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Markets for Agricultural Greenhouse Gas Offsets: The Role of Policy Design on Abatement Efficiency

Listed author(s):
  • Garnache, Cloe
  • Merel, Pierre R.
  • Lee, Juhwan
  • Six, Johan

This article investigates the role of greenhouse gas (GHG) offset payment design on abatement efficiency in agriculture. We develop a regionally disaggregated positive mathematical programming model of California agriculture calibrated to economic and agronomic information. Regional yield and GHG emission responses to production practices are derived from a biophysical process model. The economic optimization model allows for simultaneous and continuous changes in water, nitrogen fertilizer, and tillage intensities, and captures crop substitution effects. Empirical results show that second-best policies relying on regionally aggregated emission factors lead to small abatement efficiency losses relative to the first-best policy with finer-scale emission factors. Because the costs of such second-best policies are substantially lower, this finding suggests that they could be cost-effective in California. In contrast, second-best policies targeting a single GHG or a single input entail significant abatement efficiency losses, which nonetheless can be reduced by combining policy instruments.

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File URL: http://purl.umn.edu/170718
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Paper provided by Agricultural and Applied Economics Association in its series 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota with number 170718.

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Date of creation: 28 May 2014
Handle: RePEc:ags:aaea14:170718
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  12. Sophie Durandeau & Benoit Gabrielle & Caroline Godard & Pierre-Alain Jayet & Christine Le Bas, 2010. "Coupling biophysical and micro-economic models to assess the effect of mitigation measures on greenhouse gas emissions from agriculture," Post-Print hal-00410001, HAL.
  13. Douglas M. Larson & Gloria E. Helfand & Brett W. House, 1996. "Second-Best Tax Policies to Reduce Nonpoint Source Pollution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1108-1117.
  14. Cloé Garnache & Pierre R. Mérel, 2015. "What Can Acreage Allocations Say about Crop Supply Elasticities? A Convex Programming Approach to Supply Response Disaggregation," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(1), pages 236-256, 02.
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