How Would Cap-and-Trade Climate Policy Affect Agricultural Producers in North Dakota? An Economic Analysis
AbstractThe purpose of this study is to examine the possible impacts of cap-and-trade climate policy on agricultural producers in North Dakota. In this study, we focused on carbon sequestration potential and production cost impacts of carbon prices, and explicitly considered farmer preferences and adaptation behavior to estimate the benefits and costs of greenhouse gas cap-and-trade. Based on empirically estimated farmer behavior models, a policy simulation with agricultural census data identified farmer acreage allocation for carbon sequestration, carbon offset supplies and revenues, the production cost impacts of carbon prices, and impacts on net farm income and their distributions among heterogeneous farmers. Our analysis found that: 1) farmer ex ante preferences in general were biased against carbon sequestration participation although farmer involvement increased with carbon prices; 2) with the fertilizer industry exempted from cap-and-trade regulation, the production cost impact would be small, and more than half of the farms would gain with a carbon price possibly greater than $10 per metric ton of carbon; and 3) the production cost impact with a capped fertilizer industry would be 2 times higher, and more than half of the farms or farmland would lose unless the carbon price could reach more than $55 per metric ton of carbon.
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Bibliographic InfoPaper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agribusiness & Applied Economics Report with number 98170.
Date of creation: Aug 2010
Date of revision:
cap-and-trade; climate change; agricultural impacts; economics; carbon sequestration; Agricultural Finance; Financial Economics;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-01-03 (Agricultural Economics)
- NEP-ALL-2011-01-03 (All new papers)
- NEP-ENE-2011-01-03 (Energy Economics)
- NEP-ENV-2011-01-03 (Environmental Economics)
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