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Paying Farmers to Reduce Nitrogen Application on Corn: The Baseline Approach

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  • Horowitz, John
  • Ueda, Kohei
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    Abstract

    We model a simulated green-payment policy to reduce nitrogen application on corn. In contrast to other papers, we recognize that the farm’s business-as-usual application rate cannot be known by the policymaker. We develop a structural model and data-driven approach to address this issue. We find that only one-third of the credits that would receive payments would be additional nitrogen reductions. The substantial volume of non-additional “reductions” leads the effective payment rate to be 3.5 times the price paid by the simulated policy. We discuss a further eligibility criterion that can improve policy performance.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150561.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaea13:150561

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    Keywords: Agricultural and Food Policy; Crop Production/Industries;

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    1. Robert N. Stavins & Ruben N. Lubowski & Andrew J. Plantinga, 2008. "What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions," Working Papers 2008.83, Fondazione Eni Enrico Mattei.
    2. Fell, Harrison & Burtraw, Dallas & Morgenstern, Richard & Palmer, Karen, 2011. "Climate Policy Design with Correlated Uncertainties in Offset Supply and Abatement Cost," Discussion Papers dp-10-01-rev, Resources For the Future.
    3. Robert Finger & Werner Hediger, 2008. "The Application of Robust Regression to a Production Function Comparison – the Example of Swiss Corn," IED Working paper 08-02, IED Institute for Environmental Decisions, ETH Zurich.
    4. Francisco Rosas & Bruce A. Babcock & Dermot J. Hayes, 2011. "A Nonlinear Offset Program to Reduce Nitrous Oxide Emissions Induced by Excessive Nitrogen Application," Center for Agricultural and Rural Development (CARD) Publications 11-wp521, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    5. Marshall, Elizabeth P. & Weinberg, Marca, 2012. "Baselines in Environmental Markets: Tradeoffs Between Cost and Additionality," Economic Brief 138922, United States Department of Agriculture, Economic Research Service.
    6. Ribaudo, Marc & Delgado, Jorge & Livingston, Michael J., 2011. "Preliminary Assessment of Nitrous Oxide Offsets in a Cap and Trade Program," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(2), August.
    7. Mezzatesta, Mariano & Newburn, David A. & Woodward, Richard T., 2011. "Additionality And The Adoption Of Farm Conservation Practices," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103592, Agricultural and Applied Economics Association.
    8. Richard D. Horan & Roger Claassen, 2007. "Targeting Green Payments under a Budget Constraint," Land Economics, University of Wisconsin Press, vol. 83(3), pages 319-330.
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