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

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.

Issue Date:
Jul 17 2010
Publication Type:
Conference Paper/ Presentation
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JEL Codes:
Q50; Q58; Q54
Series Statement:
Selected Paper

 Record created 2017-04-01, last modified 2018-01-22

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