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

Author

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

Abstract

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.

Suggested Citation

  • Wu, Feng & Guan, Zhengfei & Yu, Fan & Myers, Robert J., 2013. "The spillover effects of biofuel policy on participation in the conservation reserve program," Journal of Economic Dynamics and Control, Elsevier, vol. 37(9), pages 1755-1770.
  • Handle: RePEc:eee:dyncon:v:37:y:2013:i:9:p:1755-1770 DOI: 10.1016/j.jedc.2013.03.013
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    References listed on IDEAS

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    More about this item

    Keywords

    Spillover; Biofuel production; Conservation reserve; Risk and uncertainty; Real options;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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