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Expansion of ethanol production in the United States has raised concerns regarding its land‐use change effects. However, little is known about the extent to which observed land use change in the United States can be attributed to ethanol plant proximity or is caused by changes in crop prices that may be partly induced by expansion in ethanol production. This study aims to examine the determinants of changes in corn acreage and aggregate crop acreage by simultaneously identifying the effects of establishment of ethanol plants serving as terminal markets for corn and the effects of changes in crop prices in the United States between 2003 and 2014. Our results show that corn acreage and total acreage are fairly inelastic with respect to both changes in ethanol capacity in the vicinity, as well as changes in crop prices. Our estimates of acreage elasticity with respect to corn ethanol production are smaller than those obtained by previous studies that disregard the price effect on crop acreage. We find that, ceteris paribus, the increase in ethanol capacity alone led to a modest 3% increase in corn acreage and less than a 1% increase in total crop acreage by 2012 when compared to 2008. The effect of corn price and aggregate crop price on acreage change from 2008 to 2012 was more than twice larger than that of effective ethanol production capacity over this period; but this price effect was largely reversed by the downturn in crop prices after 2012. This study shows that land‐use change is not a static phenomenon and that it is important to examine how it evolves in response to various factors that may change over time.

We investigate the effect of crop price and climate variables on rainfed corn and soybean yields and acreage in the United States using a large panel dataset for the 1977–2007 period. Instrumental variables are used to control for endogeneity of prices in yield and acreage regressions, while allowing for spatially auto-correlated errors. We find that an increase in corn price has a statistically significant positive impact on corn yield, but the effect of soybean price on soybean yields is not statistically significant. The estimated price elasticities of corn yield and acreage are 0.23 and 0.45, respectively. Of the increase in corn supply caused by an increase in corn price, we find that 33.8% is due to price-induced yield enhancement and 66.2% is due to price-induced acreage expansion. We also find that the impact of climate change on corn production ranges from $-$7% to $-$41% and on soybean ranges from $-$8% to $-$45%, depending on the climate change scenarios, time horizon, and global climate models used to predict climate change. We show that the aggregate net impact of omitting price variables is an overestimation of the effect of climate change on corn yield by up to 9% and on soybean yield by up to 15%.

The rise in food commodity prices since 2004, which reached record highs in 2008, has coincided with the tripling of corn ethanol production from 15 billion liters (BL) to 50 BL over the 2004–2010 period. This has spurred the food vs. fuel debate and raised questions about the extent to which biofuels have contributed to the increase in food crop prices. Estimates of the impact of observed levels of biofuel production differ widely across studies and lie between 20% and 60% (Hochman et al. 2011). Biofuel production in the United States (US) has surged as a result of government policies like the Renewable Fuel Standard (RFS), volumetric ethanol excise tax credit (VEETC) for blenders of ethanol, and tariffs that restrict the imports of sugarcane ethanol. The RFS authorized by the Energy Independence and Security Act (EISA) of 2007 has set ambitious targets of increasing biofuel production sixfold to 136 BL by 2022, with over 60% of it to be met by advanced biofuels produced using non-corn starch based feedstocks. A $0.12/liter VEETC is provided to blenders of ethanol to reduce their costs of meeting the RFS while a tariff of $0.14/liter and an ad valorem tariff of 2.5% were enacted to prevent transfer of the tax credit to ethanol producers in Brazil. The current VEETC and import tariff expired in 2011. With increasing federal debt and concerns about the impact of these policies on food and feed prices, political support for the

Interest in cellulosic biofuels has grown due to recent concerns about the impact of expanding production of corn ethanol on food prices and the greater potential of cellulosic biofuels to mitigate climate change. The Energy Independence and Security Act (EISA) of 2007 limits the production of corn ethanol to 56 billion liters after 2015 and mandates the production of at least 80 of the 136 billion liters of ethanol from non–corn starch–based cellulosic feedstocks by 2022. The Biomass Research and Development Act of 2000 had established an even more ambitious goal of using biomass to replace the equivalent of 30% of current petroleum consumption by 2030 and estimated that this would require 1 billion dry (short) tons of biomass annually (U.S. Department of Energy [USDOE 2003]). Biomass can be obtained from several different sources, including forest resources, crop residues,woody biomass,and perennial grasses. A USDA/USDOE report (Perlack et al. 2005) examined the technical feasibility of sustaining this supply of biomass and the land resources that would be required under alternative scenarios with yield-enhancing and other technological changes in conventional crops and perennial bioenergy crops. The study estimated that 0.54 to 1 billion dry tons of agricultural crop-based biomass could be obtained annually from cropland, idle cropland, and cropland pasture with moderate to high productivity gains in crop productivity, residue collection, and tillage practices.

A general equilibrium approach is used to evaluate the welfare impacts of alternative policies for reducing agricultural pollution in an open economy with preexisting distortions caused by income taxes and agricultural subsidies. The policies examined here include the removal of distortionary agricultural subsidies. We find that even though these distortions are small compared to others in the economy, removing them and imposing nitrogen reduction subsidies and/or output taxes can enhance welfare and reduce nitrogen pollution; thereby leading to a substantial double dividend. The relative efficiency of the alternative policies examined here depends on the level of the nitrogen reduction target. Copyright 2008, Oxford University Press.

Land retirement as a policy instrument for reducing environmental damages from agricultural production has been growing in importance since 1985 when the Conservation Reserve Program (CRP) was first established. The goals of the program have evolved from an initial focus on reducing soil erosion to achieving multiple environmental benefits. In 1996, the Conservation Reserve Enhancement Program (CREP) was established to more cost-effectively target high-priority, environmentally sensitive areas by restricting eligible cropland to a narrowly defined geographic area. For Illinois CREP, this area is the 100year floodplain and adjacent land in the Illinois River Basin. Reducing off-site sediment abatement to improve water quality is an important goal for both Illinois CREP and CRP. In addition to defining eligibility, an important issue that public agencies must tackle in designing a land retirement instrument is the choice of a decision rule for selecting the land to be retired. Environmental benefits and eco

This paper develops a model of farmer decision-making to examine the extent to which uncertainties about the performance of site-specific technologies (SSTs) and about the weather impact the value of these technologies. The model uses the jointly estimated risk and technology parameters to examine the impacts of SSTs on returns and nitrogen pollution. The availability of uncertain soil information and production uncertainty can lead risk-averse farmers to apply more fertilizers and generate more pollution. Ignoring the impact of uncertainty and risk preferences of farmers leads to a significant overestimation of the economic and environmental benefits of SSTs and underestimation of the required subsidy for inducing adoption of SSTs. The model that accounts for uncertainties about soil conditions and production as well as risk preferences of farmers provides an explanation for the low observed adoption rates of SSTs. Improvements in the accuracy of SSTs have the potential to increase the incentives for adoption.

This paper analyzes the sequential decision to adopt two site-specific technologies, soil testing and variable rate technology (VRT), and their impact on nitrogen productivity in four Midwestern states. The results indicate that while farm location was a key variable influencing the adoption of soil testing, human capital and innovativeness of farmers had a significant impact on the adoption of VRT. A double selectivity model applied to correct for sample selection bias shows that gains in nitrogen productivity due to the two adoption decisions are largest for farms with below average soil quality and statistically insignificant for farms with above average soil quality. These findings have implications for the targeting of public policies designed to promote adoption to reduce nitrate pollution.