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The spillover effects of biofuel policy on participation in the conservation reserve program

  • Wu, Feng
  • Guan, Zhengfei
  • Yu, Fan
  • Myers, Robert J.

This paper studies the spillover effects of rising biofuel production on participation in the Conservation Reserve Program. Landowner participation decisions are modeled using a real options framework. We develop a land use decision model that captures biofuel-driven structural changes in market demand and derive threshold conditions that trigger participation in the program. We then quantify the impacts of biofuel production on participation at both the national and state levels using Monte Carlo simulations. The model is also used to analyze how changes in the persistence of the biofuel production boom and in the volatility of farming returns affect conservation participation decisions. Policy implications of the results are discussed.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 37 (2013)
Issue (Month): 9 ()
Pages: 1755-1770

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Handle: RePEc:eee:dyncon:v:37:y:2013:i:9:p:1755-1770
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  6. David Zilberman & Gal Hochman & Deepak Rajagopal & Steve Sexton & Govinda Timilsina, 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 275-281.
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  14. Insley, Margaret, 2002. "A Real Options Approach to the Valuation of a Forestry Investment," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 471-492, November.
  15. JunJie Wu & Haixia Lin, 2010. "The Effect of the Conservation Reserve Program on Land Values," Land Economics, University of Wisconsin Press, vol. 86(1), pages 1-21.
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