The implications of the US renewable fuel standard programme for farm structure

Constant I. Tra and Charles Towe ()

Applied Economics, 2016, vol. 48, issue 8, 712-722

Abstract: We investigate the impact of the 2005 Renewable Fuel Standard (RFS) on farm structure, particularly farm size. We rely on the salience of a new ethanol plant in a farmers' local neighbourhood to identify the impact of the RFS mandate on these spatially advantaged farms. To control for the nonrandom selection of ethanol production facilities, we utilize a propensity score matching estimator, and to remove impact of farm-level or market shifting unobservables resulting from shifts in commodity prices we employ a difference-in-difference (DD) matching approach. We estimate the treatment effect of an ethanol production facility on farm size prior to the RFS mandate and after the RFS programme. The effect of the RFS policy on farm size is obtained as the difference between these two DD matching estimators. Overall, our results suggest that the RFS programme raised the probability of farm size increase by roughly 12-18%, on average, for farms located within a 30-mile radius of new ethanol plants. In addition, the programme contributed to a net increase in farm size of 25-32%, on average, for those spatially advantaged farms.

Date: 2016
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DOI: 10.1080/00036846.2015.1085644

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