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

Cloé Garnache, Pierre Mérel (), Juhwan Lee and Johan Six

No 170718, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: 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.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 41
Date: 2014-05-28
New Economics Papers: this item is included in nep-agr and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:170718

DOI: 10.22004/ag.econ.170718

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