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Abstract

This study compares the efficiency of three policy instruments (i.e., crop insurance, establishment cost share, and biomass price subsidy) in promoting energy crop production. The efficiency is measured by energy crop acreage increased due to the policy instrument for a given amount of government expenditure supporting the instrument. Based on a unique dataset of county-level miscanthus yield over 1979-2010 across the rainfed region of the United States, our results show that if there is no credit constraint in financing establishment costs then crop insurance is most efficient and biomass price subsidy is least efficient among the three policy instruments. If there is credit constraint in financing establishment costs, however, then crop insurance is more (respectively, less) efficient than establishment cost share for small (respectively, large) expenditure. Geographical distributions of energy crop acreage under different policy instruments are studied as well.

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