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Supply Response, Marginal Cost, and Soil Erosion Implications of Stover-based Biofuels

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  • Juan Sesmero
  • Michelle Pratt
  • Wallace Tyner

Abstract

Existing economic analysis of corn stover as an energy feedstock has not considered potential changes in land use associated with different stover prices. We estimate the response of corn stover supply density to its price driven by changes in land use and examine its implications for a processing plant's pricing strategy and marginal cost, as well as associated changes in soil erosion. We find that plants will exploit the intensive margin as well as the extensive margin to secure additional amounts of stover. Our results show, counterintuitively, that a market for stover may result in lower soil erosion due to reallocations of land to continuous corn with removal, which, combined with no-till farming, results in lower soil erosion than the baseline without stover removal. Also contrary to expectations, using cover crops with stover removal may result in higher soil erosion due to land use changes within the fuel shed associated with optimal pricing.

Suggested Citation

  • Juan Sesmero & Michelle Pratt & Wallace Tyner, 2015. "Supply Response, Marginal Cost, and Soil Erosion Implications of Stover-based Biofuels," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(3), pages 502-523.
  • Handle: RePEc:oup:apecpp:v:37:y:2015:i:3:p:502-523.
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    File URL: http://hdl.handle.net/10.1093/aepp/ppu042
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    References listed on IDEAS

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    1. Moschini, GianCarlo & Cui, Jingbo & Lapan, Harvey E., 2012. "Economics of Biofuels: An Overview of Policies, Impacts and Prospects," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(3), pages 1-28, December.
    2. Rosburg, Alicia & Miranowski, John & Jacobs, Keri, 2013. "Cellulosic biofuel potential under land constraints: locations, plant sizes and feedstock supply costs," ISU General Staff Papers 201308130700001049, Iowa State University, Department of Economics.
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    Cited by:

    1. Rosburg, Alicia & Miranowski, John & McFadden, Jonathan, 2016. "Mitigating Feedstock Supply Risk in Corn Stover Biofuel Production," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235875, Agricultural and Applied Economics Association.
    2. Kwabena Krah & Daniel R Petrolia & Angelica Williams & Keith H Coble & Ardian Harri & Roderick M Rejesus, 2018. "Producer Preferences for Contracts on a Risky Bioenergy Crop," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 40(2), pages 240-258.
    3. Rosburg, Alicia & Miranowski, John & Jacobs, Keri, 2016. "Modeling biomass procurement tradeoffs within a cellulosic biofuel cost model," Energy Economics, Elsevier, vol. 58(C), pages 77-83.
    4. Ruiqing Miao & Madhu Khanna, 2017. "Effectiveness of the Biomass Crop Assistance Program: Roles of Behavioral Factors, Credit Constraint, and Program Design," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(4), pages 584-608.

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