Economist: Government Climate Regulations on Agriculture Reduce Food Production

Despite talk of a food shortage, the U.S. Securities and Exchange Commission proposes adding more regulation on the agriculture sector. It could put a significant financial burden on small family-owned farms and could lead to lower food production in the United States. The SEC proposal is titled the Enhancement and Standardization of Climate-Related Disclosures for Investors. It would require companies to disclose what they're doing or not doing to reduce their climate footprint. Here to talk with Entity's Don Ma about it is Daniel Akai. He's the Chief Economist at the Chesses Hedge Fund. Daniel, thanks for coming on today. So, I want to talk to you about governmental climate regulations. So, the U.S. Securities and Exchange Commission proposed new climate rules a few months ago where agriculture producers like farmers and ranchers are required to report climate impacts if they want to sell to public companies. Now, a number of groups and politicians are against this. Forbes today even came out with an article that said the SEC's climate proposal sets the table for a Netherlands-style farm crisis in the U.S. So, my question to you is, are there any parallels compared to European countries? Certainly. I think that what we can say about the current proposal is that it's not as bad as what we saw, for example, in the Netherlands. However, it is truly a big problem in the sense that it puts an even further strain on the global food supply chain. We're seeing regulation that, and it's important to say this, that all of these regulations are not going to make a significant positive impact in terms of environment, but are going to generate a very significant impact on supply because it's making it virtually impossible for farmers to truly generate the level of production that is required in order to offset the challenges created by the Ukraine crisis. So, what we have seen in Canada, in the Netherlands, in Germany, etc., are backfiring laws, are actually laws that don't improve the situation. They're actually making things a lot worse in an environment in which governments should be implementing measures that would help ease supply chains, not make them even more strained. So, if the proposal doesn't do anything for the climate and it doesn't help producers produce more, what is the goal? What is the point of the regulations? This is the problem of developed countries' regulations in terms of climate, that they don't look at the global picture. For example, you ban fracking in Europe, you end up depending even more on natural gas coming from the United States that is produced by fracking. You ban the mining of copper or aluminum or the production of aluminum or the mining of some rare earth in Europe, and you depend more on China. The exact same thing is happening with food. By making it uneconomical and making it more difficult and more bureaucratic, what ends up happening is that developed nations produce less and we depend more on nations that actually don't have any of those regulations and that actually do not have the same kind of respect for the environment. So, think about this. Why did we end up having such a large dependency on Ukraine and Russia? Because the production in developed economies was being shrunk artificially by misguided regulation and what ended up happening is that numerous nations, specifically in the European Union, ended depending on Russian production. So, that is something that is happening in numerous parts of the economy, in various areas of industries, from renewables to energy and now in farming. I see. Those are some good points. Daniel Akaiye, Chief Economist at TRESSIS. Thanks for coming on today. Thank you so much.