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Impacts of Ethanol on Planted Acreage in Market Equilibrium

  • Hongli Feng
  • Bruce A. Babcock

The magnitude of land conversion caused by biofuels expansion largely determines whether biofuels reduce net greenhouse gas emissions. To examine this issue, we model how equilibrium changes in input use and land allocation decisions respond to market- and policy-induced increases in corn ethanol demand. We demonstrate why total cropland area unambiguously increases with increased ethanol demand. The impact of ethanol price subsidies and consumption mandates are examined in the context of technical change. If ethanol demand is elastic enough, an exogenous increase in corn yields leads to cropland expansion with price subsidies. Yield increases under consumption mandates reduce land use. Copyright 2010, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ajae/aaq023
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 92 (2010)
Issue (Month): 3 ()
Pages: 789-802

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Handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:789-802
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  1. Hennessy, David A., 2004. "On Monoculture and the Structure of Crop Rotations," Staff General Research Papers 12004, Iowa State University, Department of Economics.
  2. Miranowski, John & Orazem, Peter, 1994. "A Dynamic Model of Acreage Allocation with General and Crop-Specific Capital," Staff General Research Papers 10695, Iowa State University, Department of Economics.
  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 12881, Iowa State University, Department of Economics.
  4. Feng, Hongli & Rubin, Ofir D. & Babcock, Bruce A., 2008. "Greenhouse Gas Impacts of Ethanol from Iowa Corn," Lifecycle Carbon Footprint of Biofuels Workshop, January 29, 2008, Miami Beach, Florida 49101, Farm Foundation.
  5. Keeney, Roman & Hertel, Thomas, 2008. "The Indirect Land Use Impacts of U.S. Biofuel Policies: The Importance of Acreage, Yield, and Bilateral Trade Responses," GTAP Working Papers 2810, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  6. Carlos Arnade & David Kelch, 2007. "Estimation of Area Elasticities from a Standard Profit Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 727-737.
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