@article{Reilly:332120,
      recid = {332120},
      author = {Reilly, John and Gurgel, Angelo and Cronin, Tim and  Paltsev, Sergey and Kicklighter, David and Melillo, Jerry},
      title = {Food, Fuel, Forests and the Pricing of Ecosystem Services},
      address = {2011},
      pages = {23},
      year = {2011},
      note = {Presented at the 14th Annual Conference on Global Economic  Analysis, Venice, Italy},
      abstract = {We investigate how demand for alternative ecosystem  services, as agricultural and biofuels production,  recreation and carbon storage, may be complementary or  competitive. We also assess how pricing of all of new  services may affect land use, food prices, and the  prospects for biofuels production. We expand the Emissions  Prediction and Policy Analysis (EPPA) model, a recursive  dynamic general equilibrium model of the world economy, to  explicitly represents the recreation value of ecosystems,  formulated through the expansion of traditional economic  accounts to represent outdoor recreation services used by  the household. We also extend this model to represent the  carbon storage value of alternative ecosystem services.  Another innovation introduced in the model is to be able to  price carbon uptake or emissions from land use change. We  consider the decision to invest in biofuels as a dynamic  problem, since the land use changes needed to produce  biomass result in an initial carbon debt that is eventually  repaid through repeated harvests that continue to offset  fossil fuel use. We simulate several experiments,  considering CO2 prices on fossil fuel use, land use  emissions and credits for carbon uptake from land use  changes. We find that growth in demand for biofuels  increases with implementation of CO2 pricing policies and  that leads to increased CO2 emissions from land use  conversion if CO2 prices only cover energy emissions and  are not extended to emissions from land. If we extend CO2  pricing to land use emissions that provides sufficient  economic incentive to avoid most of the deforestation that  would otherwise occur. If we further extend CO2 pricing to  provide credits for increasing the stock of carbon we find  significant reforestation such that globally land use  becomes a large net sink for CO2, with a substantial  increase in CO2 storage in vegetation and soils at the  expense of other land uses, especially pasture and grazing.  Our analysis suggests that land transitions occurring over  the century if CO2 storage is credited would eventually  store CO2 equal to as much as a third the entire global  energy emissions over this coming century assuming these  emissions are controlled by climate policy. With at least  two new large non-food demands for land (CO2 storage and  biofuels) that compete with land for food the need to  assure that low income households worldwide have food or  the resources to afford it becomes critical. Finally, we  simulate scenarios where different coalitions of countries  impose policies penalizing land use emissions and crediting  land use uptakes to investigate whether leakage is an  important phenomenon in land use emissions.},
      url = {http://ageconsearch.umn.edu/record/332120},
}