In late June, the House of Representatives narrowly passed legislation 219-212 to cap greenhouse gas emissions and allow farmers and ranchers to generate carbon credits and sell them in a market to polluters who need them to comply with this “cap and trade” law.

During the negotiations, Agriculture Committee Chairman Collin Peterson negotiated with House Energy and Commerce Committee Chairman Henry Waxman over a number of issues important to rural members. In the end, Peterson managed to gain a number of concessions, the most important of which puts the USDA, rather than the EPA, in charge of the program to evaluate and accredit ag projects that reduce greenhouse gases (GHG) in the atmosphere.

Farmers and ranchers can do so by sequestering carbon in the soil or in trees, or can capture methane, another greenhouse gas, from animal waste in digesters and burn it to generate electricity. This new “carbon” market is expected to generate billions of dollars each year in revenues to farmers and ranchers.

Peterson also negotiated a provision that will provide some needed sober reflection on the issue of estimating lifecycle GHG emissions for biofuels – including the highly controversial concept of international indirect land use changes (ILUC) – before EPA can plow forward and impose these unfair and poorly documented penalties on biofuels.

The Peterson amendment requires that the whole issue of ILUC be delayed for five years while the National Academy of Sciences study the ability of computer models to estimate the effects of indirect international land use changes. Within five years of enactment, EPA and USDA must determine whether valid scientific models exist to project the emissions impacts of international indirect land use changes. If such methodologies exist, EPA and USDA would need to jointly establish such methodologies and EPA then would proceed to conduct an analysis of the GHG emissions associated with indirect land use changes in other countries.

This is an important change, and we all owe Chairman Peterson a debt of gratitude. It will prevent EPA from rushing to judgment based on models that no one in the industry believes are capable of accurately determining whether biofuels use in the U.S. causes any land use changes in the tropics, and if so, the extent to which those changes contribute to GHG emissions.

Now the debate moves to the Senate where the proponents of cap and trade legislation are likely 10 votes short of the 60 they need. This means that biofuels supporters like Senators Harkin, Nelson, Johnson, Lugar, Dorgan, and Conrad may have enough leverage to make additional changes to the GHG provisions of the Renewable Fuels Standard law.

Senate Majority Leader Reid has indicated that he wants to vote on the cap and trade bill in the fall. Expect to see more negotiations over biofuels between now and then.