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Modeling the Effects of Cap and Trade and a Carbon Offset Policy on Crop Allocations and Farm Income

Author

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  • Nalley, Lawton Lanier
  • Popp, Michael P.

Abstract

A static, producer profit maximization framework is used to capture county level land use choice on the basis of profitability, greenhouse gas (GHG) emissions to the farm gate as well as soil carbon sequestration as affected by tillage and soil type. Policy scenarios of a 5% GHG cap on agricultural emissions in conjunction with a carbon offset payment system, designed to provide producer payments for net carbon footprint (GHG emissions – soil carbon sequestration) reductions compared to a baseline are evaluated to determine potential changes to land use and or producer income as a result of different policy scenarios. Results suggest that a policy solely targeted at emissions can be counterproductive in the sense that acreage reductions of more input-intensive crops also lead to soil carbon sequestration reductions. Producer income effects are largely negative unless carbon prices reach nearly $100 per ton.

Suggested Citation

  • Nalley, Lawton Lanier & Popp, Michael P., 2010. "Modeling the Effects of Cap and Trade and a Carbon Offset Policy on Crop Allocations and Farm Income," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60931, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:60931
    DOI: 10.22004/ag.econ.60931
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    File URL: https://ageconsearch.umn.edu/record/60931/files/Nalley_Popp.pdf
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    Cited by:

    1. Smith, S. Aaron & Popp, Michael P. & Nalley, Lawton Lanier & Brye, Kristofor R., 2012. "Modeling Pine as a Carbon-Sequestering Crop in Arkansas," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(2), pages 1-15, August.
    2. Wright, Andrew P. & Hudson, Darren, 2012. "An Analysis of the Feasibility of Carbon Management Policies as a Mechanism to Influence Water Conservation Using Optimization Methods," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119819, Southern Agricultural Economics Association.
    3. Popp, Michael P. & Nalley, Lawton Lanier, 2011. "Modeling Interactions of a Carbon Offset Policy and Biomass Markets on Crop Allocations," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(3), pages 1-13, August.

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