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Implications of a Carbon-Based Energy Tax for U.S. Agriculture

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  • Schneider, Uwe A.
  • McCarl, Bruce A.

Abstract

Policies to mitigate greenhouse gas emissions are likely to increase energy prices. Higher energy prices raise farmer costs for diesel and other fuels, irrigation water, farm chemicals, and grain drying. Simultaneously, renewable energy options become more attractive to agricultural producers. We consider both of these impacts, estimating the economic and environmental consequences of higher energy prices on U.S. agriculture. To do this we employ a price-endogenous agricultural sector model and solve that model for a range of carbon-tax-based energy price changes. Our results show mostly positive impacts on net farm income in the intermediate run. Through market price adjustments, fossil fuel costs are largely passed on to consumers. Additional farm revenue arises from the production of biofuels when carbon taxes reach $30 per ton of carbon or more. Positive environmental benefits include not only greenhouse gas emission offsets but also reduced levels of nitrogen leaching.

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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 34 (2005)
Issue (Month): 2 (October)
Pages:

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Handle: RePEc:ags:arerjl:10242

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Web page: http://www.narea.org/
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Related research

Keywords: energy tax; greenhouse gas policy; U.S. agricultural sector; bioenergy; mathematical programming; Environmental Economics and Policy;

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References

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  1. Konyar, Kazim & Howitt, Richard E., 2000. "The Cost Of The Kyoto Protocol To U.S. Crop Production: Measuring Crop Price, Regional Acreage, Welfare, And Input Substitution Effects," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
  2. Schneider, Uwe A. & Kumar, Pushpam, 2008. "Greenhouse Gas Mitigation through Agriculture," Choices, Agricultural and Applied Economics Association, vol. 23(1).
  3. Spreen, Thomas H., 2006. "Price Endogenous Mathematical Programming Models and Trade Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(02), August.
  4. Moreira, Jose R. & Goldemberg, Jose, 1999. "The alcohol program," Energy Policy, Elsevier, vol. 27(4), pages 229-245, April.
  5. Harry S. Baumes & Bruce A. McCarl, 1978. "Linear Programming And Social Welfare: Model Formulation And Objective Function Alternatives," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 26(3), pages 53-60, November.
  6. Antle, John M. & Capalbo, Susan M. & Johnson, James B. & Miljkovic, Dragan, 1999. "The Kyoto Protocol: Economic Effects Of Energy Prices On Northern Plains Dryland Grain Production," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(1), April.
  7. Alig, Ralph J. & Adams, Darius M. & McCarl, Bruce A., 1998. "Impacts Of Incorporating Land Exchanges Between Forestry And Agriculture In Sector Models," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(02), December.
  8. Uwe A. Schneider & Bruce A. McCarl, 2001. "Economic Potential of Biomass-Based Fuels for Greenhouse Gas Emission Mitigation," Center for Agricultural and Rural Development (CARD) Publications 01-wp280, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  9. Uwe A. Schneider & Bruce A. McCarl, 2002. "Potential of U.S. Agriculture and Forestry to Mitigate Greenhouse Gas Emissions: An Agricultural Sector Analysis, The," Center for Agricultural and Rural Development (CARD) Publications 02-wp300, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  10. Chen, Chi-Chung & McCarl, Bruce A., 2000. "The Value Of Enso Information To Agriculture: Consideration Of Event Strength And Trade," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
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Citations

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Cited by:
  1. Roberto Roson & Richard s.J. Tol, 2003. "An Integrated Assessment Model Of Economy-Energy-Climate – The Model Wiagem: A Comment," Working Papers FNU-26, Research unit Sustainability and Global Change, Hamburg University, revised May 2003.
  2. Dritan Osmani, . "A note on optimal transfer schemes, stable coalition for environmental protection and joint maximization assumption," Working Papers FNU-176, Research unit Sustainability and Global Change, Hamburg University.
  3. Vaal, Albert de & Yetkiner, I. Hakan & Zon, Adriaan van, 2002. "The cyclical advancement of drastic technologies," CCSO Working Papers 200217, University of Groningen, CCSO Centre for Economic Research.
  4. P. Michael Link, 2003. "Auswirkungen populationsdynamischer Veränderungen in Fischbeständen auf die Fischereiwirtschaft in der Barentssee," Working Papers FNU-29, Research unit Sustainability and Global Change, Hamburg University, revised May 2003.
  5. Doumax, Virginie & Philip, Jean-Marc & Sarasa, Cristina, 2014. "Biofuels, tax policies and oil prices in France: Insights from a dynamic CGE model," Energy Policy, Elsevier, vol. 66(C), pages 603-614.
  6. Ahlroth, Sofia & Hojer, Mattias, 2007. "Sustainable energy prices and growth: Comparing macroeconomic and backcasting scenarios," Ecological Economics, Elsevier, vol. 63(4), pages 722-731, September.
  7. I. Hakan Yetkiner, 2003. "Is There An Indispensable Role For Government During Recovery From An Earthquake? A Theoretical Elaboration," Working Papers FNU-25, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2003.
  8. Thompson, Wyatt & Meyer, Seth D. & Westhoff, Patrick C., 2008. "Potential for Uncertainty about Indirect Effects of Ethanol on Land Use in the Case of Brazil," Environmental and Rural Development Impacts Conference, October 15-16, 2008, St. Louis, Missouri 54650, Farm Foundation, Transition to a Bio Economy Conferences.
  9. Uwe A. Schneider & Michael Obersteiner & Erwin Schmid & Bruce A. McCarl, 2007. "Agricultural adaptation to climate policies under technical change," Working Papers FNU-133, Research unit Sustainability and Global Change, Hamburg University, revised Jan 2008.

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