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Using Carbon Offsets to Fund Agricultural Conservation Practices in a Working-Lands Setting

  • Reeling, Carson J.
  • Gramig, Benjamin M.
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    The nitrogen cascade concept indicates that agriculture serves as a significant link between emissions of the potent greenhouse gas (GHG) nitrous oxide and losses of nitrate-N to surface waters. Conservation practices have the potential to exploit this link, as their implementation is found to reduce fluxes of GHGs and nonpoint source (NPS) water pollution. Several studies have recognized this link and have documented the potential to improve environmental quality through the use of programs which retire land, the cost of which can be offset by the sale of carbon credits. However, the ability to use land for both agricultural production and environmental conservation is important. As such, this study provides a novel analytical framework that is used to examine the potential for implementing agricultural conservation practices to reduce NPS water pollutants and fluxes of GHGs in a working-lands setting. The extent to which carbon pricing can affect practice implementation costs and the optimal distribution of these practices throughout the watershed is also explored. Results from this study indicate that carbon offsets can sharply reduce conservation practice implementation costs and therefore have the potential to reduce greater amounts of NPS pollution for a given cost of implementation. This conclusion has significant implications for policymaking, particularly with regard to using market mechanisms to improve water quality in watersheds where markets have historically been unsuccessful. However, this study found that the optimal allocation of practices was heavily reliant on fertilizer management, which is difficult to enforce in practice.

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    File URL: http://purl.umn.edu/103577
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    Paper provided by Agricultural and Applied Economics Association in its series 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania with number 103577.

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    Date of creation: 2011
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    Handle: RePEc:ags:aaea11:103577
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    1. Manoj Jha & Sergey Rabotyagov & Philip W. Gassman, 2009. "Optimal Placement of Conservation Practices Using Genetic Algorithm with SWAT," Center for Agricultural and Rural Development (CARD) Publications 09-wp496, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Bontems, Philippe & Thomas, Alban, 2006. "AJAE Appendix: Regulating Nitrogen Pollution with Risk-Averse Farmers under Hidden Information and Moral Hazard," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 88(1), February.
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