Modeling the Effects of Cap and Trade and a Carbon Offset Policy on Crop Allocations and Farm Income

Lawton Nalley and Michael Popp

No 60931, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: A static, producer profit maximization framework is used to capture county level land use choice on the basis of profitability, greenhouse gas (GHG) emissions to the farm gate as well as soil carbon sequestration as affected by tillage and soil type. Policy scenarios of a 5% GHG cap on agricultural emissions in conjunction with a carbon offset payment system, designed to provide producer payments for net carbon footprint (GHG emissions – soil carbon sequestration) reductions compared to a baseline are evaluated to determine potential changes to land use and or producer income as a result of different policy scenarios. Results suggest that a policy solely targeted at emissions can be counterproductive in the sense that acreage reductions of more input-intensive crops also lead to soil carbon sequestration reductions. Producer income effects are largely negative unless carbon prices reach nearly $100 per ton.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 19
Date: 2010-07-17
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:60931

DOI: 10.22004/ag.econ.60931

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