The spillover effects of biofuel policy on participation in the conservation reserve program

Feng Wu, Zhengfei Guan, Fan Yu and Robert Myers ()

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 9, 1755-1770

Abstract: This paper studies the spillover effects of rising biofuel production on participation in the Conservation Reserve Program. Landowner participation decisions are modeled using a real options framework. We develop a land use decision model that captures biofuel-driven structural changes in market demand and derive threshold conditions that trigger participation in the program. We then quantify the impacts of biofuel production on participation at both the national and state levels using Monte Carlo simulations. The model is also used to analyze how changes in the persistence of the biofuel production boom and in the volatility of farming returns affect conservation participation decisions. Policy implications of the results are discussed.

Keywords: Spillover; Biofuel production; Conservation reserve; Risk and uncertainty; Real options (search for similar items in EconPapers)
JEL-codes: C61 D81 Q24 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:9:p:1755-1770

DOI: 10.1016/j.jedc.2013.03.013

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