IDEAS home Printed from https://ideas.repec.org/p/ags/aaea15/205741.html
   My bibliography  Save this paper

Fueling Local Water Pollution: Ethanol Refineries, Land Use, and Nitrate Runoff

Author

Listed:
  • Stevens, Andrew

Abstract

Ethanol production in the United States, driven by federal renewable fuel policy, has exploded over the past two decades and has prompted the construction of many ethanol refineries throughout the US Corn Belt. These refineries have introduced a new inelastic demand for corn in the areas where they were built, reducing basis for nearby farmers and effectively subsidizing local corn production. In this paper, I explore whether and to what extent the construction of new ethanol refineries has actually increased local corn acreage. I also explore some environmental effects of this acreage increase. Using a thirteen year panel of over two million field-level observations in Illinois, Indiana, Iowa, and Nebraska, I estimate a net increase of nearly 300,000 acres of corn in 2014 relative to 2002 that can be attributed to the placements of new ethanol refineries. This increase comprises approximately 0.75% of the total 2014 corn acreage within my dataset. Furthermore, this effect is separate from the general equilibrium effect of ethanol policy increasing aggregate demand for corn. Back-of-the-envelope calculations suggest that over 21,000 tons of the nitrogen applied to fields in my sample in 2014 can be attributed to refinery location effects. Essentially all of these observed effects occur only in areas within 30 miles of an ethanol refinery, suggesting that refineries have meaningful localized impacts on land use and environmental quality such as nitrate runoff.

Suggested Citation

  • Stevens, Andrew, 2015. "Fueling Local Water Pollution: Ethanol Refineries, Land Use, and Nitrate Runoff," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205741, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea15:205741
    DOI: 10.22004/ag.econ.205741
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/205741/files/Stevens_AAEA_2015.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.205741?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kevin McNew & Duane Griffith, 2005. "Measuring the Impact of Ethanol Plants on Local Grain Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 164-180.
    2. Hongli Feng & Bruce A. Babcock, 2010. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 789-802.
    3. Miao, Ruiqing, 2013. "Impact of Ethanol Plants on Local Land Use Change," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(2), pages 1-19, August.
    4. Paul Gallagher & Robert Wisner & Heather Brubacker, 2005. "Price Relationships in Processors' Input Market Areas: Testing Theories for Corn Prices Near Ethanol Plants," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(2‐3), pages 117-139, June.
    5. Fatal, Yehushua S. & Thurman, Walter N., 2014. "The Response of Corn Acreage to Ethanol Plant Siting," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 46(2), pages 1-15, May.
    6. Michael Livingston & Michael J. Roberts & Yue Zhang, 2015. "Optimal Sequential Plantings of Corn and Soybeans Under Price Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(3), pages 855-878.
    7. Gallagher, Paul W. & Wisner, Robert N. & Brubaker, Heather, 2005. "Pricing Relationships in Processors' Input Market Areas: Testing Theories for Corn Prices Near Ethanol Plants," Staff General Research Papers Archive 12305, Iowa State University, Department of Economics.
    8. Lambert, Dayton M. & Wilcox, Michael D. & English, Alicia & Stewart, Lance A., 2008. "Ethanol Plant Location Determinants and County Comparative Advantage," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(1), pages 1-19, April.
    9. Camilo Sarmiento & William W. Wilson & Bruce Dahl, 2012. "Spatial Competition and Ethanol Plant Location Decisions," Agribusiness, John Wiley & Sons, Ltd., vol. 28(3), pages 260-273, June.
    10. Kevin McNew & Duane Griffith, 2005. "Measuring the Impact of Ethanol Plants on Local Grain Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 164-180.
    11. Turnquist, Alan & Fortenbery, T. Randall & Foltz, Jeremy D., 2008. "Progress or Devastation? The Effects of Ethanol Plant Location on Local Land Use," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6125, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Mônica A. Haddad & Gary Taylor & Francis Owusu, 2010. "Locational Choices of the Ethanol Industry in the Midwest Corn Belt," Economic Development Quarterly, , vol. 24(1), pages 74-86, February.
    13. Katchova, Ani L., 2009. "The Spatial Effect of Ethanol Biorefinery Locations on Local Corn Prices," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49309, Agricultural and Applied Economics Association.
    14. Nathan P. Hendricks & Aaron Smith & Daniel A. Sumner, 2014. "Crop Supply Dynamics and the Illusion of Partial Adjustment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1469-1491.
    15. repec:cup:jagaec:v:40:y:2008:i:1:p:117-135_4 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew W. Stevens, 2023. "Estimating Agricultural Acreage Responses to Input Prices: Groundwater in California," Natural Resource Management and Policy, in: David Zilberman & Jeffrey M. Perloff & Cyndi Spindell Berck (ed.), Sustainable Resource Development in the 21st Century, pages 93-106, Springer.
    2. Stigler, Matthieu M., 2018. "Supply response at the field-level: disentangling area and yield effects," 2018 Annual Meeting, August 5-7, Washington, D.C. 274343, Agricultural and Applied Economics Association.
    3. Gaurav Arora & Peter T. Wolter & Hongli Feng & David A. Hennessy, 2016. "Role of Ethanol Plants in Dakotas Land Use Change: Incorporating Flexible Trends in the Difference-in-Difference Framework with Remotely-Sensed Data," Center for Agricultural and Rural Development (CARD) Publications 16-wp564, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Austin, K.G. & Jones, J.P.H. & Clark, C.M., 2022. "A review of domestic land use change attributable to U.S. biofuel policy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 159(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stevens, Andrew W., 2021. "Ethanol Refineries and Local Land Use," 2021 Conference, August 17-31, 2021, Virtual 315304, International Association of Agricultural Economists.
    2. Ani L. Katchova & Ana Claudia Sant’Anna, 2019. "Impact of Ethanol Plant Location on Corn Revenues for U.S. Farmers," Sustainability, MDPI, vol. 11(22), pages 1-13, November.
    3. Ben H. Blomendahl & Richard K. Perrin & Bruce B. Johnson, 2011. "The Impact of Ethanol Plants on Surrounding Farmland Values: A Case Study," Land Economics, University of Wisconsin Press, vol. 87(2), pages 223-232.
    4. Arora, Gaurav & Wolter, Peter T. & Feng, Hongli & Hennessy, David A., 2015. "Role of Ethanol Plants in Dakotas’ Land Use Change: Analysis Using Remotely Sensed Data," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 206565, Agricultural and Applied Economics Association.
    5. Gaurav Arora & Peter T. Wolter & Hongli Feng & David A. Hennessy, 2016. "Role of Ethanol Plants in Dakotas Land Use Change: Incorporating Flexible Trends in the Difference-in-Difference Framework with Remotely-Sensed Data," Center for Agricultural and Rural Development (CARD) Publications 16-wp564, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    6. John L. Pender & Jeremy G. Weber & Jason P. Brown, 2014. "Sustainable Rural Development and Wealth Creation," Economic Development Quarterly, , vol. 28(1), pages 73-86, February.
    7. Yanbing Wang & Michael S. Delgado & Juan Sesmero & Benjamin M. Gramig, 2020. "Market Structure and the Local Effects of Ethanol Expansion on Land Allocation: A Spatially Explicit Analysis," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1598-1622, October.
    8. Liu, Bing & Hudson, Darren & Farmer, Michael, 2015. "The Impact of a Sorghum-Based Ethanol Plant on Local Cotton Acreage: A Spatial Approach," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229799, Southern Agricultural Economics Association.
    9. Serra, Teresa, 2011. "Volatility spillovers between food and energy markets: A semiparametric approach," Energy Economics, Elsevier, vol. 33(6), pages 1155-1164.
    10. Zhige Wu & Alex Maynard & Alfons Weersink & Getu Hailu, 2018. "Asymmetric spot‐futures price adjustments in grain markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1549-1564, December.
    11. Junpyo Park & John Anderson & Eric Thompson, 2019. "Land-Use, Crop Choice, and Proximity to Ethanol Plants," Land, MDPI, vol. 8(8), pages 1-14, July.
    12. Jinho Jung & Juan Sesmero & Ralph Siebert, 2020. "Spatial Differentiation and Market Power in Input Procurement: Evidence from a Structural Model of the Corn Market," CESifo Working Paper Series 8088, CESifo.
    13. Junpyo Park, 2022. "Distance to Biorefinery Plants and Its Influence on Agricultural Land Value: Evidence from the United States Midwest Region," Land, MDPI, vol. 11(9), pages 1-14, September.
    14. Stigler, Matthieu M., 2018. "Supply response at the field-level: disentangling area and yield effects," 2018 Annual Meeting, August 5-7, Washington, D.C. 274343, Agricultural and Applied Economics Association.
    15. Jennifer Ifft & Deepak Rajagopal & Ryan Weldzuis, 2019. "Ethanol Plant Location and Land Use: A Case Study of CRP and the Ethanol Mandate," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(1), pages 37-55, March.
    16. Jinho Jung & Juan Sesmero & Ralph Siebert, 2022. "A structural estimation of spatial differentiation and market power in input procurement," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 613-644, March.
    17. Brent A. Gloy & Jason Henderson, 2008. "The impact of ethanol plants on cropland values in the Great Plains," Regional Research Working Paper RRWP 08-01, Federal Reserve Bank of Kansas City.
    18. Grashuis Jasper, 2020. "The Competitive Impact of Cooperatives on the Spot Market: A Spatial Analysis of Iowa Corn Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 18(2), pages 1-11, November.
    19. Henderson, Jason R. & Gloy, Brent A., 2008. "The Impact of Ethanol Plants on Cropland Values in the Great Plains," Working Papers 51080, Cornell University, Department of Applied Economics and Management.
    20. Mônica A. Haddad & Gary Taylor & Francis Owusu, 2010. "Locational Choices of the Ethanol Industry in the Midwest Corn Belt," Economic Development Quarterly, , vol. 24(1), pages 74-86, February.

    More about this item

    Keywords

    Land Economics/Use; Production Economics;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea15:205741. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.