports partner organizations in implementing regionally focused, coordinated conservation activities. Funds will be directed toward partnership agreements and projects that assist agricultural producers and nonindustrial private forestland owners in directly improving soil carbon, reducing nitrogen losses, or reducing, capturing, avoiding, or sequestering carbon dioxide, methane, or nitrous oxide emissions, associated with agricultural production.
• $1.4 billion for the Agricultural Conservation Easement Program (ACEP), which protects agricultural land from development. Funds will be available for easements that will most reduce, capture, avoid, or sequester carbon dioxide, methane, or nitrous oxide emissions associated with land eligible for the program.

The Act also authorizes an increase from $25 million to $50 million for testing new or innovative conservation approaches under USDA’s Conservation Innovation Grants program, with prioritization of projects that use diet and feed management to reduce methane emissions from ruminants (e.g., cattle, sheep). Finally, the Act appropriates an additional $1 billion to support conservation technical assistance (available until Sep. 30, 2031) and $300 million to carry out a program, using field-based data, to quantify carbon sequestration and carbon dioxide, methane, and nitrous oxide emissions and assess the impact of conservation activities on these variables.

These provisions are important investments in making agriculture part of the climate solution and in strengthening producers’ resilience to climate change. Each of these investments align with the recommendations in FBLE’s recently released in FBLE’s Climate & Conservation Report.

IRA does, however, raise questions for policymakers and advocates about how the provisions will shape farm bill negotiations next year. The next bill is anticipated in 2023; most authorizations from the 2018 Farm Bill expire at that time. However, funds appropriated through IRA, broken down by fiscal year in the table below, overlap with and extend beyond the sums authorized in 2018 as mandatory funding for each of these programs. Additionally, IRA would extend the authorization for these programs from 2023 to 2031. While the Act is not positioned to supplant farm bill conservation program authorization—IRA’s appropriations are limited to particular climate objectives and thus would not cover a large portion of conservation activities that the programs support—it still changes the landscape going into the 2023 Farm Bill in a meaningful way. Importantly, new information may be gleaned from IRA’s implementation, such as the amount of demand for the new funds made available in FY2023 (one justification for the new funding is that these programs are already significantly oversubscribed, with demand much higher than available funds) and learnings from the more immediate investments in technical assistance and measuring carbon sequestration and emissions. National Sustainable Agriculture Coalition’s Michael Lavender (interim policy director) voiced optimism to Civil Eats about IRA’s impact on the farm bill: “It opens the doors to really make it a climate-resilience focused farm bill.”

Changes to Support for Socially Disadvantaged Farmers and Ranchers

More surprisingly, several provisions that made it into the revised version of IRA that passed on Sunday concern Congress and USDA’s efforts to address equity in agriculture. The Act authorizes $3.1 billion in funding for USDA to provide payments to distressed borrowers of FSA loans (direct and guaranteed) for the cost of loans or loan modifications, which USDA already had some discretion to do on its own. It also amends the American Rescue Plan Act’s (ARPA) Section 1006 (USDA assistance and support for socially disadvantaged farmers, ranchers, and forest land owners) to provide support for underserved farmers, ranchers, and foresters, a presumably broader cohort. The Section 1006 amendments include $2.2 billion to provide financial assistance to farmers, ranchers, and foresters determined to have experienced discrimination in USDA’s farm lending programs prior to January 1, 2021, with a cap of $500,000 going to any individual recipient. The program will be administered via nongovernmental entities selected by USDA. Finally, IRA repeals Section 1005 of ARPA, which authorized a debt cancellation program for socially disadvantaged farmers and ranchers.

While the Act would ostensibly invest billions in supporting underserved producers and distressed borrowers—many of whom would also be among the socially disadvantaged farmers and ranchers ARPA sought to benefit—it has drawn both praise and disdain from individuals and organizations advocating for farmers of color. In press releases issued over the last several days, the Federation of Southern Cooperatives and National Black Farmers Association expressed disappointment at the changes, particularly the repeal of Section 1005. If IRA passes, debt cancellation may still be in the cards for some FSA borrowers who qualified for the ARPA program, but the scope, terms, and conditions will be largely left to the discretion of USDA rather than automatically available for producers who belong to a group that’s been subject to racial or ethnic discrimination (i.e., “socially disadvantaged”). The Federation pointed out, in particular, that the Act does not provide for a specific pathway for borrowers who already received notice from USDA that their debt would be cancelled under ARPA to receive relief under the new program.

Still, others expressed optimism that the sums appropriated would provide important relief for farmers of color, and particularly Black farmers. Unlike ARPA’s debt cancellation program, the $2.2 billion in assistance could benefit those who do not currently have an outstanding loan with FSA. This difference could be meaningful, as USDA’s discriminatory practices have caused many farmers to seek loans elsewhere or leave the industry altogether. As Lloyd Wright told Civil Eats: “The department had not been making loans to Blacks. That in itself is biased and discriminatory, and that’s why we didn’t have loans to forgive.”

The legislation will likely render moot the ongoing litigation concerning the constitutionality of ARPA’s debt cancellation program. Soon after the program’s enactment, white farmers in various jurisdictions sued USDA to enjoin the program’s implementation, arguing that the program violated the constitution’s equal protection guarantees by discriminating against white farmers on the basis of race. Several courts found the claims strong enough to enjoin the program on a preliminary basis while the litigation transpired. Thus, farmers who thought, and were directly told, relief would be coming never received any payments under the program. The litigation remains pending; in Miller v. Vilsack, the most prominent of the cases and the one on track for decision first, parties filed their summary judgment motions less than a month ago. The Federation of Southern Cooperatives intervened as a defendant in Miller, fighting to prove that the program serves a compelling government interest and is narrowly tailored to serve that interest (the legal standard for the program to survive an equal protection claim in these circumstances). For more about the legal issues involved in the cases, see Debt-Relief for Socially Disadvantaged Farmers and Ranchers on Hold. Stakeholders in the case expressed frustration that, if IRA goes forward, they may not have the opportunity to vindicate the program in court and have debt cancellation move forward as promised. Others may be relieved out of concern that a decision on the merits that goes against the program could establish bad precedent for remedial programs in the future.

In any case, the Inflation Reduction Act, if passed, will shape the 2023 Farm Bill conversation through what it accomplished and what it failed to do. We hope to see further investments in climate-friendly agriculture and advancing equity when the farm bill comes up next year. Check out FBLE’s 2023 Farm Bill page for our recommendations and stay tuned to this blog for updates.