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Indirect Land Use Effects of Corn Ethanol in the U.S: Implications for the Conservation Reserve Program

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  • Chen, Xiaoguang
  • Khanna, Madhu

Abstract

We developed an integrated model of U.S agricultural and transportation sectors to examine the impacts of corn ethanol production on the reduction in CRP enrollment and grassland conversion during the period 2007-2012. We also examine the extent to which ethanol production raised the budgetary cost of maintaining the CRP program at the 2007 level. Our simulation analysis shows that by raising crop prices and increasing opportunity costs of marginal lands, corn ethanol production led to additional 1.6 million acres reduction in CRP enrollment and grassland conversion relative to a no-biofuel policy baseline scenario. In order to maintain the CRP enrollment at the 2007 levels, a net present value of government expenditure of $1.85 billion on reenrollment would be needed under the baseline scenario for the period 2007-2012. Government expenditure will increase to $2.07 billion with the booming of corn ethanol industry.

Suggested Citation

  • Chen, Xiaoguang & Khanna, Madhu, 2014. "Indirect Land Use Effects of Corn Ethanol in the U.S: Implications for the Conservation Reserve Program," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170284, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:170284
    DOI: 10.22004/ag.econ.170284
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    References listed on IDEAS

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    1. Spreen, Thomas H., 2006. "Price Endogenous Mathematical Programming Models and Trade Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(2), pages 1-5, August.
    2. Xiaoguang Chen & Haixiao Huang & Madhu Khanna & Hayri Önal, 2011. "Meeting the Mandate for Biofuels: Implications for Land Use, Food, and Fuel Prices," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 223-267, National Bureau of Economic Research, Inc.
    3. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
    4. Bruce A. McCarl & Thomas H. Spreen, 1980. "Price Endogenous Mathematical Programming As a Tool for Sector Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(1), pages 87-102.
    5. Chen, Xiaoguang & Huang, Haixiao & Khanna, Madhu & Önal, Hayri, 2014. "Alternative transportation fuel standards: Welfare effects and climate benefits," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 241-257.
    6. Thomas W. Hertel & Wallace E. Tyner & Dileep K. Birur, 2010. "The Global Impacts of Biofuel Mandates," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 75-100.
    7. Xiaoguang Chen & Hayri Önal, 2012. "Modeling Agricultural Supply Response Using Mathematical Programming and Crop Mixes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 674-686.
    8. Hochman, Gal & Rajagopal, Deepak & Timilsina, Govinda & Zilberman, David, 2011. "The role of inventory adjustments in quantifying factors causing food price inflation," Policy Research Working Paper Series 5744, The World Bank.
    9. Madhu Khanna & Christine L. Crago, 2012. "Measuring Indirect Land Use Change with Biofuels: Implications for Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 161-184, August.
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    Cited by:

    1. Johnson, Kris A. & Dalzell, Brent J. & Donahue, Marie & Gourevitch, Jesse & Johnson, Dennis L. & Karlovits, Greg S. & Keeler, Bonnie & Smith, Jason T., 2016. "Conservation Reserve Program (CRP) lands provide ecosystem service benefits that exceed land rental payment costs," Ecosystem Services, Elsevier, vol. 18(C), pages 175-185.

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    Keywords

    Agricultural and Food Policy; Environmental Economics and Policy; Land Economics/Use; Resource /Energy Economics and Policy;
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